UNITED
        STATES
 SECURITIES
        AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 
 FORM
          10-KSB/A
 
 (Amendment
          No. 2)
 
 
 (Mark
        One)
 x
              Annual
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
                for the fiscal year ended December 31,
                2003
 
 o
              Transition
                report under Section 13 or 15(d) of the Securities Exchange Act of
                1934
 
 For
        the
        transition period from ____ to______.
 
 Commission
        file number: 000-30516
 
 
 CHINA
                  GRANITE CORPORATION(Exact
                  name of small business issuer as specified in its
                  charter)
 
 Nevada
              
              880448920(State
                  of Other Jurisdiction
              
              (I.R.S.
                  Employer I.D. No.)incorporation
                  or organization)
 
 2642
                  Collins Avenue, Suite 305, Miami, FL
              
              33140(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 Issuer's
                  telephone number
              (305)
                  534-1684
 
 
 Arbor,
                  Inc.(Former
                  name, former address and former fiscal year, if changed since last
                  report)
 
 Securities
        Registered under Section 12(b) of the Exchange Act: None
 
 Securities
        Registered pursuant to Section 12(g) of the Act:
 Common
                  Stock, par value $0.001 per share(Title
                  of class)
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the Registrant was required to file such reports) and (2) has been subject
        to such filing requirements for the past 90 days.    Yes x No o
  
  Check
        if
        there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
        S-K (229.405 of this chapter) contained herein, and no disclosure will be
        contained, to the best of the registrant's knowledge, in definitive proxy
        or
        information statements incorporated by reference in Part III of this Form
        10-KSB
        or any amendment to this Form 10-KSB. Yes
x      
        No o
  
 State
        Registrant's revenues for its most recent fiscal year: $2,493
 
 State
        the
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates computed by reference to the price at which the common equity
        was
        sold, or the average bid and asked prices of such common equity, as of a
        specified date within the past 60 days: 11,442,8122 shares held by
        non-affiliates had an aggregate market value of $61,219,044 as at April 6,
        2004
 
 (APPLICABLE
        ONLY TO CORPORATE REGISTRANTS)
 
 State
        the
        number of shares outstanding of each of the Registrant's classes of common
        stock, as of the latest practicable date.
 
 13,998,000
        common shares issued and outstanding as of April 6, 2004
 
 
 DOCUMENTS
        INCORPORATED BY REFERENCE
 
 None.
 
 Transitional
        Small Business Disclosure Format (Check one):
 
 Yes o No x
 
  TABLE
        OF
        CONTENTS
 PART
                    I
                PageItem
                    1.
                Description
                    of Business
                1Item
                    2.
                Description
                    of Property
                14Item
                    3.
                Legal
                    Proceedings
                14Item
                    4.
                Submission
                    of Matters to a Vote of Security Holders
                14PART
                    IIItem
                    5.
                Market
                    for Common Equity and Related Stockholder Matters
                15Item
                    6.
                Management
                    Discussion and Analysis or Plan of Operation
                16Item
                    7.
                Financial
                    Statements
                F-1Item
                    8.
                Changes
                    in and Disagreements with Accountants on Accounting and Financial
                    Disclosure
                19Item
                    8A.
                Controls
                    and Procedures
                20PART
                    IIIItem
                  9.
                Directors,
                      Executive Officers, Promoters and Control Persons;Compliance with
                      Section 16 (a) of the Exchange Act
                20Item
                    10.
                Executive
                    Compensation
                24Item
                    11.
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters
                26Item
                    12.
                Certain
                    Relationships and Related Transactions
                27Item
                    13.
                Exhibits
                    and Reports on Form 8-K
                28Item
                    14.
                Principal
                    Accountant Fees and Services
                29SIGNATURESFINANCIAL
                    STATEMENTS
                F-1EXHIBITS
 
  PART
        I
 
 Item
        1. Description
        of Business.
  Overview
 
 China
        Granite Corporation conducts granite mining and processing operations in
        the
        People's Republic of China (the "PRC") through the wholly-owned subsidiary
        of
        its subsidiary, China Laizhou Bay Mining International Corporation, a
        corporation organized under the laws of the British Virgin Islands ("Laizhou").
        This operating company, Laizhou Jia Sheng Stone Company ("Laizhou China"),
        is a
        limited liability company organized under the laws of the People's Republic
        of
        China.
 
 Unless
        otherwise specified or the context OTHERWISE requires, in this Form 10-KSB/A
        the
        terms the "Company", "China Granite", "we", and "our" shall mean the operations
        or business of China Granite Corporation, a Nevada corporation, and its
        subsidiaries. Unless otherwise specified or the context otherwise requires,
        in
        this Form 10-KSB/A the term "Arbor" shall refer to the operations of the
        Company
        prior to the reorganization with Laizhou.
 
 Introduction
 
 We
        were
        incorporated in the State of Nevada as E Investments, Inc., on February 25,
        1999, and subsequently changed our name to Arbor, Inc. on December 16, 1999.
        We
        originally intended to engage in the business of manufacturing, selling and
        distributing fence posts to be used by government parks, highway departments,
        ranchers and farmers throughout North America. Due to a lack of capital,
        we were
        forced to abandon our original business and examine other business
        options.
 
 In
        October 2002, we appointed a new director, Mr. Costas Takkas, to assist us
        with
        our strategic planning and in forming a new direction for our business. Mr.
        Takkas was responsible for the management of our new business direction in
        2003
        and helped to focus the Company's efforts on real estate development projects
        in
        Brazil.
 
 The
        Brazil Project
 
 In
        October and November 2003 (the "November Placement"), we received $500,000
        ($250,000 of which came from Mr. Takkas) through a private placement of 600,000
        shares of our restricted common stock to fund a real estate development project
        between CPL Construcoes e Comercio, Inc. ("CPL") and China Granite in Brazil.
        To
        this end a Brazilian corporation was formed to carry on the venture, namely
        CPL
        Arbor do Brasil Construtora Limitada ("CPL Arbor"), which is owned in equal
        parts by CPL and us. An aggregate of $425,000 of the funds raised in the
        November Placement have been committed to CPL Arbor. Of this aggregate amount,
        $325,000 is a loan to CPL Arbor and is repayable on October 31, 2004, with
        an
        interest rate of 4% above LIBOR. The remaining $100,000 is held in trust
        and
        will not be released to CPL Arbor unless it completes the infrastructure
        work
        for the project. As a result of the acquisition of Laizhou, we determined
        in
        February 2004 that we would no longer pursue the Brazil Project and we intend
        on
        selling our interest in CPL Arbor. To date, however, no such sale has been
        consummated.
 1
  The
        Laizhou China Project
 
 On
        February 5, 2004, we completed a reorganization with Laizhou pursuant to
        a Stock
        Exchange Agreement and Plan of Reorganization (the "Agreement"). We intend
        on
        continuing the business operations of Laizhou, which conducts granite mining
        and
        processing operations in the PRC through its wholly owned subsidiary, Laizhou
        China. Laizhou China's operations consist of extracting granite blocks, measured
        in cubic meters, from quarries and processing granite blocks into finished
        pieces measured in square meters: granite slabs, used in construction, cladding,
        thinner pieces often used for tile, and carved, decorative features such
        as
        statues, pedestals and ornaments.
 
 In
        December 2003, we completed an additional private placement of 550,000 shares
        of
        restricted common stock priced at $1.00 per share (the "December Placement'),
        to
        fund an initial advance to Laizhou China pursuant to the Agreement and, to
        pay
        for professional fees related to the transaction. There were no finders'
        fees
        payable for either the November or December Placement.
 
 The
        Chinese Granite Industry
 
 According
        to the China Stone Materials Industry Association (the "CSMIA"), the past
        20
        years have seen the Chinese stone market grow at an average annual rate of
        20%.
        As data in the China Home Decoration Materials Market Report (published in
        June
        2001) indicates, in the past decade the Chinese decorative stone market has
        expanded rapidly. In 1990, a total of 25.13 million square meters of stone
        was
        produced. By 2000, a total of 120 million square meters was produced,
        representing a 477% increase over the decade. Breakdown into various groups
        indicates that some stones have become more popular than others: whereas
        in 1990
        only 7.05 million square meters of marble were produced, this number went
        up to
        20.8 million square meters by 2000, an annual growth rate of 11%. The most
        remarkable growth came from granite, 5.73 million square meters of which
        were
        produced in 1990 and 87 million square meters in 2000 - an annual growth
        rate
        exceeding 31%.
 
 The
        Hong
        Kong-based online trade marketplace Alibaba.com estimates raw material output
        of
        Chinese stone in 2000 at 15 million tons, which does not include numerous
        small
        rural production bases. The same report estimates total output value of Chinese
        stone in 2001 at 100 billion RMB ($12 billion). The Italian Institute gives
        the
        same figure for Foreign Trade. The Italian report estimates block production
        at
        6 million cubic meters, which equals roughly 16.8 million tons. Slab production
        is gauged in the report at 140 million square meters, of which granite makes
        up
        80 million square meters and marble makes up 40 million square
        meters.
 2
  On
        the
        other hand, consumption of stone in China was reported to be 60 million square
        meters of slabs in 2000, which rose to 100 million square meters in 2001,
        according to Alibaba.com. A 2002 report by the Shenzhen-based online B2B
        trade
        marketplace China Building Material Commercial Net put Chinese consumption
        at
        61.30 million square meters, making the country the largest consumer of natural
        stone on the planet. Other large consumers and their levels of consumption
        in
        2002 of decorative stone include Italy (56 million square meters), Germany
        (44
        million), the United States (42 million), and Spain (40 million). The China
        Stone Materials Industry Association puts the total value of consumed stone
        products in 2001 at 45-50 billion RMB ($5.4-6 billion).
 
 The
        growth in Chinese consumption of stone is expected to continue this growth.
        Compared to many players on the global stage, per capita consumption of stone
        in
        China is extremely low at 0.05 square meters. Greece leads the world in per
        capita stone consumption with 1.5 square meters, followed by Saudi Arabia
        and
        Switzerland (1.32 square meters), Italy (1.01 square meters), and Germany
        (0.55
        square meters). This indicates that there may be much more room for growth,
        provided that Chinese consumers' taste develops the same partiality to marble
        pillars and bathrooms and other decorative features that are typical of European
        countries.
 
 In
        addition, China is currently engaged in a significant expansion of new
        construction. The China Academy of Building Research, has forecast for the
        time
        span of 2001-2010, construction of new houses in rural areas covering 5 billion
        square meters, public construction covering 1 billion square meters, and
        urban
        housing covering 3.35 billion square meters. Given the low per capita
        consumption and the ongoing construction boom in China, the China Stone Material
        Industry Association expects decorative stone consumption to rise to 200
        billion
        RMB ($24 billion) by 2010, translating into a compound annual growth rate
        of
        nearly 17%. Per capita consumption will be raised from the current 0.05 square
        meters to 0.15 square meters in 2010.
 
 Laizhou
        and Laizhou China
 
 Laizhou
        was incorporated on January 6, 2004, in the territory of the British Virgin
        Islands. On January 20, 2004, Laizhou acquired 100% of Laizhou China. Laizhou
        has no other assets or operations other than its ownership of Laizhou China.
        Laizhou China was organized on January 9, 2003 when it acquired a business
        license issued by the Laizhou Administration for Industry and
        Commerce.
  Laizhou
        China is located in the Shandong Province on the East Coast of the PRC. Laizhou
        China owns and operates two granite quarries, Shangjiashan Granite No. 1
        Quarry
        ("No. 1 Quarry") and Laizhou Zuocun Town West Jiangjia Village Granite Quarry
        Group 14 ("Group 14 Quarry"). Laizhou China purchased all of the land-use
        rights, buildings and stone product processing equipment for the Group 14
        Quarry
        on February 15, 2003, and purchased mining equipment used at the No. 1 Quarry
        on
        July 7, 2003.
 3
  No.
        1
        Quarry is an open-pit quarry located in Zuocon Town Laizhou City in the Shandong
        Province of the PRC. No. 1 Quarry is located on the northern side of a valley
        that runs East-West. It is accessed via 25 kilometers of road running east
        of
        Laizhou. No. 1 Quarry currently has three main operative fronts from which
        granite is extracted. Power for the property is obtained from the nearby
        village
        and generators. The following is a list of equipment currently located and
        used
        at No. 1 Quarry:
  Category
              QuantitiesBeijing
                  Forton truck
              1Excavator
              1Loader
              1Fork
                  lift
              1Press
                  modifier assembly
              1Vertical
                  linear driller
              2Special
                  horizontal linear driller
              2Portable
                  stone driller
              16Pneumatic
                  driven miller
              2Hydraulic
                  lifting device
              2Fork
                  lift
              1
 
 Group
        14
        Quarry is an open-pit quarry located several hundred meters from No. 1 Quarry
        on
        the opposite side of the valley. Power for the property is obtained from
        the
        nearby village and generators. The following is a list of equipment currently
        located and used at No. 1 Quarry:
 
 Category
              QuantitiesSubmerged
                  driller
              1Air
                  compressor
              3Truck
              1Excavator
              1Vertical
                  linear driller
              2Special
                  horizontal linear driller
              3Portable
                  stone driller
              16Pneumatic
                  driven miler
              2Hydraulic
                  lifting device
              2Wind
                  pipes
              1000Excavator
              150
                  loader
              1Crane
              1Air
                  reservoir
              1
 
  The
            rock
            mineralization found at Group 14 Quarry is a medium grained granite.
            The rock
            appears to be mainly composed by whitish feldspar (approximately 60%
            of the
            total) and a light grey quartz (approximately 25-30%), with limited amount
            of
            smaller dark minerals (Fe/Mg silicates, 5% or even less of the total).
            The
            average hue of granite is light grey. The morphology is favorable for
            quarrying
            operations, because of the slope gradient which, is not too steep for
            access,
            but inclined enough to gradually open, in a prospective program of development.
 
 The
            rock
            mineralization found at No. 1 Quarry is a medium to coarse grained granite.
            The
            rock appears mainly composed by whitish to pale grey feldspars (approximately
            55-65 %) and grey quartz (approximately 30%), with a limited amount of
            dark
            minerals (Fe/Mg silicates, 5% or slightly more) scattered in the groundmass.
            The
            morphology of the deposit is favorable for quarrying operations because
            of the
            dome shaped outcrops, both at the present quarry site and behind the
            site.
 
 We
            are
            conducting no geologic exploration at any of our mines. Both Group 14
            Quarry and
            No. 1 Quarry had previous production before we acquired the property,
            and our
            decision to acquire the property was on an evaluation of the opened mining
            fronts from previous mining.
 
 Power
            for
            the property is obtained from the nearby village and generators. We use
            diesel
            generators at each mining site. We have a total of three large and twelve
            small
            generators for all of our operations.
  The
            mines
            are located on two parcels of land that are leased by Laizhou China from
            the
            local PRC government body. The mines consist of approximately 0.27 square
            kilometers containing granite reserves in two marketable varieties or
            distinct
            colors. The approximate locations of our mines are set forth below:
  
 
 Laizhou
            China has two stone processing factories: the yet-to-be completed 20,000
            square
            meter facility (the "New Yard") and the old 18,000 square meter factory
            (the
            "Old Yard"). The New Yard is located in the Laizhou City Economic Development
            Zone and its products developed for export are exempt from the domestic
            value
            added tax ("VAT"). The majority of blocks that are processed at the stone
            processing factory are first cut into slabs and checked for quality.
            These slabs
            are then polished and cut into tiles or cladding.
 
 For
            the
            year ended December 31, 2003, Laizhou China processed approximately 39,000
            square meters of granite slab and cladding from 1,600 cubic meters of
            granite
            and processed additional granite to make approximately 3,000 custom carved
            features.
 
 Mining
            Rights
 
 Pursuant
            to the Mineral Resources Law of the People's Republic of China (1996),
            mineral
            resources are owned by the national government. Shandong Province, where
            Laizhou
            China's operations are located, has autonomy in mining concessions from
            the
            national government. The mining concessions are negotiated and signed
            with the
            city government in Laizhou and filed with the Shandong Province governmental
            authority.
 
 Pursuant
            to the Shandong Province Contract for Selling Mining Rights between Laizhou
            China and the Laizhou Administration of State Land and Resources (the
            "ASLR")
            and the PRC Mining Rights License issued by the ASLR, Laizhou China owns
            the
            mining rights of the No. 1 Quarry from November 2003 to November 2008
            with
            options to extend its mining rights through 2033. On November 8, 2002,
            one of
            the stockholders of Laizhou China purchased the mining rights to No.
            1 Quarry
            for approximately $725,000 (6,000,000 Yuan). On March 10, 2003 that stockholder
            assigned the No. 1 Quarry mining rights to Laizhou China for a payment
            of
            approximately $725,000 (6,000,000 Yuan), the same amount that the stockholder
            originally paid for those rights.
   Laizhou
            China also operates the Group 14 Quarry. Laizhou China is currently in
            the
            application process with the ASLR for the mining rights to the Group
            14 Quarry.
            The ASLR issued the PRC Mining Rights License for the Group 14 Quarry
            (the
            "Group 14 Mining Rights") on August 29, 1998 to West Jiangjia Village
            (a legal
            collective organization). On January 10, 2003, one of the stockholders
            of
            Laizhou China signed a mining rights lease contract with the Villager
            Committee
            of West Jiangjia Village and purchased the Group 14 Mining Rights for
            $845,000
            (7,000,000 Yuan). On March 3, 2003, that stockholder assigned the Group
            14
            Mining Rights to Laizhou China for a payment of $845,000 (7,000,000 Yuan),
            the
            same amount that the stockholder originally paid for the rights. The
            Group 14
            Quarry was in full operation at April 1, 2004.
   4
  Mining
            Equipment
 
 Laizhou
            China has one thirty ton excavator, one front end loader, 30 mining drills,
            two
            generators and six air compressors, vehicles, tools and 11 buildings
            for
            processing, selling and managing the operations. During 2003, Laizhou
            China
            contracted with outside vendors for all other trucking services.
 
 During
            the first quarter of 2004, Laizhou China completed both a geological
            site survey
            and a development plan to determine what modern extraction equipment
            is needed
            at Laizhou China's two mines. The survey and development plan is intended
            to
            increase the rate of extraction of blocks for the manufacture of slabs,
            tiles
            and sheets for cladding and to improve both the regularity of the stone
            and the
            sizes of stone Laizhou China is able to produce and distribute. Laizhou
            China's
            facilities are not equipped to process cladding in large sheets.
 
 Customers
 
 In
            2003,
            approximately 25% of Laizhou China's revenue came from Chinese government
            projects, approximately 25% came from commercial pavers, approximately
            25% came
            from commercial cladding, and the remainder came from other projects.
            In 2003,
            the granite products of Laizhou China were sold in the following markets:
            (i)
            the local Chinese region (Beijing) 40%: (ii) exports to Korea 30%; (iii)
            exports
            to Japan 20%%; and (iv) Shanghai/Hong Kong 10%.
 
 Competition
 
 Competition
            in the Chinese granite market is extremely fragmented. The Laizhou area
            contains
            approximately 300 quarries and 2,000 stone processing factories. In the
            Fujian
            Province of southern China, there are several larger scale granite mining
            and
            processing operations.
 
 Major
            stone quarrying and production bases are numerous throughout China. According
            to
            the China Home Decoration Materials Market Report, Fujian Province is
            the
            largest geographic producer of granite, with a 46% share of the Chinese
            market.
            Other granite producing provinces include Guangdong (19% share of the
            Chinese
            market) and Shandong (12%).
 
 The
            four
            most notable quality stone processing (as opposed to quarrying) bases
            in China
            are: Nan'an in Fujian province, Yunfu in Guangdong province, Ya'an in
            Sichuan
            province, and Laizhou in Shandong province.
 5
  According
            to the Italian Institute for Foreign Trade (as reported in "Building
            Sector
            Series 05: Chinese Decorative Stone Market," March 2003), there are
            approximately 30,000 companies in China engaged in the stone business,
            employing
            a total workforce of about 6 million workers. Quarries employ roughly
            1.5
            million workers, processing facilities 4 million, and machinery manufacturing
            about 500,000.
 
 With
            economic reforms rippling through the Chinese market, a large number
            of private
            companies have formed, and are competing for, market share. Due to early
            economic reforms in Guangdong province, a number of well known processing
            companies were formed and are currently operating, including Yongguang
            Xiongdi,
            Ronghuafu, and Jinshan Stone Material Company.
   There
              are
              two major foreign-funded stone block and slab companies in the Chinese
              market,
              both of which are larger than Laizhou China. One is the Hong Kong-funded
              Universal Marble & Granite Group Ltd., which produces approximately 50,000
              square meters of marble and granite slabs. The other is Spanish-funded
              Jinan
              Blue Star. According to the Chinese Markets Yearbook 2003, Jinan Blue
              Star had
              revenue of more than 86 million RMB (approximately US$10.4m) in 2001,
              with a
              profit of 6.7 million RMB (approximately US$900,000). The Company produces
              only
              rough granite material, whereas Universal Marble & Granite produces
              high-quality finished products. There are approximately 400 foreign
              funded firms
              active on the Chinese decorative stone market.
 Granite
            Production and Prices
 
 In
            2003,
            Group 14 Quarry yielded approximately 9,000 cubic meters of granite blocks.
            The
            average size of the granite blocks was approximately three to four cubic
            meters.
            The average price for mined blocks is $160 per cubic meter based on a
            price
            range $120 to $200, depending on the quality and demand for a particular
            stone
            color.
 
 In
            2003,
            No. 1 Quarry yielded approximately 6,000 cubic meters of granite blocks.
            The
            average size of the granite blocks was approximately three cubic meters.
            The
            average price for mined blocks is $160 per cubic meter based on a price
            range of
            $120 to $200, depending on the quality and demand for a particular stone
            color.
 
 The
              Company segments its business in its filings because it operates two
              distinct
              businesses which are the mining of blocks for sale and processing of
              blocks for
              sale. The Company started business on January 9, 2003. As shown in
              the charts
              below, in 2003 none of the mined blocks went to Company’s processing yard. The
              Company processes many different colors, but only mines two types of
              gray, hence
              in 2003 the Company purchased all of its blocks (for processing) from
              third
              parties, once an order from a client was received.
  The
              following chart illustrates from January 9, 2003 through December 31,
              2003(i)
              the material flow from the volume mined in the Company’s quarries to product
              delivered to finishing yards or customers and (ii) the volume of slabs
              sold or
              transferred, and final polished salable products, whether produced
              by us or
              outside parties.
 
 **January
              9, 2003 through December 31, 2003 (Mining)**
 
 **Sold
                        to Clients**
                      **(cubic
                        meters)**
                    
                    **Transferred
                        to**
                      **processing
                        yard**
                      **(cubic
                        meters)**Group
                        14 Quarry
                    
                    
                    11,293
                    
                    
                    0Number
                        1 Quarry
                    
                    
                    8,095
                    
                    
                    0Total
                    
                    
                    19,388
                    
                    
                    0
  **January
              9, 2003 through December 31, 2003 (Production)**
 
 **Production**
                      **(square
                        meters)**Produced
                        in-house
                    
                    
                    37,899Outside
                        production
                    
                    
                    0Total
                    
                    
                    37,899
 According
              to Industry Guide 7 ("Industry Guide 7") promulgated by the SEC pursuant
              to the
              Securities Act of 1933, as amended, a "reserve" is defined as "[t]hat
              part of a
              mineral deposit which could be economically and legally extracted or
              produced at
              the time of the reserve determination." Further, Industry Guide 7 defines
              two
              types of reserves, "proven (measured) reserves" and "probable (indicated)
              reserves." The Company's determination of its reserves, proven and
              probable, is
              based solely upon a report from an Italian consulting geologist hired
              by the
              Company to evaluate its quarrying operations. This geologist based
              his report
              solely upon visual inspection and rough measurements. The Company has
              not
              engaged in any topographic mapping, site surveys or sample analysis
              in order to
              determine its reserves. Based solely upon this geologist's visual determinations
              that Group 14 Quarry is approximately 12 hectares and that the upper
              outcrops of
              granite extend at least 150 meters above the base of the valley, the
              Company
              believes that Group 14 Quarry's probable reserves are in excess of
              1,000,000
              cubic meters of recoverable granite. Based solely upon this geologist's
              visual
              determinations that No. 1 Group Quarry is approximately 15 hectares
              and that the
              upper outcrops of granite extend at least 130 meters above the base
              of the
              valley, the Company believes that Group 1 Quarry's probable reserves
              are in
              excess of 1,000,000 cubic meters of recoverable granite. Currently, we are assessing whether we will refine the estimate of
              our reserves
              with any surveys, geologic mapping, professional consultants, sampling,
              geologic
              mapping or topographic reconciliations.
  
 Employees
 
 As
            of
            December 31, 2003, Arbor did not have any employees other than officers.
            As of
            April 6, 2004, Laizhou China has 99 employees. Of those, 53 are in mining,
            23
            are in the processing yard, and 21 are in sales and administration. Laizhou
            China expects to hire approximately 50 additional mining employees in
            2004. The
            Company also retains consultants on a contract basis to meet internal
            corporate
            needs and develop business. The Company believes that relations with
            employees
            are good. None of the Company's employees belong to any unions or organized
            labor groups.
 6
  CAUTIONARY
            STATEMENTS REGARDING FUTURE RESULTS OF OPERATIONS
 
 You
            should read the following cautionary statements in conjunction with the
            factors
            discussed elsewhere in this Annual Report and other of the Company's
            filings
            with the Securities and Exchange Commission. These cautionary statements
            are
            intended to highlight certain factors that may affect the Company's financial
            condition and results of operations and are not meant to be an exhaustive
            discussion of risks that apply to companies such as China Granite. Like
            other
            businesses, the Company is susceptible to macroeconomic downturns in
            the PRC and
            other economies that may affect the general economic climate and performance
            of
            China Granite or its customers. Similarly, the price of the Company's
            securities
            is subject to volatility due to fluctuations in general market conditions,
            differences in results of operations from estimates and projections generated
            by
            the investment community and other factors beyond the Company's
            control.
 
 RISKS
            RELATING TO OUR OPERATIONS:
 
 WE
            MAY
            NEED FURTHER CAPITAL.
 
 Based
            on
            current reserves and anticipated cash flow from operations, we currently
            anticipate that the available funds will be sufficient to meet our anticipated
            needs for working capital, capital expenditures and business expansion
            for 12
            months. Thereafter, we will need to raise additional funds. If any of
            our
            assumptions are incorrect, we may need to raise capital before the end
            of 12
            months. If additional funds are raised through the issuance of equity
            or
            convertible debt securities, the percentage ownership of our stockholders
            will
            be reduced, stockholders may experience additional dilution and such
            securities
            may have rights, preferences and privileges senior to those of our common
            stock.
            There can be no assurance that additional financing will be available
            on terms
            favorable to us or at all. If adequate funds are not available or are
            not
            available on acceptable terms, we may not be able to fund expansion,
            take
            advantage of unanticipated acquisition opportunities, develop or enhance
            services or products or respond to competitive pressures. Such inability
            could
            have a material adverse effect on our business, results of operations
            and
            financial condition.
 
 WE
            ARE
            THE PRODUCT OF A RECENT MERGER, AND HAVE A LIMITED OPERATING HISTORY
            ON WHICH TO
            EVALUATE OUR POTENTIAL FOR FUTURE SUCCESS.
 
 On
            February 5, 2004, we completed a reorganization with Laizhou pursuant
            to the
            Agreement. We intend on continuing the business operations of Laizhou,
            which
            conducts granite mining and processing operations in the PRC through
            its
            wholly-owned subsidiary, Laizhou China. We have only a limited operating
            history
            as a combined company upon which you can evaluate our business and prospects,
            and we have yet to develop sufficient experience regarding actual revenues
            to be
            received from our combined operations.
 7
  You
            must
            consider the risks and uncertainties frequently encountered by companies
            in
            situations such as ours, including but not limited to the ability to
            grow and
            prosper and finance such growth. If we are unsuccessful in addressing
            these
            risks and uncertainties, our business, results of operations and financial
            condition will be materially and adversely affected.
  OUR
            RESERVES ESTIMATES ARE BASED ON VISUAL OBSERVATIONS ONLY AND MAY BE
            INCORRECT.
 
 In
            March
            2004 we hired an Italian consulting geologist, Giacomo Porro, to survey
            our
            quarries. The purpose of Mr. Porro's work was to assist the Company with
            its
            operations and provide advice on increasing productivity and efficiency.
            Mr.
            Porro did not perform any topographic mapping, sample analysis or test
            work on
            our quarries in order to make his recommendations and his estimations
            of our
            reserves. The imprecise nature of Mr. Porro's work and the lack of detailed
            studies performed on our quarries may diminish the quality of any volumetric
            estimates.
 
 WE
            MAY
            FACE STRONG COMPETITION FROM OTHER MINING COMPANIES FOR THE ACQUISITION
            OF NEW
            PROPERTIES.
 
 Mines
            have limited lives and as a result, we may seek to replace and expand
            our
            reserves through the acquisition of new properties. In addition, there
            is a
            limited supply of desirable mineral lands available in the PRC and other
            areas
            where we would consider conducting exploration and/or production activities.
            Because we may face strong competition for new properties from other
            mining
            companies, some of whom may have greater financial resources than we
            do, we may
            be unable to acquire attractive new mining properties on terms that we
            consider
            acceptable.
 
 RISKS
            RELATED TO DOING BUSINESS IN THE PRC:
 
 Laizhou
            operates from facilities that are located in the People's Republic of
            China.
            Accordingly, its operations must conform to the governmental regulations
            and
            rules of China.
 
 THE
            PRC
            LEGAL SYSTEM HAS INHERENT UNCERTAINTIES THAT COULD LIMIT THE LEGAL PROTECTIONS
            AVAILABLE TO YOU.
 
 The
            practical effect of the PRC's legal system on our business operations
            in China
            can be viewed from two separate but intertwined considerations. First,
            as a
            matter of substantive law, the Foreign Invested Enterprise laws provide
            significant protection from government interference. In addition, these
            laws
            guarantee the full enjoyment of the benefits of corporate Articles and
            contracts
            to Foreign Invested Enterprise participants. These laws, however, do
            impose
            standards concerning corporate formation and governance, which are not
            qualitatively different from the corporation laws found in the United
            States.
            Similarly, PRC accounting laws mandate accounting practices, which may
            not be
            consistent with US Generally Accepted Accounting Principles. The China
            accounting laws require that an annual "statutory audit" be performed
            in
            accordance with People's Republic of China accounting standards and that
            the
            books of account of Foreign Invested Enterprises are maintained in accordance
            with Chinese accounting laws. Article 14 of the PRC Wholly Foreign-Owned
            Enterprise Law requires a Wholly Foreign-Owned Enterprise to submit certain
            periodic fiscal reports and statements to designate financial and tax
            authorities, at the risk of business license revocation.
  8
  Second,
            while the enforcement of substantive rights may appear less clear than
            United
            States procedures, Foreign Invested Enterprises and Wholly Foreign- Owned
            Enterprises are Chinese registered companies that enjoy the same status
            as other
            Chinese registered companies in business-to-business dispute resolution.
            The
            Chinese legal infrastructure is significantly different in operation
            from its
            United States counterpart, and may present a significant impediment to
            the
            operation of Foreign Invested Enterprises.
 
 Laizhou
            China is organized under the laws of the PRC and is governed by its articles
            of
            association. The Chinese legal system is based on written statutes. Prior
            court
            decisions may be cited for reference but are not binding on subsequent
            cases and
            have limited precedential value. Since 1979, the Chinese legislative
            bodies have
            promulgated laws and regulations dealing with such economic matters as
            foreign
            investment, corporate organization and governance, commerce, taxation
            and trade.
            However, because these laws and regulations are relatively new, and because
            of
            the limited volume of published decisions and their non-binding nature,
            the
            interpretation and enforcement of these laws and regulations involve
            uncertainties.
 
 NEGATIVE
            IMPACT UPON ECONOMIC REFORM POLICIES OR NATIONALIZATION COULD RESULT
            IN A TOTAL
            INVESTMENT LOSS IN OUR COMMON STOCK.
 
 Since
            1979, the Chinese government has reformed its economic systems. Because
            many
            reforms are unprecedented or experimental, they are expected to be refined
            and
            improved. Other political, economic and social factors, such as political
            changes, changes in the rates of economic growth, unemployment or inflation,
            or
            in the disparities in per capita wealth between regions within China,
            could lead
            to further readjustment of the reform measures. This refining and readjustment
            process may negatively affect our operations.
 
 Although
            the Chinese government owns the majority of productive assets in China,
            including mines and quarrying sites, in the past several years the government
            has implemented economic reform measures that emphasize decentralization
            and
            encourage private economic activity. Because these economic reform measures
            may
            be inconsistent or ineffectual, there are no assurances that:
 
 •
                  We
                      will be able to capitalize on economic reforms;•
                  The
                      Chinese government will continue its pursuit of economic reform
                      policies;•
                  The
                      economic policies, even if pursued, will be successful;•
                  Economic
                      policies will not be significantly altered from time to
                      time;and•
                  Business
                      operations in China will not become subject to the risk of
                      nationalization.
 
 Over
            the
            last few years, China's economy has registered a high growth rate. Recently,
            there have been indications that rates of inflation have increased. In
            response,
            the Chinese government recently has taken measures to curb this excessively
            expansive economy. These measures have included restrictions on the availability
            of domestic credit, reducing the purchasing capability of certain of
            its
            customers, and limited re-centralization of the approval process for
            purchases
            of some foreign products. These austerity measures alone may not succeed
            in
            slowing down the economy's excessive expansion or control inflation,
            and may
            result in severe dislocations in the Chinese economy. The Chinese government
            may
            adopt additional measures to further combat inflation, including the
            establishment of freezes or restraints on certain projects or markets.
            These
            measures may adversely affect our operations.
 9
  To
            date
            reforms to China's economic system have not adversely impacted our operations
            and are not expected to adversely impact operations in the foreseeable
            future;
            however, there can be no assurance that the reforms to China's economic
            system
            will continue or that we will not be adversely affected by changes in
            China's
            political, economic, and social conditions and by changes in policies
            of the
            Chinese government, such as changes in laws and regulations, measures
            which may
            be introduced to control inflation, changes in the rate or method of
            taxation,
            imposition of additional restrictions on currency conversion and remittance
            abroad, and reduction in tariff protection and other import
            restrictions.
 
 OUR
            MINING RIGHTS ARE SUBJECT TO GOVERNMENTAL CONTROL AND RENEWAL.
 
 The
            Company's mining rights are subject to renewals by the relevant governmental
            authority. The Company is awaiting final approval of its mining rights
            to the
            Group 14 Quarry. Despite the Company having received written confirmation
            from
            the governmental authority, there is no guarantee that the Company will
            be
            granted the renewals.
 
 YOU
            MAY
            EXPERIENCE DIFFICULTIES IN EFFECTING SERVICE OF LEGAL PROCESS, ENFORCING
            FOREIGN
            JUDGMENTS OR BRINGING ORIGINAL ACTIONS IN THE PRC BASED ON U.S. OR OTHER
            FOREIGN
            LAW AGAINST OUR MANAGEMENT AND US.
 
 Laizhou
            China, our operating company, is incorporated under the laws of the PRC,
            and
            substantially all of our assets are located in the PRC. In addition,
            many of our
            directors, managers, and executive officers reside within the PRC, and
            substantially all of the assets of these persons are located within the
            PRC. As
            a result, it may not be possible to effect service of process within
            the United
            States or elsewhere outside the PRC upon certain directors, supervisors
            or
            executive officers, including with respect to matters arising under U.S.
            federal
            securities laws or applicable state securities laws. Moreover, the PRC
            does not
            have treaties providing for the reciprocal recognition and enforcement
            of
            judgments of courts with the United States, the United Kingdom, Japan
            or many
            other countries. As a result, recognition and enforcement in the PRC
            of
            judgments of a court in the United States and any of the other jurisdictions
            mentioned above in relation to any matter may be difficult or impossible.
            Furthermore, an original action may be brought in the PRC against us,
            our
            directors, managers, or executive officers only if the actions are not
            required
            to be arbitrated by PRC law and Laizhou China's articles of association,
            and
            only if the facts alleged in the complaint give rise to a cause of action
            under
            PRC law. In connection with any such original action, a PRC court may
            award
            civil liability, including monetary damages.
 10
  GOVERNMENT
            CONTROL OF CURRENCY CONVERSION AND THE FLUCTUATION OF THE RENMINBI MAY
            MATERIALLY AND ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL
            RESULTS.
 
 We
            receive substantially all of our revenues in Renminbi, which currently
            is not a
            freely convertible currency. The Chinese government may, at its discretion,
            restrict access in the future to foreign currencies for current account
            transactions. If this were to occur, we may not be able to pay dividends
            in
            foreign currencies to our shareholders.
 
 The
            value
            of the Renminbi against the U.S. dollar and other currencies fluctuates
            and is
            affected by, among other things, changes in the PRC's political and economic
            conditions. Since 1994, the conversion of Renminbi into foreign currencies,
            including Hong Kong and U.S. dollars, has been based on rates set by
            the
            People's Bank of China, which are set daily based on the previous day's
            interbank foreign exchange market rates and current exchange rates on
            the world
            financial markets. Since 1994, the official exchange rate for the conversion
            of
            Renminbi to U.S. dollars generally has been stable. Any devaluation of
            the
            Renminbi, however, may materially and adversely affect the value of,
            and any
            dividends payable on, our shares in foreign currency terms, since we
            will
            receive substantially all of our revenues, and express our profits, in
            Renminbi.
            Our financial condition and results of operations also may be affected
            by
            changes in the value of certain currencies other than the Renminbi. The
            Company's results may be adversely affected by changes in the political
            and
            social conditions in the PRC, and changes in governmental policies with
            respect
            to laws and regulations, anti-inflationary measures, currency conversion
            and
            remittance abroad, and rates and methods of taxation, among other
            things.
 
 RISKS
            RELATED TO THE GRANITE MINING INDUSTRY:
 
 WE
            OPERATE IN A SPECIALIZED INDUSTRY THAT REQUIRES MODERN FACILITIES AND
            EQUIPMENT.
 
 The
            Company operates in business segments that require the use of specialized
            facilities and technology. The Company currently relies on older equipment,
            such
            as drills, excavators and loaders, and facilities to process the raw
            granite
            blocks to maintain its production level. There is no guarantee that the
            Company
            will be able to upgrade its equipment, facilities and technology to increase
            production and make operations more efficient.
 11
  OUR
            CASH
            FLOW DEPENDS HEAVILY ON THE MARKET PRICE FOR GRANITE.
 
 The
            cash
            flow and profitability of the Company's current operations are significantly
            affected by the market price of granite that is affected by numerous
            factors
            beyond the Company's control. Specifically, the prices for granite slabs
            and
            cladding depend heavily on the type and amount of commercial and residential
            construction in the PRC.
 
 Factors
            that could cause such volatility may include, among other things:
 
 •
                  actual
                    or anticipated fluctuations in our quarterly operating
                    results;
 •
                  conditions
                    or trends in the mining industries and governmental regulations
                    that
                    affect such industries;
 •
                  changes
                    in the market valuations of other mining companies, especially
                    our
                    partners and competitors;
 •
                  general
                    market conditions; and political events, including actions by
                    the PRC
                    government.
 
 OUR
            COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE.
 
 Our
            common stock price is likely to be highly volatile. The market price
            of our
            common stock has been, and is likely to continue to be, highly volatile
            as the
            stock market in general, and the market for mining companies in particular,
            has
            been highly volatile. Investors may not be able to resell their shares
            of our
            common stock following periods of volatility because of the market's
            adverse
            reaction to volatility. The trading prices of many mining companies'
            stocks have
            been highly volatile, and we cannot assure you that our stock will trade
            at the
            same levels of other mining stocks or that mining stocks in general will
            sustain
            their current market prices.
 
 ENVIRONMENTAL
            AND GOVERNMENTAL REGULATIONS
 
 Our
            operations are subject to and affected by national, provincial and local
            laws
            and regulations relating to the environment, health and safety, and other
            regulatory matters. Certain of our operations may from time to time involve
            the
            use of substances that are classified as toxic or hazardous substances
            within
            the meaning of these laws and regulations. Environmental operating permits
            are,
            or may be, required for certain of our operations and such permits are
            subject
            to modification, renewal, and revocation. We regularly monitor and review
            our
            operations, procedures, and policies for compliance with these laws and
            regulations. Despite these compliance efforts, risk of environmental
            liability
            is inherent in the operation of our businesses, as it is with other companies
            engaged in similar businesses, and there can be no assurance that environmental
            liabilities will not have a material adverse effect on us in the
            future.
 
 We
            believe that our operations and facilities, both owned and leased, are
            in
            substantial compliance with applicable laws and regulations and that
            any
            noncompliance is not likely to have a material adverse effect on our
            operations
            or financial condition. See "Legal Proceedings" on page 14 of this Form
            10-KSB/A. However, future events, such as changes in or modified interpretations
            of existing laws and regulations or enforcement policies, or further
            investigation or evaluation of the potential health hazards of certain
            products
            or business activities, may give rise to additional compliance and other
            costs
            that could have a material adverse effect on our operations and business.
            We,
            through safety information sheets and other means, communicate what we
            believe
            to be appropriate warnings and cautions to employees about the risks
            associated
            with granite mining and processing.
 12
  ENVIRONMENTAL
            LIABILITY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS; POTENTIAL
            LITIGATION ARISING FROM OUR OPERATIONS COULD HAVE A MATERIAL ADVERSE
            EFFECT ON
            OUR FINANCIAL CONDITION
 
 From
            time
            to time claims of various types may be asserted against us arising out
            of our
            operations in the normal course of business, including claims relating
            to land
            use and permits, safety, health and environmental matters. Such matters
            are
            subject to many uncertainties and it is not possible to determine the
            probable
            outcome of, or the amount of liability, if any, from these matters. In
            the
            opinion of our management (which opinion is based in part upon consideration
            of
            the opinion of counsel), it is unlikely that the outcome of these claims
            will
            have a material adverse effect on our operations or financial condition.
            However, there can be no assurance that an adverse outcome in any of
            such
            litigation would not have a material adverse effect on us or our operating
            segments.
 
 SOME
            OF
            THE INFORMATION IN THIS ANNUAL REPORT ON FORM 10-KSB/A CONTAINS FORWARD-LOOKING
            STATEMENTS.
 
 Some
            of
            the information in this Annual Report on Form 10-KSB/A contains forward-looking
            statements that involve risks and uncertainties. You can identify these
            statements by forward-looking words such as "may," "will," "expect,"
            "anticipate," "believe," "estimate" and "continue" or similar words.
            You should
            read statements that contain these words carefully because they:
 
 •
                  discuss
                    our expectations about our future
                    performance;
 •
                  contain
                    projections of our future operating results or of our future
                    financial
                    condition; or
 •
                  state
                    other "forward-looking" information.
 
 We
            believe it is important to communicate our expectations to our stockholders.
            There may be events in the future, however, that we are not able to predict
            accurately or over which we have no control. The risk factors listed
            in this
            section, as well as any cautionary language in this Annual Report, provide
            examples of risks, uncertainties and events that may cause our actual
            results to
            differ materially from the expectations we describe in our forward-looking
            statements. You should be aware that the occurrence of any of the events
            described in these risk factors and elsewhere in this Annual Report could
            have a
            material and adverse effect on our business, results of operations and
            financial
            condition.
 13
  Item
            2. Description of
            Property
 
 Principal
            Offices
 
 Laizhou
            China is located in the Shandong Province of China, and our mining properties
            are described above. Our principal executive offices are located at 2642
            Collins
            Avenue, Suite 305, Miami, Florida 33140. We currently utilize this space
            from
            one of our directors for no charge. This space is suitable for our current
            uses
            and it is easily replaceable in the event that we decide to
            relocate.
 
 Item
            3. Legal
            Proceedings
 
 We
            have
            no pending legal proceedings. From time to time, we may be involved in
            various
            claims, lawsuits, disputes with third parties, actions involving allegations
            of
            discrimination or breach of contract actions incidental to the normal
            operations
            of the business. We are currently not involved in any such
            litigation.
 
 Granite
            mining and processing entails an inherent risk of workers' compensation
            and
            environmental liability. We may be named as a defendant in such lawsuits
            and
            thus become subject to the attendant risk of substantial damage awards.
            We
            believe that we have adequate insurance coverage. There can be no assurance,
            however, we will not be sued, that any such lawsuit will not exceed our
            insurance coverage, or that we will be able to maintain such coverage
            at
            acceptable costs and on favorable terms.
 
 Item
            4. Submission of Matters
            to a Vote of Security Holders
 
 No
            matter
            was submitted to a shareholder vote during the fourth quarter of the
            2003 fiscal
            year. An information statement on Schedule 14C was filed with the SEC
            and mailed
            to shareholders on March 11, 2004. The information statement informed
            shareholders that, pursuant to majority written consent of our shareholders,
            we
            (i) amended and restated our articles of incorporation to, among other
            things,
            change our name to China Granite Corporation, (ii) amended and restated
            our
            bylaws, (iii) adopted a stock option plan, and (iv) appointed three new
            members
            to our Board of Directors.
 14
  PART
            II
 
 Item
            5. Market for Common
            Equity and Related Stockholder Matters
 
 General
 
 We
            trade
            on the Over The Counter Bulletin Board ("OTCBB") under the symbol "CGNT".
            The
            following quotations reflect the high and low bids for our common stock
            based on
            inter-dealer prices, without retail mark-up, mark-down or commission
            and may not
            represent actual transactions. The high and low bid prices for our common
            shares
            for each full financial quarter for the two most recent full fiscal years
            were
            as follows:
 
 Quarter
                        Ended
                    High
                    Low20034th
                        Quarter
                    $3.30
                    $0.703rd
                        Quarter
                    $1.01
                    $0.752nd
                        Quarter
                    $1.03
                    $0.301st
                        Quarter
                    $1.05
                    $0.4020024th
                        Quarter
                    $1.98
                    $0.493rd
                        Quarter
                    $1.48
                    $0.952nd
                        Quarter
                    $3.05
                    $0.451st
                        Quarter
                    $3.70
                    $1.60
 
 As
            of
            April 6, 2004, the shareholders' list for our common stock showed 38
            registered
            shareholders of record and 13,998,000 common shares issued and outstanding.
            We
            believe that there are approximately 500 beneficial holders of our common
            stock.
            On April 6, 2004, the closing price of our common stock on the OTCBB
            was
            $5.35.
 
 Dividend
            Policy
 
 We
            have
            never declared a dividend on our common stock. We have not paid, nor
            declared,
            any dividends since our inception and we do not intend to declare any
            such
            dividends in the foreseeable future. Our ability to pay dividends is
            subject to
            limitations imposed by Nevada law. Under Nevada law, dividends may be
            paid to
            the extent that the a corporation's assets exceed its liabilities and
            it is able
            to pay its debts as they become due in the usual course of
            business.
 
 As
            of
            December 31, 2003, we did not have any securities authorized for issuance
            under
            equity compensation plans.
 
 On
            February 4, 2004, we adopted the 2004 Stock Option Plan (the "Plan").
            Under the
            Plan, One Million Four Hundred Thousand (1,400,000) shares of our common
            stock
            are reserved for issuance to selected officers and key employees. The
            purpose of
            the Plan is to encourage selected officers and key employees to accept
            or
            continue employment with the Company or its Affiliates; and increase
            the
            interest of selected officers, directors, key employees and consultants
            in our
            welfare through participation in the growth in value of our common stock
            of the
            Company. A copy of the Plan has been filed as an exhibit to this Annual
            Report.
 15
  Recent
            Sales of Unregistered Securities
 
 In
            October and November 2003, the Company completed the November Placement.
            We sold
            600,000 shares of our restricted common stock for $500,000. A director
            and the
            then President, Costas Takkas, purchased 300,000 of these shares. The
            November
            Placement was made only to accredited investors without general solicitation
            in
            compliance with Regulation D of the Securities Act of 1933, as amended.
            There
            were no finders' fees or brokerage commissions paid for the November
            Placement.
 
 In
            December 2003, the Company completed the December Placement, selling
            an
            aggregate of 550,000 shares of our restricted common stock for $1.00
            per share.
            Mr. Costas purchased 50,000 of these shares and Stephen Spoonamore, a
            director
            and the then Secretary, purchased 30,000 of these shares. The December
            Placement
            was made only to accredited investors without general solicitation in
            compliance
            with Regulation D of the Securities Act of 1933, as amended. There were
            no
            finders' fees or brokerage commissions paid for the December
            Placement.
 
 In
            April
            2004, the Company completed an additional private placement of 500,000
            shares of
            restricted common stock priced at $3.00 per share (the "April Placement").
            Mr.
            Costas purchased 2,000 of these shares and Mr. Spoonamore purchased 10,000
            of
            theses shares. The April Placement was made only to accredited investors
            without
            general solicitation in compliance with Regulation D of the Securities
            Act of
            1933, as amended. There were no finders' fees or brokerage commissions
            paid for
            the April Placement.
 
 Item
            6.    Management Discussion and Analysis or Plan of
            Operation
 
 We
            were
            incorporated in the State of Nevada as E Investments, Inc., on February
            25,
            1999, and subsequently changed our name to Arbor, Inc. on December 16,
            1999. We
            originally intended to engage in the business of manufacturing, selling
            and
            distributing fence posts to be used by government parks, highway departments,
            ranchers and farmers throughout North America. Due to a lack of capital,
            we were
            forced to abandon our original business and examine other business
            options.
 
 On
            February 5, 2004, we completed a reorganization with Laizhou pursuant
            to the
            Agreement. We intend on continuing the business operations of Laizhou,
            which
            conducts granite mining and processing operations in the PRC through
            its wholly
            owned subsidiary, Laizhou China.
 
 In
            2004,
            we will focus on the business operations of Laizhou China and the acquisition
            of
            other granite mining properties in the PRC. As a result of the acquisition
            of
            Laizhou, we will no longer pursue the Brazil Project and plan to sell
            our
            interest in CPL Arbor.
 16
  Beginning
            in the first quarter of 2004, we completed the site surveys needed to
            install
            modern extraction equipment at our two quarries, No. 1 Quarry and Group
            14
            Quarry. We believe that newer equipment will increase the rate of extraction
            of
            granite blocks for slabs and tiles and vastly improve both the regularity
            of the
            stone and the sizes of stone that we are able to process and sell. The
            newer
            equipment will also reduce the damage to the granite blocks extracted,
            thereby
            improving the quality of our products and reducing waste. We also plan
            on hiring
            a new quarry master to supervise and manage both quarries.
 
 During
            the second quarter of 2004, we plan to add equipment to each mine in
            addition to
            reconfiguring how the property is mined. Examples of the type of equipment
            planned for purchase at the Group 14 Quarry includes: a 30-ton loader,
            a 33-ton
            excavator, a 30-ton off road dump truck, 16 manual rock drills and a
            horizontal
            rock drill. Examples of the type of equipment planned for purchase at
            No. 1
            Quarry includes: a 30-ton loader, a 33-ton excavator, 16 manual rock
            drills, a
            horizontal rock drill, and a diamond wire cutting system. We currently
            estimate
            that this equipment will cost an aggregate of approximately $1,500,000.
            We plan
            to partially finance these acquisitions with $2,050,000 raised in private
            placement offerings completed in December 2003 and April 2004. The balance
            of
            the financing will take the form of debt. We currently have no arrangements
            for
            any financing, and there can be no assurance that such financing will
            be
            available on terms acceptable to us.
 
 The
            operations of the Company prior to February 5, 2004, were the operations
            of
            Arbor, Inc. Subsequent to February 5, 2004, the operations of the Company
            will
            reflect the continuation of the operations of Laizhou and Laizhou China.
 
 The
            Company (formerly Arbor, Inc.)
 
 Results
            of Operation
 
 Year
            Ended December 31, 2003 Compared With Year Ended December 31, 2002
 
 Revenues .
            Revenues for the twelve months ended December 31, 2003 were $2,493, compared
            to
            $0 for the twelve months ended December 31, 2002. The small revenue in
            2003 was
            from interest accrued on the loan to CPL Arbor. Prior to the reorganization
            with
            Laizhou in February 2004, the Company focused its efforts on the development
            of
            a viable business model, and therefore generated no revenues from
            operations.
 
 General
            and Administrative Expenses .
            General
            and administrative expenses in the year ended December 31, 2003 were
            $238,182,
            an increase from $83,120 for the year ended December 31, 2002. The increase
            was
            due primarily to the increase in our operations to complete the reorganization
            with Laizhou in February 2004 and to consummate the Brazil Project with
            CPL
            Arbor.
 17
  Net
            Loss .
            As a
            result of the foregoing factors, the Company's net loss increased to
            $236,578
            for the year ended December 31, 2003, from a net loss of $83,259 for
            the year
            ended December 31, 2002. The Company's net loss per share increased to
            $0.03 for
            the year ended December 31, 2003, from $0.01 for the year ended December
            31,
            2002, due to an increase in 2003 in the Company's net loss.
 
 Liquidity
            and Capital Resources
 
 In
            October and November 2003, the Company completed the November Placement.
            We sold
            600,000 shares of our restricted common stock for $500,000. A director
            and the
            then President, Costas Takkas, purchased 300,000 of these shares. The
            November
            Placement was made only to accredited investors without general solicitation
            in
            compliance with Regulation D of the Securities Act of 1933, as amended.
            There
            were no finders' fees or brokerage commissions paid for the November
            Placement.
 
 In
            December 2003, the Company completed the December Placement, selling
            an
            aggregate of 550,000 shares of our restricted common stock for $1.00
            per share.
            The December Placement was made only to accredited investors without
            general
            solicitation in compliance with Regulation D of the Securities Act of
            1933, as
            amended. There were no finders' fees or brokerage commissions paid for
            the
            December Placement.
 
 In
            April
            2004, the Company completed an additional private placement of 500,000
            shares of
            restricted common stock priced at $3.00 per share (the "April Placement").
            The
            April Placement was made only to accredited investors without general
            solicitation in compliance with Regulation D of the Securities Act of
            1933, as
            amended. There were no finders' fees or brokerage commissions paid for
            the April
            Placement.
 
 The
            Company estimates that after giving effect to the November, December
            and April
            Placements, the current capital reserves that result will allow China
            Granite to
            operate for at least twelve months without relying on additional financing.
            If
            additional funds are raised through the issuance of equity or convertible
            debt
            securities, the percentage ownership of the Company's stockholders will
            be
            reduced, stockholders may experience additional dilution and such securities
            may
            have rights, preferences and privileges senior to those of China Granite's
            common stock. There can be no assurance that additional financing will
            be
            available on terms favorable to China Granite or at all. If adequate
            funds are
            not available or are not available on acceptable terms, the Company may
            not be
            able to fund expansion, take advantage of unanticipated acquisition
            opportunities, develop or enhance services or products or respond to
            competitive
            pressures. Such inability could harm China Granite's business, results
            of
            operations and financial condition.
 18
  For
            the
            next 12 months the Company expects the primary sources of liquidity to
            be funds
            generated by operations and cash on hand. To December 31, 2003, the Company
            has
            not been profitable and has experienced negative cash flows from operations.
            Operations have been primarily financed through the issuance of
            stock.
 
 Laizhou
            China
 
 Results
            of Operation for the period from January 9, 2003 (date of inception)
            to December
            31, 2003.
 
 Laizhou
            China's revenues for the period from January 9, 2003 (date of inception)
            to
            December 31, 2003 were $3,050,183 (25,255,000 Yuan), $2,443,000 of which
            came
            from granite mining and $607,000 of which came from the production of
            granite
            slabs and ornaments.
 
  Selling,
              General and Administrative Expenses .
              Laizhou
              China's selling, general and administrative expenses in the year ended
              December
              31, 2003 were $161,780. Selling expenses relate to mining of granite
              and the
              production of granite slabs, cladding and decorative features. For
              the
              period ended January 9, 2003 through December 31, 2003, Laizhou China
              spent
              approximately $30,193 on obtaining permits for its mines. Since Laizhou
              China
              does not anticipate future material permit costs for the following
              year, it has
              not budgeted any money for future permit spending.
 
 Net
              Income. As a
              result of the foregoing factors, Laizhou China's net income was $1,462,923
              for
              the year ended December 31, 2003.
   Critical
            Accounting Policies
 
 The
            preparation of financial statements and related disclosures in conformity
            with
            accounting principles generally accepted in the United States requires
            China
            Granite to make judgments, assumptions and estimates that affect the
            amounts
            reported. Note 1 of Notes to China Granite's Financial Statements describes
            the
            significant accounting policies used in the preparation of the China
            Granite
            financial statements. Note 2 of Notes to Laizhou China's Financial Statements
            describes the significant accounting policies used in the preparation
            of the
            Laizhou China financial statements.
 
 Item
            7. Financial
            Statements
 
 The
            Company's Financial Statements can be found immediately following Item
            14
            below.
 
 Item
            8. Changes in and
            Disagreements with Accountants on Accounting and Financial Disclosure
 
 None.
 19
  Item
            8A.Controls
            and Procedures
 
 On
            December 31, 2003, the Company's management concluded its evaluation
            of the
            effectiveness of its disclosure controls and procedures. As of that date,
            the
            Company's President and Chief Financial Officer concluded that China
            Granite
            maintains effective disclosure controls and procedures that ensure information
            required to be disclosed in reports under the Securities Exchange Act
            of 1934 is
            recorded, processed, summarized and reported within the time periods
            specified
            in the SEC's rules and forms. Specifically, the disclosure controls and
            procedures assure that information is accumulated and communicated to
            management, including the President and Chief Financial Officer, as appropriate,
            to allow timely decisions regarding required disclosure. There have been
            no
            significant changes in the Company's internal controls or in other factors
            that
            could significantly affect these controls subsequent to the date of management's
            evaluation.
 
 PART
            III
 
 Item
            9.    Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16 (a) of the Exchange Act
 
 The
            following table sets forth the names of all of our current directors
            and
            executive officers as of April 6, 2004. These persons will serve until
            the next
            annual meeting of the stockholders or until their successors are elected
            or
            appointed and qualified, or their prior resignation or termination.
  Name
                    Age
                    PositionDong
                        Chen
                    43
                    President
                        and DirectorJuan
                        Chen
                    49
                    Chief
                        Financial Officer and Secretary and DirectorPiguo
                        Man
                    44
                    Manager
                        and DirectorMaria
                        C. Maz
                    35
                    TreasurerMichael
                        Miller
                    49
                    Vice-President
                        of Investor RelationsCostas
                        Takkas
                    47
                    DirectorStephen
                        Spoonamore
                    39
                    Director
 Dong
            Chen: Mr. Chen has served as our President since the reorganization on
            February
            5, 2004. Prior to the reorganization, from June 2001 until joining us,
            Mr. Chen
            served as the Chief Executive Officer of Yantai Maple Leaf Beverage Company
            Ltd., a company that bottles and distributes bottled water in the People's
            Republic of China. From 1997 until May 2001, Mr. Chen was the Vice President
            of
            Marketing for China New Hope Electronic Development Co., which manufactured
            and
            sold digital videodisc players. Mr. Chen received a degree in Business
            Administration from Jilin Normal University in the People's Republic
            of China.
            Mr. Chen is the brother of Juan Chen, our Chief Financial Officer, Secretary
            and
            a Director.
 
 Juan
            Chen: Ms. Chen has been our Vice General Manager since the reorganization
            on
            February 5, 2004. Prior to the reorganization, from March 2003 until
            joining us,
            Ms. Chen served as the General Manager of Laizhou Jia Sheng Stone Company.
            From
            January 2002 until February 2003, Ms. Chen was the Director of Operations
            of
            Yanbian Airblower Factory. From June 2000 until December 2001, she served
            as the
            Head of Mining at Jilin Huadian City San Dao Ling Gold Mine in Jilin,
            China.
            From 1998 until May 2000, Ms. Chen was the General Manager of Jilin Ocean
            Hotel
            in Jilin, China. Ms. Chen is the sister of Dong Chen, our President and
            a
            Director.
 20
  Piguo
            Man: Mr. Man has been our Manager since the reorganization on February
            5, 2004.
            Prior to the reorganization, from March 2003 until joining us, Mr. Man
            was Vice
            General Manager of Laizhou Jia Sheng Stone Company. From November 2002
            until
            February 2003, Mr. Man served as the General Manager of the Laizhou Science
            and
            Technology Bureau, which consulted with agriculture and stone processing
            companies. From August 1998 until October 2002, Mr. Man served as the
            General
            Manager of the Laizhou Science and Technology Development Company.
 
 Camilla
            Maz: Ms. Maz was appointed as Treasurer in October 2003. Prior to this
            position,
            Ms. Maz worked for the past five years in the financial services industry
            as an
            assistant and advisor for multiple small and medium size companies in
            the United
            States and Canada through her consulting company Prosper Financial Inc.
            In 1993,
            Ms Maz played an important role in the financing, bid preparation to
            the
            Colombian government and subsequent implementation of cellular communications,
            in the northern region of Columbia; Ms. Maz has also been founder, owner
            and
            operator of several companies in South America. Ms. Maz holds a Bachelors
            Degree
            in Business Administration (BBA) with emphasis in Finance from Universidad
            de
            Los Andes, Bogota, Colombia. Ms. Maz is the sister-in-law of Michael
            Miller, our
            Vice-President of Investor Relations.
 
 Michael
            Miller: Mr Miller has served as our Vice President of Investor Relations
            since
            October 2003. Since January 2000, Mr. Miller has been the President and
            50%
            shareholder of Candide Investments Ltd. which has offered consulting
            services to
            a number of public companies, assisting them with corporate restructuring,
            mergers and acquisitions, raising capital and investor relations. From
            1997 to
            1999, Mr. Miller was an account executive with Canaccord Capital Corp.
            Mr.
            Miller is the brother-in-law of Camilla Maz, our Treasurer.
 
 Costas
            Takkas: Mr. Takkas has served as a member of our Board of Directors since
            October 2002. He has served as a director of the following Toronto Stock
            Exchange Venture Exchange (formerly the "VSE") companies: Serena Resources
            Ltd.
            (now named Capstone Gold Ltd.) (1998-2001) and Emerald Mining Corp. (1998-1999).
            He was also a director of Ourominas Minerals Inc. (1996-1997, now named
            Thistle
            Mining Ltd.) which is listed on the Toronto Stock Exchange. Mr. Takkas
            has been
            a member of the Institute of Chartered Accountants in England & Wales since
            1982. He graduated with a B.Sc. (Honors) and Associate to the Royal College
            of
            Science in Physics from the Imperial College of Science and Technology,
            University of London in 1978.
 21
  Stephen
            Spoonamore: Mr. Spoonamore has served as a member of our Board of Directors
            since March 2003. Since September 2003 he has served as the Director
            of
            Strategic Relationships for SendWordNow Inc., a firm that provides high-speed,
            high-volume disaster recovery communications. In January 2001, he founded
            and
            currently acts as the CEO of DVDojo that provides digital videodisc shooting,
            editing and production training and equipment in New York City. In January
            1999
            he co-founded RSW Management, a construction management firm that he
            sold later
            in 1999. In 1997 he founded CPR-Group that provided studio and show design
            services until its sale in 2002.
 
 Family
            Relationships
 
 Other
            than as set forth above, there are no familial relationships between
            members of
            our Board of Directors or our executive officers.
 
 Involvement
            in Certain Legal Proceedings
 
 Mr.
            Robert Miller, former Treasurer and Vice President of Investor Relations
            of the
            Company, the husband of Camilla Maz, our Treasurer and the brother of
            Michael
            Miller, our Vice President of Investor Relations, was a director of Nanovation
            Technologies Inc. ("Nanovation") from 1996 to 1999. Nanovation made switches
            and
            circuits for fiber optics networks and it filed for Chapter 11 bankruptcy
            protection in July 2001.
 
 Committees
            of the Board of Directors
 
 Our
            Audit
            Committee is chaired by Costas Takkas. Stephen Spoonamore and Dong Chen
            serve as
            the other members of the Audit Committee. The Audit Committee oversees
            our
            financial reporting processes and is responsible for reviewing our financial
            condition. The Audit Committee did not meet in 2003 since the Company
            was
            primarily focused on searching for new business opportunities.
 
 Audit
            Committee Financial Expert
 
 Our
            Board
            of Directors has determined that we have at least one audit committee
            financial
            expert serving on our audit committee, namely Costas Takkas. Mr. Takkas
            would
            not be considered independent, as that term is defined by the NASD because
            he
            was an officer of the Company within the past three years. Under the
            applicable
            Securities and Exchange Commission standard, an audit committee financial
            expert
            means a person who has the following attributes:
 
 •
                  An
                    understanding of generally accepted accounting principles and
                    financial
                    statements;
 •
                  The
                    ability to assess the general application of such principles
                    in connection
                    with the accounting for estimates, accruals and reserves;
 22
  •
                  Experience
                    preparing, auditing, analyzing or evaluating financial statements
                    that
                    present a breadth and level of complexity of accounting issues
                    that are
                    generally comparable to the breadth and complexity of issues
                    that can
                    reasonably be expected to be raised by the registrant's financial
                    statements, or experience actively supervising one or more persons
                    engaged
                    in such activities;
 •
                  An
                    understanding of internal controls and procedures for financial
                    reporting;
                    and
 •
                  An
                    understanding of audit committee
                    functions.
 
 Mr.
            Takkas received his designation as a chartered accountant from the Institute
            of
            Chartered Accountants in England and Wales in 1982. Early in his career
            he
            worked as a chartered accountant and auditor. He is now self-employed,
            investing
            his time and money in speculative projects.
 
 Compensation
            Committee
 
 Our
            Compensation Committee is chaired by Juan Chen. Costas Takkas and Piguo
            Man
            serve as the other members of the Compensation Committee. The Compensation
            Committee oversees the compensation of our executive officers and directors.
            Our
            Compensation Committee did not meet in 2003 since the Company was primarily
            focused on searching for new business opportunities and did not have
            operations.
 
 Compliance
            with Section 16(a) of the Securities Exchange Act of 1934
 
 Section
            16(a) of the Exchange Act requires our officers and directors, and persons
            who
            own more than 10% of the our common stock, to file reports of ownership
            and
            changes of ownership of such securities with the United States Securities
            and
            Exchange Commission. Based on a review of the our records, management
            believes
            that all filing requirements applicable to the our officers, directors
            and
            holders of more than 10% of our common stock were complied with during
            the 2003
            fiscal year, except that: with respect to Mr. Chen, a Form 3 was filed
            late;
            with respect to Ms. Chen, a Form 3 was filed late; with respect to Mr.
            Miller, a
            Form 3 was filed late; with respect to Ms. Maz a Form 3 was filed late,
            with
            respect to Mr. Stephen Spoonamore a Form 3 was filed late, and; with
            respect to
            Mr. Costas Takkas a Form 4 was filed late concerning the purchase of
            shares.
 
 Code
            of
            Ethics
 
 We
            do not
            yet have a Code of Ethics. The Board of Directors intends to discuss
            the
            preparation and adoption of a Code of Ethics at its next meeting. Due
            to the
            recent completion of the reorganization with Laizhou, the Board of Directors
            had
            decided to postpone the adoption of a code of ethics until the Company
            was able
            to focus its business plan and develop a greater infrastructure. Once
            we have
            adopted a Code of Ethics, a copy may be obtained by sending a written
            request to
            the Secretary of Company.
 23
  Item
            10.   Executive Compensation
 
 EXECUTIVE
            COMPENSATION SUMMARY
 
 The
            following table provides compensation information for the period indicated
            with
            respect to the persons who served as our President for the years ended
            December
            31, 2003, 2002 and 2001, and all other executive officers of Arbor receiving
            total salary and bonus in excess of $100,000 during the years ended December
            31,
            2003, 2002 and 2001 (collectively, the "Named Executive Officers"):
 
 SUMMARY
            COMPENSATION TABLE
 Long
                          Term CompensationAnnual
                          Compensation
                      Awards
                      Payouts(a)
                      (b)
                      (c)
                      (d)
                      (e)
                      (f)
                      (g)
                      (h)
                      (i)Name
                          and Principal Position
                      Year
                      Salary
                          ($)
                      Bonus($)
                      OtherAnnual
                          Compensation
                      Restricted
                          StockAwards
                          ($)
                      Securities
                          Under-lyingOptions/
                          SarS(#)
                      LTIPPayouts
                          ($)
                      All
                          Other Compensation
                        ($)Dong
                          Chen (1)
                      2003
                      0
                      0
                      0
                      0
                      0
                      0
                      0PresidentJuan
                          Chen (2)
                      2003
                      0
                      0
                      0
                      0
                      0
                      0
                      0CFOCostas
                          Takkas (3)
                      2003
                      0
                      0
                      $
                          18,000
                      0
                      0
                      0
                      0CEO
                          & President
                      2002
                      0
                      0
                      0
                      0
                      0
                      0
                      0Stephen
                          Spoonamore (4)
                      2003
                      0
                      0
                      $
                          27,000
                      0
                      0
                      0
                      0CFO
                          & SecretaryRobert
                          Miller (5)
                      2003
                      0
                      0
                      0
                      0
                      0
                      0
                      0Treasurer
                          & VP Investor RelationsCamilla
                          Maz (6)
                      2003
                      0
                      0
                      $
                          36,000
                      0
                      0
                      0
                      0TreasurerMichael
                          Miller (7)
                      2003
                      0
                      0
                      0
                      0
                      0
                      0
                      0VP
                          Investor RelationsJoginder
                          Brar (8)
                      2003
                      0
                      0
                      0
                      0
                      0
                      0
                      0CEO
                          & President
                      2002
                      0
                      0
                      0
                      0
                      0
                      0
                      02001
                      0
                      
                      
                      
                      600,000
                          (9)
                      
                      $  
                          30,000
 (1) Effective
            February 4, 2004 pursuant to the reorganization with Laizhou, Mr. Chen's
            salary
            is $2,000 per month.
 24
  (2) Effective
            February 4, 2004 pursuant to the reorganization with Laizhou, Ms. Chen's
            salary
            is $500 per month.
 (3) Mr.
            Takkas was President, Chief Executive Officer and director of our company
            from
            October 2002 until February 5, 2004 when he resigned as an officer but
            remained
            as a director. Prior to the reorganization with Laizhou, Mr. Takkas was
            paid
            $3,000 per month pursuant to a consulting agreement under which he provided
            management services to the Company.
 (4) Mr.
            Spoonamore was our Chief Financial Officer, Secretary and director from
            March
            2003 until February 5, 2004 when he resigned as an officer but remained
            as a
            director. Prior to the reorganization with Laizhou, Mr. Spoonamore was
            paid
            $3,000 per month pursuant to a consulting agreement under which he provided
            management services to the Company.
 (5) Mr.
            Robert Miller was our Treasurer and Vice President of Investor Relations
            from
            March 2003 until October 2003.
 (6) Ms.
            Maz
            was appointed Treasurer in October 2003.
 (7) Mr.
            Michael Miller was appointed Vice President of Investor Relations in
            October
            2003.
 (8) Mr.
            Brar
            resigned as President and a director of our company in March 2003.
 (9) The
            total
            value of the services rendered by Mr. Brar was $60,000. The services
            rendered
            included administrative duties, board duties, contract negotiations,
            financing
            services, production and distribution research, shareholder communication
            and
            organizational duties.
 
 Stock
            Options/SAR Grants
 
 No
            grants
            of stock options or stock appreciation rights were made during the fiscal
            year
            ended December 31, 2003, to our named executive officers or any other
            parties.
 
 On
            February 4, 2004, pursuant to the reorganization with Laizhou, we issued
            options
            to purchase 840,000 shares of our common stock to certain directors,
            officers
            and employees of our newly reorganized company.
 
 Employment
            Contracts and Termination of Employment or Change of Control
 
 We
            have
            no plans or arrangements in respect of remuneration received or that
            may be
            received by our executive officers to compensate such officers in the
            event of
            termination of employment (as a result of resignation, retirement, change
            of
            control) or a change of responsibilities following a change of control,
            where
            the value of such compensation exceeds $60,000 per executive
            officer.
 
 Director
            Compensation
 
 Both
            of
            our directors, Costas Takkas and Stephen Spoonamore had consulting agreements
            with the Company during the year ended December 31, 2003. Mr. Takkas's
            consulting agreement provided for payment of $3,000.00 per month for
            providing
            management services to the Company. This agreement was in effect from
            July 1,
            2003 until December 31, 2003. Mr. Spoonamore's consulting agreement provided
            for
            payment of $3,000.00 per month for providing management services to the
            Company.
            This agreement was in effect from April 1, 2003 until December 31,
            2003.
 25
  Other
            than set forth above, no cash compensation was paid to any of our directors
            for
            services as a director during the fiscal year ended December 31, 2003.
            We have
            no standard arrangement pursuant to which our Board of Directors are
            compensated
            for their services in their capacity as directors except for the granting
            from
            time to time of incentive stock options. The Board of Directors may award
            special remuneration to any director undertaking any special services
            on behalf
            of our company other than services ordinarily required of a director.
            All
            authorized out-of-pocket expenses incurred by a director on our behalf
            will be
            subject to reimbursement upon our receipt of required supporting document
            of
            such expenses. No director received and/or accrued any compensation for
            his
            services as a director, including committee participation and/or special
            assignments.
 
 Item
            11.  Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters
 
 Security
            Ownership of Certain Beneficial Owners and Management.
 
 The
            following table sets forth certain information known to us with respect
            to the
            beneficial ownership of our common stock as of April 6, 2004 and (i)
            all persons
            who are known to us to be beneficial owners of five percent or more of
            the
            common shares, (ii) each of our Directors, (iii) the Named Executive
            Officers
            named in the "Executive Compensation" section of this Annual Report and
            (iv) all
            current Directors and executive officers as a group.
 
 NAME
                      AND ADDRESS OF BENEFICIAL OWNER (1)
                  
                  SHARES
                      BENEFICIALLY OWNED
                  
                  %
                      OF CLASS OWNEDDong
                      Chen
                  
                  
                  698,396
                  
                  
                  4.99
                  %Juan
                      Chen
                  
                  
                  667,268
                  
                  
                  4.67
                  %Piguo
                      Man
                  
                  
                  403,074
                  
                  
                  2.88
                  %Costas
                      Takkas
                  
                  
                  525,000
                  (2)
                  
                  3.75
                  %Stephen
                      Spoonamore
                  
                  
                  113,000
                  (3)
                  
                  **Camilla
                      Maz
                  
                  
                  43,450
                  
                  
                  **Michael
                      Miller
                  
                  
                  105,000
                  (4)
                  
                  **Officers
                      and Directors as a group (seven persons)
                  
                  
                  2,555,188
                  
                  
                  18.25
                  %
  (1)
                  Unless
                    otherwise stated, the address of all persons in the table is
                    c/oChina
                    Granite Corporation, 2642 Collins Avenue, Suite 305, Miami Beach,
                    Florida
                    33140.
 (2)
                  Shares
                    beneficially owned by Mr. Takkas include options to purchase
                    up to 75,000
                    shares of our common stock that may be exercised in whole or
                    in part
                    within 60 days of April 6, 2004.
 26
  (3)
                  Shares
                    beneficially owned by Mr. Spoonamore include options to purchase
                    up to
                    75,000 shares of our common stock that may be exercised in whole
                    or in
                    part within 60 days of April 6, 2004.
 (4)
                  Shares
                    beneficially owned by Mr. Miller include options to purchase
                    up to 75,000
                    shares of our common stock that may be exercised in whole or
                    in part
                    within 60 days of April 6, 2004. Mr. Miller is the beneficial
                    owner of an
                    additional 30,000 shares of our common stock through his control
                    of
                    Candide Investments Ltd. which owns 30,000 shares of our common
                    stock.
 **
                  Indicates
                    less than 1%
 
 Beneficial
            ownership is determined in accordance with the rules of the Securities
            and
            Exchange Commission and includes voting or investment power with respect
            to the
            securities. Shares of Common stock subject to options or warrants that
            are
            currently exercisable or exercisable within 60 days of April 6, 2004
            are deemed
            to be outstanding and to be beneficially owned by the person or group
            holding
            such options or warrants for the purpose of computing the percentage
            ownership
            of such person or group but are not treated as outstanding for the purpose
            of
            computing the percentage ownership of any other person or group. Unless
            otherwise indicated, the address for each of the individuals listed in
            the table
            is care of Arbor, Inc., 2642 Collins Avenue, Suite 305, Miami Beach,
            Florida
            33140. Unless otherwise indicated by footnote, the persons named in the
            table
            have sole voting and sole investment power with respect to all shares
            of common
            stock shown as beneficially owned by them, subject to applicable community
            property laws. Percentage of beneficial ownership is based on 13,998,000
            shares
            of our common stock outstanding as of April 6, 2004.
 
 Item
            12.  Certain Relationships and Related Transactions
 
 In
            2002,
            we retained a consultant, Auron 2000, to assist our management. The services
            to
            be rendered include administrative duties, contract negotiations, financing
            services and shareholder communication. Auron 2000 received compensation
            of
            $3,000 per month plus expenses. Auron 2000 was wholly owned by Robert
            H. Miller,
            who was our Treasurer and Vice-President of Investor Relations, up until
            January
            2003, when he sold his interest in Auron 2000. We entered into an agreement
            with
            Prosper Financial Inc. to provide the services Auron 2000 formerly provided
            to
            us under the same terms as our engagement with Auron 2000. Maria C. Maz,
            our
            Treasurer and the wife of Robert H. Miller, owns Prosper Financial
            Inc.
 
 Mr.
            Costas Takkas, one or our directors, has a pre-existing relationship
            with CPL
            Construcoes e Comercio Inc. Mr. Takkas is owed $2,000,000 from CPL for
            loans
            made by Mr. Takkas to CPL for registration and taxes on the land owned
            by CPL in
            Tocantins, Brazil, working capital, legal opinions from various attorneys
            and
            other costs relating to financing sought for the project. Mr. Takkas
            has agreed
            to assign $1,000,000 of his interest in this debt to Arbor would occur
            if Arbor
            funded $3,000,000 to the Brazil Project. This did not occur and there
            is no
            obligation.
 
 Both
            of
            our directors, Costas Takkas and Stephen Spoonamore had consulting agreements
            with the Company during the year ended December 31, 2003. Mr. Takkas's
            consulting agreement provided for payment of $3,000.00 per month for
            providing
            management services to the Company. This agreement was in effect from
            July 1,
            2003 until December 31, 2003. Mr. Spoonamore's consulting agreement provided
            for
            payment of $3,000.00 per month for providing management services to the
            Company.
            This agreement was in effect from April 1, 2003 until December 31,
            2003.
 27
  Conflicts
            Related to Other Business Activities.
 
 The
            persons serving as our officers and directors have existing responsibilities
            and, in the future, may have additional responsibilities, to provide
            management
            and services to other entities in addition to us. As a result, conflicts
            of
            interest between us and the other activities of those persons may occur
            from
            time to time.
 
 We
            will
            attempt to resolve any such conflicts of interest in our favor. Our officers
            and
            directors are accountable to us and our shareholders as fiduciaries,
            which
            requires that such officers and directors exercise good faith and integrity
            in
            handling our affairs. A shareholder may be able to institute legal action
            on our
            behalf or on behalf of that shareholder and all other similarly situated
            shareholders to recover damages or for other relief in cases of the resolution
            of conflicts in any manner prejudicial to us.
 
 Item
            13.
            Exhibits and Reports on Form 8-K
 
 (a)
            Exhibits
   3.1*
                  Amended
                      and Restated Articles of Incorporation (incorporated by reference
                      toexhibit 3.1 to the Company's current report on Form 8-K filed
                      on
                      February 20, 2004).3.2*
                  Amended
                      and Restated Bylaws (incorporated by reference to exhibit 3.1
                      to the
                      Company's current report on Form 8-K filed on February 20,
                      2004).4.2*
                  Form
                      of Subscription Agreement10.3*
                  Consulting
                      Agreement10.4*
                  Stockholder
                      Transfer Agreement31.1
                  Certification
                      of Chairman and Chief Executive Officer Pursuant to Section
                      302of the
                      Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350) (transmitted
                      herewith).31.2
                  Certification
                      of Vice Chairman and Chief Financial Officer Pursuant to Section
                      302 of
                      the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350) (transmitted
                      herewith).32.1
                  Written
                      Statement of Chairman and Chief Executive Officer Pursuant
                      to Section 906
                      of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
                      (transmitted
                      herewith).32.2
                  Written
                      Statement of Vice Chairman and Chief Financial Officer Pursuant
                      to Section
                      906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
                      (transmitted herewith).
  
  *
              Previously filed
 (b)
            Reports of Form 8-K
 
 On
            February 20, 2004 we filed a current report on Form 8-K to announce the
            completion of the reorganization with Laizhou.
 
 Item
            14.
            Principal Accountant Fees and Services
 
 The
            following table shows the aggregate fees billed to the Corporation for
            professional services by Braverman and Company, our independent auditor,
            for
            fiscal years 2003 and 2002:
 
 FISCAL
                      2003
                  
                  FISCAL
                      2002Audit
                      Fees
                  
                  $
                  8,247
                  
                  $
                  4,257Audit-Related
                      Fees
                  
                  $
                  0
                  
                  $
                  0Tax
                      Fees
                  
                  $
                  750
                  
                  $
                  0All
                      Other Fees
                  
                  $
                  0
                  
                  $
                  0Total
                  
                  $
                  8,997
                  
                  $
                  5,757
 
 Audit
            Fees. This category includes the aggregate fees billed for professional
            services
            rendered for the audits of the Company's consolidated financial statements
            for
            fiscal years 2003 and 2002, for the reviews of the financial statements
            included
            in the Company's quarterly reports on Form 10-QSB during fiscal 2003
            and 2002,
            and for services that are normally provided by the independent auditors
            in
            connection with statutory and regulatory filings or engagements for the
            relevant
            fiscal years.
 
 Audit-Related
            Fees. This category includes the aggregate fees billed in each of the
            last two
            fiscal years for assurance and related services by the independent auditors
            that
            are reasonably related to the performance of the audits or reviews of
            the
            financial statements and are not reported above under "Audit Fees," and
            generally consist of fees for other attest engagements under professional
            auditing standards, accounting and reporting consultations, internal
            control-related matters, and audits of employee benefit plans.
 
 Tax
            Fees.
            This category includes the aggregate fees billed in each of the last
            two fiscal
            years for professional services rendered by the independent auditors
            for tax
            compliance, tax planning and tax advice. Of this amount, $750 was
            related to tax compliance services for review of federal and state tax
            returns
            for 2003.
 29
  All
            Other
            Fees. This category includes the aggregate fees billed in each of the
            last two
            fiscal years for products and services provided by the independent auditors
            that
            are not reported above under "Audit Fees," "Audit-Related Fees," or "Tax
            Fees."
 
 The
            Audit
            Committee considered the compatibility of the non-audit-related services
            performed by and fees paid to Braverman and Company in 2003 and the proposed
            non-audit-related services and proposed fees for 2004 and determined
            that such
            services and fees are compatible with the independence of Braverman and
            Company.
            During 2003, Braverman and Company did not utilize any leased personnel
            in
            connection with the audit.
 
 SIGNATURES
 
 In
            accordance with section 13 and 15 (d) of the Securities Exchange Act
            of 1934,
            the registrant has duly caused this report to be signed on its behalf
            by the
            undersigned, thereunto duly authorized.
 
 China
            Granite Corporation
 
  /s/
                      Dong Chen, President and
                      CEO/Director
 August
              3,
              2005
 
 In
            accordance with the Securities Exchange Act of 1934, this Annual Report
            on Form
            10-KSB/A Amendment 2 has been signed below by the following persons on
            behalf of the registrant and in the capacities and on the dates
            indicated.
 
 SIGNATURE
                  
                  TITLE
                  
                  DATE/s/
                      Dong Chen
                  
                  President
                      and Director
                  
                  August
                        3, 2005Dong
                      Chen/s/
                      Costas Takkas
                  
                  Chief
                      Financial Officer
                  
                  August
                        3, 2005Costas
                      Takkas
                  
                  and
                      Director/s/
                      Piguo Man
                  
                  Director
                  
                  August
                        3, 2005Piguo
                      ManDirectorStephen
                    Spoonamore
  30
  INDEPENDENT
            AUDITOR'S REPORT
 
 TO
            THE
            BOARD OF DIRECTORS AND AUDIT COMMITTEE
 CHINA
            GRANITE CORPORATION
 CALGARY,
            ALBERTA, CANADA
 
 We
            have
            audited the accompanying balance sheet of China Granite Corporation,
            Formerly
            Arbor, Inc. (a Nevada corporation in the development stage) as of December
            31,
            2003, and the related statements of operations, stockholders' Equity,
            and cash
            flows for each of the two years in the period then ended and For the
            period from
            February 25, 1999 (inception) to December 31, 2003. 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 auditing standards generally
            accepted in
            the United States of America. Those standards require that we plan and
            perform
            the audits to obtain reasonable assurance about whether the financial
            statements
            are free of material misstatement. An audit includes examining, on a
            test basis,
            evidence supporting the amounts and disclosures in the financial statements.
            An
            audit also includes assessing the accounting principles used and significant
            estimates made by management, as well as evaluating the overall financial
            statement presentation. We believe that our audits provide a reasonable
            basis
            for our opinion.
 
 In
            our
            opinion, the financial statements referred to above present fairly, in
            all
            material respects, the financial position of China Granite Corporation
            at
            December 31, 2003, and the results of its operations and its cash flows
            for each
            of the two years in the period then ended and for the period from February
            25,
            1999 (inception) to December 31, 2003, in conformity with accounting
            principles
            generally accepted in the United States of America.
 
 Braverman
            & Company, P.C.
 Prescott,
            Arizona
 March
            25,
            2004
 F-1
  CHINA
            GRANITE CORPORATION
 (A
            DEVELOPMENT STAGE COMPANY)
 BALANCE
            SHEET
 DECEMBER
            31, 2003
 
 
 ASSETS
 
 CURRENT
                      ASSETSCash
                  
                  $
                  397,810Note
                      receivable from corporate joint venture
                  
                  
                  325,000Accrued
                      interest
                  
                  
                  2,493Deferred
                      charge
                  
                  
                  11,513TOTAL
                      CURRENT ASSETS
                  
                  
                  736,816$
                  736,816LIABILITIES
                    AND STOCKHOLDERS' EQUITYCURRENT
                      LIABILITIESAccounts
                      payable
                  
                  $
                  4,506Accounts
                      payable-related party
                  
                  
                  4,402TOTAL
                      CURRENT LIABILITIES
                  
                  
                  8,908COMMITMENTS
                      AND CONTINGENCIESSTOCKHOLDERS'
                      EQUITYCommon
                      stock, par value $.001, 25,000,000shares authorized, 8,998,000,000
                      issued and outstanding
                  
                  
                  8,998Paid-in
                      capital
                  
                  
                  1,171,802Contributed
                      capital
                  
                  
                  102,319(Deficit)
                      accumulated during the development stage
                  
                  
                  (555,210
                  )Total
                      Stockholders' Equity
                  
                  
                  727,908$
                  736,816
 
 SEE
            ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 F-2
  CHINA
            GRANITE CORPORATION
 (A
            DEVELOPMENT STAGE COMPANY)
 STATEMENTS
            OF OPERATIONS
 
 
 CUMMULATIVEFROM
                      FEBRUARY 25,1999(INCEPTION)YEAR
                      ENDED DECEMBER 31,
                  
                  TODECEMBER
                      31,2003
                  
                  2002
                  
                  2003REVENUE-
                      INTEREST
                  
                  $
                  2,493
                  
                  $
                  -
                  
                  $
                  2,493EXPENSESGeneral
                      and adminstrative
                  
                  
                  238,182
                  
                  
                  83,120
                  
                  
                  556,675Interest
                  
                  
                  889
                  
                  
                  139
                  
                  
                  1,028TOTAL
                      EXPENSES
                  
                  
                  239,071
                  
                  
                  83,259
                  
                  
                  557,703NET
                      (LOSS)
                  
                  $
                  (236,578
                  )
                  $
                  (83,259
                  )
                  $
                  (555,210
                  )NET
                      (LOSS) PER COMMON SHARE-BASIC
                  
                  $
                  (0.03
                  )
                  $
                  (0.01
                  )WEIGHTED
                        AVERAGE NUMBEROF COMMON SHARES OUTSTANDING
                  
                  
                  7,943,833
                  
                  
                  7,848,000
 
 SEE
            ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 F-3
  CHINA
            GRANITE CORPORATION
 (A
            DEVELOPMENT STAGE COMPANY)
 STATEMENT
            OF CHANGES IN STOCKHOLDERS' EQUITY
   (DEFICIT)ACCUMULATEDDURING
                      THECOMMON
                      STOCK
                  
                  PAID-IN
                  
                  CONTRIBUTED
                  
                  DEVELOPMENTSHARES
                  
                  AMOUNT
                  
                  CAPITAL
                  
                  CAPITAL
                  
                  STAGE
                  
                  TOTALBALANCES,
                      AT INCEPTION
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Issuance
                      of stockFor
                      services @ $.05 per share
                  
                  
                  1,200,000
                  
                  
                  1,200
                  
                  
                  58,800
                  
                  
                  
                  
                  
                  
                  
                  
                  60,000For
                      cash @ $.05 per share
                  
                  
                  1,416,000
                  
                  
                  1,416
                  
                  
                  69,384
                  
                  
                  
                  
                  
                  
                  
                  
                  70,800Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (109,504
                  )
                  
                  (109,504
                  )BALANCES,
                      DECEMBER 31, 1999
                  
                  
                  2,616,000
                  
                  
                  2,616
                  
                  
                  128,184
                  
                  
                  -
                  
                  
                  (109,504
                  )
                  
                  21,296Contributed
                      capital
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  83,218
                  
                  
                  
                  
                  
                  83,218Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (101,549
                  )
                  
                  (101,549
                  )BALANCES,
                      DECEMBER 31, 2000
                  
                  
                  2,616,000
                  
                  
                  2,616
                  
                  
                  128,184
                  
                  
                  83,218
                  
                  
                  (211,053
                  )
                  
                  2,965Contributed
                      capital
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  19,101
                  
                  
                  
                  
                  
                  19,101Stock
                      split, 3 for 1
                  
                  
                  5,232,000
                  
                  
                  5,232
                  
                  
                  (5,232
                  )
                  
                  
                  
                  
                  
                  
                  
                  -Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (24,321
                  )
                  
                  (24,321
                  )BALANCES,
                      DECEMBER 31, 2001
                  
                  
                  7,848,000
                  
                  
                  7,848
                  
                  
                  122,952
                  
                  
                  102,319
                  
                  
                  (235,374
                  )
                  
                  (2,255
                  )Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (83,259
                  )
                  
                  (83,259
                  )BALANCES,
                      DECEMBER 31, 2002
                  
                  
                  7,848,000
                  
                  $
                  7,848
                  
                  $
                  122,952
                  
                  $
                  102,319
                  
                  $
                  (318,633
                  )
                  $
                  (85,514
                  )Proceeds
                      from issuance of stock:PPM,
                      December 11, 2003 @$.83 per share
                  
                  
                  600,000
                  
                  
                  600
                  
                  
                  499,400
                  
                  
                  
                  
                  
                  
                  
                  
                  500,000PPM,
                      December 31, 2003 @$1.00 per share
                  
                  
                  550,000
                  
                  
                  550
                  
                  
                  549,450
                  
                  
                  
                  
                  
                  
                  
                  
                  550,000Net
                      (loss) for the year
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  (236,578
                  )
                  
                  (236,578
                  )BALANCES,
                      DECEMBER 31, 2003
                  
                  
                  8,998,000
                  
                  $
                  8,998
                  
                  $
                  1,171,802
                  
                  $
                  102,319
                  
                  $
                  (555,210
                  )
                  $
                  727,908
 
 SEE
            ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 F-4
  CHINA
            GRANITE CORPORATION
 (A
            DEVELOPMENT STAGE COMPANY)
 STATEMENTS
            OF CASH FLOWS
  CUMMULATIVEFROM
                      FEBRUARY 25,1999(INCEPTION)TOYEAR
                      ENDED DECEMBER 31,
                  
                  DECEMBER
                      31,2003
                  
                  2002
                  
                  2003OPERATING
                      ACTIVITIESNet
                      (loss) from operations
                  
                  $
                  (236,578
                  )
                  $
                  (83,259
                  )
                  $
                  (555,210
                  )Contributed
                      services
                  
                  
                  102,319Issuance
                      of common stock for services
                  
                  
                  60,000Increase
                      (decrease) in cash resulting from changes in:Accrued
                      interest
                  
                  
                  (2,493
                  )
                  
                  (2,493
                  )Deferred
                      charges
                  
                  
                  (11,513
                  )
                  
                  (11,513
                  )Accounts
                      payable
                  
                  
                  (20,197
                  )
                  
                  23,448
                  
                  
                  4,505Accounts
                      payable-related party
                  
                  
                  (55,409
                  )
                  
                  59,811
                  
                  
                  4,402Officer
                      advance
                  
                  
                  (1,000
                  )NET
                      CASH USED BY OPERATING ACTIVITIES
                  
                  
                  (327,190
                  )
                  
                  -
                  
                  
                  (397,990
                  )INVESTING
                      ACTIVITIESIncrease
                      in note receivable
                  
                  
                  (325,000
                  )
                  
                  -
                  
                  
                  (325,000
                  )NET
                      CASH USED BY FINANCING ACTIVITIES
                  
                  
                  (325,000
                  )
                  
                  -
                  
                  
                  (325,000
                  )FINANCING
                      ACTIVITIESProceeds
                      from sale of common stock
                  
                  
                  1,050,000
                  
                  
                  -
                  
                  
                  1,120,800NET
                      CASH PROVIDED BY FINANCING ACTIVITIES
                  
                  
                  1,050,000
                  
                  
                  -
                  
                  
                  1,120,800NET
                      INCREASE IN CASH
                  
                  
                  397,810
                  
                  
                  -
                  
                  
                  397,810CASH,
                      BEGINNING OF PERIOD
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -CASH,
                      END OF PERIOD
                  
                  $
                  397,810
                  
                  $
                  -
                  
                  $
                  397,810OTHER
                      SUPPLEMENTAL INFORMATIONINTEREST
                      PAID
                  
                  $
                  889
                  
                  $
                  139
                  
                  $
                  1,028
 
 SEE
            ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
 F-5
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            1 -
            THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
 
 BACKGROUND
 
 China
            Granite Corporation, formerly Arbor, Inc. (the Company) was organized
            February
            25, 1999, under the laws of the State of Nevada, as originally E Investments,
            Inc. As of December 31, 2003 the Company had no revenue or operations
            and, in
            accordance with SFAS No.7, is considered a development stage company.
            The fiscal
            year end of the Company is December 31.
 
 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 which affect the reported amounts of assets
            and
            liabilities and disclosure of contingent assets and liabilities, at the
            date of
            the Financial Statements, and the reported amounts of revenue and expenses
            during the reporting period. Actual results could differ from those
            estimates.
 
 INCOME
            TAXES
 
 Income
            taxes are provided for using the liability method of accounting in accordance
            with Statement of Financial Accounting Standards No. 109 (SFAS #109)
            "Accounting
            for Income Taxes". A deferred tax asset or liability is recorded for
            all
            temporary difference between financial and tax reporting. Deferred tax
            expense
            (benefit) results from the net change during the year of deferred tax
            assets and
            liabilities.
 
 LOSS
            PER
            SHARE
 
 Net
            loss
            per share is provided in accordance with Statement of Financial Accounting
            Standards No. 128 (SFAS No.128) "Earnings Per Share". Basic loss per
            share is
            computed by dividing net loss available to common stockholders by the
            weighted
            average number of common shares outstanding during the period.
 
 CONCENTRATIONS
            OF CREDIT RISK
 
 The
            Company may have bank deposits on hand which are in excess of federally
            insured
            limits.
 
 CASH
            EQUIVALENTS
 
 The
            Company considers all highly liquid investments with original maturities
            of
            three months or less to be cash equivalents.
 F-6
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            2 -
            RELATED PARTY TRANSACTIONS
 
 MANAGEMENT
            SERVICES
 
 Prosper
            Financial, Inc., a company owned by the Treasurer of the Company, provided
            management consulting services and office overhead for the Company during
            the
            year 2003, for $3000 per month. In the prior year similar services were
            provided
            by Auron 2000, a company owned by the former Treasurer, at a cost to
            the Company
            of $59,811.
 
 ACCOUNTS
            PAYABLE-RELATED PARTY
 
 During
            the year the Company accrued $18,000 for compensation for consulting
            services
            provided by the acting president/director of the Company in connection
            with an
            agreement to compensate him at the rate of $3,000 per month for twelve
            months
            effective July 1, 2003, and also approved payment for approximately $
            36,400 for
            expenses he incurred on behalf on its behalf during 2002 and 2003. Of
            this
            total, $50,000 was converted to common stock at $1 per share as of December
            31,
            2003, and the balance of $4,402 remained unpaid at that date.
 
 CONSULTING
            AGREEMENT
 
 The
            Company entered into a one year consulting agreement with the Secretary/director
            of the Company commencing April 1, 2003, for compensation of $3,000 per
            month.
            The entire compensation for 2003 of $27,000, and expenses incurred of
            $3,000
            were converted to 30,000 shares of common stock at $1 per share as of
            December
            31, 2003.
 
 CORPORATE
            JOINT VENTURE
 
 The
            acting president/director of the Company has a pre-existing relationship
            with
            CPL Construcoes e Comercio Inc. a joint venturer in a Brazilian based
            company,
            CPLArbor do brasil Constutora Ltda (CPLARBOR) in which the Company is
            to receive
            a 50 percent equity interest as of December 31, 2003, at no cost. The
            Company
            loaned CPLARBOR in October 2003, $325,000 on an unsecured basis. The
            acting
            president/director is owed $2,000,000 from CPL for loans made by him
            to CPL for
            registration and taxes on the land owned by CPL in Tocantins, Brazil,
            working
            capital, legal opinions from various attorneys and other costs relating
            to
            financing sought for the project. See Note 5 of the Notes to financial
            statements for a further discussion of this transaction.
 F-7
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            3 -
            INCOME TAXES
 
 There
            was
            no current federal tax provision or benefit recorded for any period since
            inception, nor were there any recorded deferred income tax assets as
            such
            amounts were completely offset by valuation allowances. Substantially
            all
            expenses incurred to date are considered start-up costs for income tax
            purposes
            except for expenses provided as contributed capital, and will become
            deductible
            once the Company's business commences. Such costs which total $456,158
            as of
            December 31, 2003 are subject to amortization over a 5 year period, unless
            permanently capitalized. The Company has net operating loss carryovers
            for
            income tax purposes of $1,028 as of December 31, 2003, expiring by
            2023.
 
 The
            following is an analysis of deferred tax assets for as of December 31,
            2002 and
            2003.
  Deferred
                  
                  ValuationTax
                      Assets
                  
                  Allowance
                  
                  BalanceDeferred
                      tax assets at December 31, 2002
                  
                  $
                  73,661
                  
                  $
                  (73,661
                  )
                  $
                  -0-Additions
                      for 2003
                  
                  
                  0,437
                  
                  
                  (80,437
                  )
                  
                  -0-Deferred
                      tax assets at December 31, 2003
                  
                  $
                  155,498
                  
                  $
                  (155,498
                  )
                  $
                  -0-
  The
            following is reconciliation from the expected statutory federal income
            tax rate
            to the Company's actual income tax rate for the years ended December
            31:
  2003
                  
                  2002Expected
                      income tax (benefit) at federal statutory tax rate
                  
                  
                  34
                  %
                  
                  34
                  %Valuation
                      allowance
                  
                  
                  (
                      34
                  )%
                  
                  (34
                  )%Actual
                      income tax (benefit)
                  
                  
                  0
                  %
                  
                  0
                  %
 
 In
            accordance with FASB #109, the valuation allowance was based on the results
            of
            operations as of December 31, 2003.
 
 NOTE
            4 -
            LETTERS OF INTENT DURING 2003
 
 THE
            ABUCCO PROJECT
 
 The
            Company entered into a letter of intent to acquire Abucco Technology,
            Inc., a
            British Columbia based technology company (Abucco) in March 2003 for
            4,786,000
            restricted common shares of the Company, in exchange for all of the common
            stock
            outstanding of Abucco. The letter of intent expired in September 2003
            without
            renewal or extension.
 F-8
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            4 -
            LETTERS OF INTENT DURING 2003 (CONTINUED)
 
 THE
            CHINA
            PROJECT
 
 In
            November 2003 the Company entered into a letter of intent to acquire
            an interest
            in a China based company, Laizhou Jia Sheng Stone Company Limited, in
            connection
            with a proposed stock exchange transaction which would transfer control
            to the
            Chinese company, if completed. During 2003, the Company paid and expensed
            approximately $80,000 in legal, audit and accounting fees in furtherance
            of this
            project. This transaction was concluded successfully in February 2004,
            as more
            fully discussed in the Subsequent Events footnote below.
 
 NOTE
            5 -
            NOTE RECEIVABLE FROM CORPORATE JOINT VENTURE
 
 In
            October 2003, after an initial letter of intent, the Company provided
            an
            unsecured loan of $325,000 to CPLArbor do brasil Constutora Ltda (CPLARBOR),
            a
            corporation formed on February 19, 2003, in the State of Sao Paulo, Brazil,
            to
            acquire undeveloped real estate and construct residential housing units.
            CPLARBOR is in the development stage, in accordance with FASB #7. The
            loan bears
            interest at LIBOR rate plus 4 percent per annum and is due with accrued
            interest
            in October 2004.
 
 As
            of
            December 31, 2003, the audited financial statements of CPLARBOR revealed
            the
            following financial position:
 
 Assets
                  
                  
                  
                  
                  LiabilitiesCash
                  
                  $
                  112,093
                  
                  Note
                      payable to China Granite Corp.Advances
                  
                  
                  8,054
                  
                  with
                      accrued interest
                  
                  $
                  327,693UndevelopedReal
                      estate
                  
                  
                  178,942
                  
                  Shareholders'
                      Equity
                  
                  
                  (26,431)Fixed
                      assets & other
                  
                  
                  2,173TOTAL
                      ASSETS
                  
                  $
                  301,262
                  
                  TOTAL
                      LIABILITIES & EQUITY
                  
                  $
                  301,262
  Shareholders'
            equity consisted only of the net loss for 2003 since no capital was paid
            in by
            either joint venturer. The net loss of $26,431 was net of interest income
            of
            $3,082 and included interest expense payable to the Company of
            $2,693.
 
 The
            50%
            corporate joint venture interest is considered by the Company only as
            contingent
            collateral for the loan as of December 31, 2003, since the shares evidencing
            the
            equity interest were not transferred into the name of the Company by
            that date,
            and it has decided in 2004 to sell its interest therein. Accordingly,
            no portion
            of the equity in the net loss of the corporate joint venture was recorded
            by the
            Company as of December 31, 2003.
 F-9
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            5 -
            NOTE RECEIVABLE FROM CORPORATE JOINT VENTURE (CONTINUED)
 
 The
            loan
            to CPL was not considered impaired as a result of the limited activities
            of the
            corporate joint venture as of December 31, 2003, but the loan could become
            impaired subsequent to 2004 if, as a result of any disposition of the
            Company's
            potential interest in the joint venture, the joint venture is unable
            to obtain
            additional, necessary financing to proceed with its real estate development
            plans, or is unable to realize the value of its assets and settle its
            liabilities in the normal course of its business activities, should it
            be
 
 unable
            to
            either attract a new joint venturer, or be unable to complete its pending
            project for any other reason.
 
 NOTE
            6 -
            THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
 Below
            is
            a listing of the most recent accounting standards and their effect on
            the
            Company.
 
 SFAS
            148
            Accounting for Stock-Based Compensation-Transition and Disclosure
 
 Amends
            FASB 123 to provide alternative methods of transition for an entity that
            voluntarily changes to the fair value based method of accounting for
            stock-based
            employee compensation.
 
 SFAS
            149
            Amendment of Statement 133 on Derivative Instruments and Hedging
            Activities
 
 This
            Statement amends and clarifies financial accounting and reporting for
            derivative
            instruments, including certain derivative instruments embedded in other
            contracts (collectively referred to as derivatives) and for hedging activities
            under FASB Statement NO. 133, Accounting for Derivative Instruments and
            Hedging
            Activities.
 
 SFAS
            150
            Financial Instruments with Characteristics of both Liabilities and
            Equity
 
 This
            Statement requires that such instruments be classified as liabilities
            in the
            balance sheet. SFAS 150 is effective for financial instruments entered
            into or
            modified after May 31, 2003.
 
 INTERPRETATION
            NO. 46 (FIN 46)
 
 Effective
            January 31, 2003, The Financial Accounting Standards Board requires certain
            variable interest entities to be consolidated by the primary beneficiary
            of the
            entity if the equity investors in the entity do not have the characteristics
            of
            a continuing financial interest or do not have sufficient equity at risk
            for the
            entity to finance its activities without additional subordinated financial
            support from other parties. The Company has not invested in any such
            entities,
            and does not expect to do so in the foreseeable future.
 
 The
            adoption of these new Statements is not expected to have a material effect
            on
            the Company's financial position, results or operations, or cash
            flows.
 F-10
  CHINA
            GRANITE CORPORATION
 (a
            Development Stage Company)
 
 NOTES
            TO
            FINANCIAL STATEMENTS
 
 NOTE
            7 -
            SUBSEQUENT EVENTS
 
 THE
            CHINA
            PROJECT
 
 On
            February 5, 2004 the Company entered into a stock exchange transaction
            with
            China Laizhou Bay Mining International Corporation, a corporation organized
            under the laws of the British Virgin, Islands ("Laizhou") which owns
            all of the
            outstanding common stock of Laizhou Jia Sheng Stone Company Limited,
            resulting
            in a change of control of the Company. The Company acquired all of the
            issued
            and outstanding common stock of Laizhou for 8,500,000 shares of restricted
            common stock of which 5 million shares were represented by newly issued
            shares
            of the Company, and the balance represented by shares held by the principal
            shareholder of the Company. Laizhou is considered the accounting acquirer
            and
            all future financial statements will be that of the acquirer and its
            subsidiaries which include the company, whose assets will be consolidated
            at
            fair value.
 
 The
            majority of the Company's funds available as of December 31, 2003, and
            amounts
            raised subsequently of approximately $600,000 were used to finance additional
            costs and expenses of Laizhou Jia Sheng Stone Company Limited. In addition,
            $100,000 was transferred in trust to ultimately assist in CPLARBOR's
            development.
 
 STOCK
            OPTIONS/SAR GRANTS
 
 No
            grants
            of stock options or stock appreciation rights were made during the fiscal
            year
            ended December 31, 2003. On February 4, 2004, pursuant to the reorganization
            with Laizhou, options were issued to purchase 840,000 shares of common
            stock to
            certain directors, officers and employees of the newly reorganized
            company.
 
 CONSULTING
            AGREEMENTS WITH MANAGEMENT
 
 As
            a
            result of the stock exchange transaction with Laizhou, the contracts
            with the
            acting president and secretary were terminated.
 F-11
  **Report
              of Registered Public Accounting Firms**
  To
                the
                Stockholders and the Board of Directors of
 
 **Laizhou
                Jia Sheng Stone Company Limited**
  
 We
                have
                audited the accompanying balance sheet of Laizhou Jia Sheng Stone
                Company
                Limited (the “Company”) as of December 31, 2003, and the related statements of
                operations, stockholders’ equity and cash flows for the period from January 9,
                2003 (date of incorporation) to December 31, 2003. 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
                audit.
 
 We
                conducted our audit in accordance with auditing standards generally
                accepted of
                the Public Company Accounting Oversight Board (United States). Those
                standards
                require that we plan and perform the audit to obtain reasonable assurance
                about
                whether the financial statements are free of material misstatement.
                An audit
                includes examining, on a test basis, evidence supporting the amounts
                and
                disclosures in the financial statements. An audit also includes assessing
                the
                accounting principles used and significant estimates made by management,
                as well
                as evaluating the overall financial statement presentation. We believe
                that our
                audit provides 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 the Company as of December
                31, 2003
                and the results of its operations and its cash flows for the period
                from January
                9, 2003 (date of incorporation) to December 31, 2003, in conformity
                with
                accounting principles generally accepted in the United States of
                America.
 
  
 **Moores
                Rowland Mazars**
 *Chartered
                Accountants*
 *Certified
                Public Accountants,*
 Hong
                Kong, March 30, 2004, except for note 1#, as to which the date is
                May 11,
                2005.
  F-12
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Balance
                  Sheet**
 
 **As
                                of December 31, 2003****ASSETS**
                            
                            *Rmb*
                            
                            *US$***Current
                                assets**Cash
                                and cash equivalents
                            
                            
                            345,400
                            
                            
                            41,715Accounts
                                receivable
                            
                            
                            2,010,493
                            
                            
                            242,813Inventories
                                (Note 3)
                            
                            
                            947,305
                            
                            
                            114,408Deposits,
                                prepayments and other receivables
                            
                            
                            9,900
                            
                            
                            1,196**Total
                                current assets**
                            
                            
                            3,313,098
                            
                            
                            400,132Plant
                                and equipment, net (Note 4)
                            
                            
                            22,010,328
                            
                            
                            2,658,253Mineral
                                interests, net (Note 5)
                            
                            
                            12,538,225
                            
                            
                            1,514,278Deferred
                                stripping costs, net (Note 6)
                            
                            
                            7,719,689
                            
                            
                            932,330**Total
                                assets**
                            
                            
                            45,581,340
                            
                            
                            5,504,993**LIABILITIES
                                AND SHAREHOLDERS’ EQUITY****Current
                                liabilities**Accruals
                                and other payables (Note 7)
                            
                            
                            989,271
                            
                            
                            119,477Business
                                and resource tax and government surcharges payable
                            
                            
                            1,652,683
                            
                            
                            199,599Due
                                to a shareholder (Note 12)
                            
                            
                            750,000
                            
                            
                            90,580Due
                                to a former director (Note 12)
                            
                            
                            1,000,000
                            
                            
                            120,773Income
                                tax payable
                            
                            
                            5,966,104
                            
                            
                            720,544**Total
                                current liabilities**
                            
                            
                            10,358,058
                            
                            
                            1,250,973**Commitments
                                and contingencies**(Note 10)**Stockholders’
                                equity**Registered
                                capital
                            
                            
                            5,000,000
                            
                            
                            603,865Additional
                                paid-in capital
                            
                            
                            18,110,284
                            
                            
                            2,187,232Dedicated
                                reserves
                            
                            
                            1,749,128
                            
                            
                            211,247Retained
                                earnings
                            
                            
                            10,363,870
                            
                            
                            1,251,676**Total
                                stockholders’ equity**
                            
                            
                            35,223,282
                            
                            
                            4,254,020**Total
                                liabilities and stockholders’ equity**
                            
                            
                            45,581,340
                            
                            
                            5,504,993
  *The
                    accompanying notes are an integral part of these financial
                    statements.*
 F-13
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Statement
                  of Operations**
 
  **Period
                            from January 9, 2003**
                          **(date
                            of incorporation)**
                          **to
                            December 31, 2003***Rmb*
                        
                        *US$*Net
                            sales
                        
                        
                        25,255,513
                        
                        
                        3,050,183Cost
                            of sales
                        
                        
                        (5,840,871
                        )
                        
                        (705,419
                        )Gross
                            profit
                        
                        
                        19,414,642
                        
                        
                        2,344,764Selling,
                            general and administrative expenses
                        
                        
                        (1,339,538
                        )
                        
                        (161,780
                        )**Operating
                            income**
                        
                        
                        18,075,104
                        
                        
                        2,182,984Other
                            income:Interest
                            income
                        
                        
                        3,998
                        
                        
                        483**Income
                            before income taxes**
                        
                        
                        18,079,102
                        
                        
                        2,183,467Provision
                            for income taxes (Note 8)
                        
                        
                        (5,966,104
                        )
                        
                        (720,544
                        )**Net
                            income**
                        
                        
                        12,112,998
                        
                        
                        1,462,923
  *The
                    accompanying notes are an integral part of these financial
                    statements.*
 F-14
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Statement
                  of Stockholders’ Equity**
 
  **Registered**
                          **capital**
                        
                        **Additional**
                          **paid-in**
                          **capital**
                        
                        **Dedicated**
                          **reserves**
                        
                        **Retained**
                          **earnings**
                        
                        **Total**
                        
                        **Total***Rmb*
                        
                        *Rmb*
                        
                        *Rmb*
                        
                        *Rmb*
                        
                        *Rmb*
                        
                        *US$*Proceeds
                            on issuance of registered capital
                        
                        
                        5,000,000
                        
                        
                        18,110,284
                        
                        
                        -
                        
                        
                        -
                        
                        
                        23,110,284
                        
                        
                        2,791,097Net
                            income
                        
                        
                        -
                        
                        
                        -
                        
                        
                        -
                        
                        
                        12,112,998
                        
                        
                        12,112,998
                        
                        
                        1,462,923Transfer
                        
                        
                        -
                        
                        
                        -
                        
                        
                        1,749,128
                        
                        
                        (1,749,128
                        )
                        
                        -
                        
                        
                        -Balance
                            as of December 31, 2003
                        
                        
                        5,000,000
                        
                        
                        18,110,284
                        
                        
                        1,749,128
                        
                        
                        10,363,870
                        
                        
                        35,223,282
                        
                        
                        4,254,020
 *The
                      accompanying notes are an integral part of these financial
                      statements.*
 F-15
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Statement
                  of Cash Flows**
 
  **Period
                            from January 9, 2003**
                          **(date
                            of incorporation)**
                          **to
                            December 31, 2003***Rmb*
                        
                        *US$***Cash
                            flows from operating activities**Net
                            income
                        
                        
                        12,112,998
                        
                        
                        1,462,923Adjustments
                            to reconcile net income to net cash provided by operating
                            activities:Depreciation
                            of plant and equipment
                        
                        
                        975,534
                        
                        
                        117,818Amortization
                            of mineral interests
                        
                        
                        461,775
                        
                        
                        55,770Amortization
                            of deferred stripping costs
                        
                        
                        280,311
                        
                        
                        33,854Changes
                            in operating assets and liabilities:Accounts
                            receivable
                        
                        
                        (2,010,493
                        )
                        
                        (242,813
                        )Deposits,
                            prepayments and other receivables
                        
                        
                        (9,900
                        )
                        
                        (1,196
                        )Inventories
                        
                        
                        1,678,895
                        
                        
                        202,765Accruals
                            and other payables
                        
                        
                        989,271
                        
                        
                        119,477Business
                            and resource tax and government surcharge payable
                        
                        
                        1,652,683
                        
                        
                        199,599Income
                            taxes payable
                        
                        
                        5,966,104
                        
                        
                        720,544**Net
                            cash provided by operating activities**
                        
                        
                        22,097,178
                        
                        
                        2,668,741**Cash
                            flows from investing activities**Acquisition
                            of plant and equipment
                        
                        
                        (13,501,778
                        )
                        
                        (1,630,650
                        )Acquisition
                            of mineral interests
                        
                        
                        (7,000,000
                        )
                        
                        (845,410
                        )Acquisition
                            of deferred stripping costs
                        
                        
                        (8,000,000
                        )
                        
                        (966,184
                        )**Net
                            cash****used
                            in investing activities**
                        
                        
                        (28,501,778
                        )
                        
                        (3,442,244
                        )**Cash
                            flows from financing activities**Net
                            proceeds from issuance of registered capital
                        
                        
                        5,000,000
                        
                        
                        603,865Advance
                            from a shareholder
                        
                        
                        3,500,000
                        
                        
                        422,705Repayment
                            to a shareholder
                        
                        
                        (2,750,000
                        )
                        
                        (332,125
                        )Advance
                            from a former director
                        
                        
                        1,000,000
                        
                        
                        120,773**Net
                            cash provided by financing activities**
                        
                        
                        6,750,000
                        
                        
                        815,218Net
                            increase in cash and cash equivalents
                        
                        
                        345,400
                        
                        
                        41,715**Cash
                            and cash equivalents, end of period**
                        
                        
                        345,400
                        
                        
                        41,715**Non-cash
                            investing and financing activities:**Acquisition
                            of plant and equipment funded by shareholders
                        
                        
                        9,484,084
                        
                        
                        1,145,421Acquisition
                            of inventories funded by shareholders
                        
                        
                        2,626,200
                        
                        
                        317,173Acquisition
                            of mineral interest funded by shareholders
                        
                        
                        6,000,000
                        
                        
                        724,638
  *The
                    accompanying notes are an integral part of these financial
                    statements.*
 F-16
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
  **1.**
                        **ORGANIZATION
                            AND PRINCIPAL ACTIVITIES**
 
 Laizhou
                  Jia Sheng Stone Company Limited ("The Company") was incorporated
                  in the People's
                  Republic of China ("PRC") on January 9, 2003. The Company is engaged
                  in granite
                  mining and processing of granite. Most of raw granites mined are
                  sold without
                  any further processing. The Company also acquires raw granite from
                  others for
                  further processing into slabs for sale.
 
 The
                  Company has acquired mineral interests of granite reserves in two
                  locations in
                  Laizhou city of Shandong province in the PRC. The mining right
                  periods under
                  these two mineral interests are 20 and 30 years respectively.
 
 #
                        Restatement
                            of financial statements
 
 Subsequent
                  to the issuance of the Company’s 2003 consolidated financial statements,
                  management determined that the financial statements required restatement
                  due to
                  the change of method in amortizing mineral interests from the straight-line
                  basis to unit-of-production method and capitalization of stripping
                  costs and
                  amortization of such deferred stripping costs using the units-of
                  production
                  method.
 
 Management
                  believes that the units-of-production method results in a better
                  matching of
                  current costs with current revenues and that costs incurred during
                  the
                  development of the mine should be capitalized under EITF 04-6 “Accounting for
                  Stripping Costs Incurred during Production in the Mining Industry” and amortized
                  using the units-of production method
 
 The
                  restatement is attributable only to the non-recognition of (i)
                  amortization of
                  mineral interests; (ii) amortization of deferred stripping costs;
                  (iii)
                  capitalization of stripping cost and (iv) additional tax arise
                  from amortization
                  of mineral rights and stripping costs. The restatement increased
                  the Company’s
                  net income by US$631,801 for the period.
 
 The
                  dollar effects of the retroactive application of the restatement
                  to net income,
                  additional paid-in capital, retained earnings, stockholders’ equity and total
                  assets throughout the period is summarized in the table below:
 
 **Period
                            from January 9, 2003**
                          **(date
                            of incorporation) to**
                          **December
                            31, 2003***RMB*
                        
                        *US$***(1)****Net
                            income**As
                            previously reported
                        
                        
                        6,881,691
                        
                        
                        831,122Adjustments:(i)Amortization
                            of mining rights
                        
                        
                        88,233
                        
                        
                        10,656(ii)Capitalization
                            of deferred stripping costs,
                          net
                            of amortization
                        
                        
                        7,719,689
                        
                        
                        932,330(iv)Additional
                            income tax provided
                        
                        
                        (2,576,615
                        )
                        
                        (311,185
                        )As
                            restated
                        
                        
                        12,112,998
                        
                        
                        1,462,923
  
 F-17
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 **1.**
                          **ORGANIZATION
                              AND PRINCIPAL ACTIVITIES
                              (CONTINUED)**
 
 Restatement
                  of financial statements (Continued)
  **As
                              of December 2003***RMB*
                          
                          *US$***(2)****Additional
                              paid-in capital (“APIC”)******(no
                              effect on restatement)
                          
                          
                          18,110,284
                          
                          
                          2,187,232**(3)****Retained
                              earnings**-
                              As previously reported
                          
                          
                          5,132,563
                          
                          
                          619,875Adjustments*:*(i)Amortization
                              of mineral rights
                          
                          
                          88,233
                          
                          
                          10,656(ii)Amortization
                              of stripping costs
                          
                          
                          7,719,689
                          
                          
                          932,330(iv)Additional
                              income tax provided
                          
                          
                          (2,576,615
                          )
                          
                          (311,185
                          )-
                              As restated
                          
                          
                          10,363,870
                          
                          
                          1,251,676**(4)****Ordinary
                              stock**(no
                              effect on restatement)
                          
                          
                          5,000,000
                          
                          
                          603,865**(5)****Dedicated
                              reserves**(no effect on restatement)
                          
                          
                          1,749,128
                          
                          
                          211,247**(6)****Stockholders’
                              equity**(sum
                              of (2) + (3) + (4) + (5))-
                              As previously reported
                          
                          
                          29,991,975
                          
                          
                          3,622,219Adjustments:(i)Amortization
                              of mineral rights
                          
                          
                          88,233
                          
                          
                          10,656(ii)Amortization
                              of stripping costs
                          
                          
                          7,719,689
                          
                          
                          932,330(iv)Additional
                              income tax provided
                          
                          
                          (2,576,615
                          )
                          
                          (311,185
                          )-
                              As restated
                          
                          
                          35,223,282
                          
                          
                          4,254,020**(7)****Total
                              liabilities**-
                              As previously reported
                          
                          
                          7,781,443
                          
                          
                          939,788Adjustments:(iv)Additional
                              income tax provided
                          
                          
                          2,576,615
                          
                          
                          311,185-
                              As restated
                          
                          
                          10,358,058
                          
                          
                          1,250,973
   
 F-18
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 **1.**
                          **ORGANIZATION
                              AND PRINCIPAL ACTIVITIES
                              (CONTINUED)**
 
 Restatement
                  of financial statements (Continued)
 
 **As
                            of December 2003***RMB*
                        
                        *US$***(8)****Total
                            liabilities and stockholders’ equity**(sum
                            of (6) + (7))-
                            As restated
                        
                        
                        45,581,340
                        
                        
                        5,504,993**(9)****Total
                            assets**-
                            As previously reported
                        
                        
                        37,773,418
                        
                        
                        4,562,007Adjustments:(i)Amortization
                            of mineral rights
                        
                        
                        88,233
                        
                        
                        10,656(ii)Amortization
                            of stripping costs
                        
                        
                        (280,311
                        )
                        
                        (33,854
                        )(iii)Capitalization
                            of stripping costs
                        
                        
                        8,000,000
                        
                        
                        966,184-
                            As restated
                        
                        
                        45,581,340
                        
                        
                        5,504,993
  **2.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING
                              POLICIES**
 
 **Basis
                    of accounting**
 The
                    financial statements have been prepared in accordance with accounting
                    principles
                    generally accepted in the United States of America. The financial
                    statements are
                    presented in Renminbi (“Rmb”) which is the Company’s functional currency as the
                    Company’s operations are located in the PRC.
 
 **Cash
                    and cash equivalents**
 The
                    Company considers all cash and highly liquid investments purchased
                    with an
                    original maturity of three months or less to be cash equivalents.
 
 **Leasehold
                    land, plant and equipment and depreciation**
 Leasehold
                    land is recorded at cost less accumulated amortization. Amortization
                    is provided
                    over the term of the land use right certificate on a straight-line
                    basis.
                    Leasehold land located in the PRC is subject to lease term specified
                    in the land
                    use right certificate granted by the governmental authority.
                    An initial lump-sum
                    payment is paid to the government to acquire the right to use
                    the land over a
                    specified period. During the lease term, the leasehold land is
                    transferrable.
                    After the expiration of the lease term, the leasehold land is
                    required to be
                    returned to the government unless further renewal is made with
                    the governmental
                    authority.
 
 Other
                    plant and equipment are stated at cost. Significant renewals
                    and additions are
                    capitalized at cost. Maintenance and repairs, and minor renewals
                    and betterments
                    are charged to operations as incurred.
  
 F-19
  **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
  **2.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES
                              (CONTINUED)**
 
 **Leasehold
                    land, plant and equipment and depreciation (Continued)**
 Mineral
                    exploration costs are expensed as incurred. When it has been
                    determined that a
                    mineral property can be economically developed as a result of
                    establishing
                    proven and probable reserves, costs incurred prospectively to
                    develop the
                    property are capitalized as incurred and are amortized. Major
                    development costs
                    incurred after the commencement of production are capitalized
                    and amortized.
                    Ongoing development expenditures to maintain production are charged
                    to
                    operations as incurred. No exploration and development costs
                    have been
                    capitalized for the period.
 
 The
                    existing terms of the mineral rights (mining right periods) are
                    not sufficient
                    to recover all identified and valued proven and probable reserves
                    and/or
                    undeveloped mineral interests in respect of the two mineral rights
                    currently
                    owned by the Company. Therefore the Company depreciates and amortizes
                    its
                    mining-related plant and equipment and mining development costs
                    on a
                    straight-line basis over the estimated useful lives of the plant
                    and
                    equipment.
 
 Depreciation
                    is calculated to write off the cost of plant and equipment over
                    their estimated
                    useful lives from the date on which they become fully operational
                    and after
                    taking into account their estimated residual values, using the
                    straight line
                    method, at the following annual rates:
  Leasehold
                              land
                          Over
                              the unexpired term of leaseBuildings
                          10
                              - 20 yearsMotor
                              vehicles
                          2
                              -
                              10 yearsFurniture
                              and equipment
                          1
                              -
                              20 years
 **Accounts
                    receivable**
 Accounts
                    receivable are stated at the amount billed to customers.  The Company
                    provides an allowance for doubtful accounts, which is based upon
                    a review of
                    outstanding receivables, historical collection information and
                    existing economic
                    conditions.  Accounts past due more than 120 days are considered
                    delinquent.  Delinquent receivables are written off based on individual
                    credit evaluation and specific circumstances of the customer.
 
 **Inventories**
 Inventories
                    are valued at the lower of cost or market using weighted average
                    cost method of
                    accounting.
 
 Raw
                    materials represent purchased raw granite for use in further
                    processing into
                    granite slabs. Work-in-progress represents materials that are
                    currently in the
                    process of being converted to granite slabs. Finished goods represent
                    granite
                    blocks (raw granite) held for sale from mining and processed
                    granite slabs. The
                    Company does not expect to maintain a material line of inventory
                    from time to
                    time as it only extracts granite once an order is received.
 
 **Mineral
                    interests**
 Mineral
                    interests represent acquired mineral rights for parcels of land
                    not owned by the
                    Company. These mineral interests are currently in the production
                    stage which
                    contain proven and probable reserves. Mineral interests are amortized
                    using the
                    units of production method over the terms of mineral
                    rights which are 20 and 30 years for the Company's two mineral
                    interests. Units
                    of production method of amortization is used because the production
                    level may
                    vary from period to period. In accordance with SFAS 151 we have
                    applied waste
                    factors of 60% and 50% respectively in determining to reserves
                    from which units
                    of production were applied.
 
 F-20
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 **2.**
                            **SUMMARY
                                OF SIGNIFICANT ACCOUNTING POLICIES
                                (CONTINUED)**
 
 **Mineral
                      interests**
 The
                      Company was issued a mining right certificate in respect of
                      one of its two
                      mineral interests from the relevant governmental authority.
                      The initial
                      application and registration fee of applying a mining right
                      certificate from
                      relevant governmental authority amounted to Rmb250,000 (US$30,193).
                      The mining
                      right certificate is to be renewed every five years. The management
                      of the
                      Company considers the renewal fee would be minimal and the
                      chance of renewals
                      not being granted by the relevant governmental authority is
                      remote. The Company
                      further received a confirmation from the governmental authority
                      confirming that
                      the mining right certificate can be renewed every five years.
                      With respect to
                      the remaining mineral interest, the Company has submitted an
                      application for a
                      mining right certificate for which an acknowledgement of application-in-progress
                      was received from the relevant governmental authority.
 
 The
                      Company has received another written confirmation from the
                      relevant governmental
                      authority that the Company has valid mining rights in its two
                      mineral interests
                      since the commencement of mining business throughout the terms
                      of respective
                      mineral interests, despite the fact that official mining right
                      certificates have
                      not been issued at the time of commencement of mining business.
 
 **Deferred
                      stripping costs**
 In
                      general, mining costs are charged to operations as incurred.
                      The costs of
                      removing overburden and other waste materials during mine development
                      stage to
                      access mineral deposits at open pit mines are capitalized and
                      amortized. These
                      costs of removing waste materials and road construction are
                      referred to as
                      stripping costs. Stripping costs during post-production phase
                      are expensed as
                      incurred. However, industry practice does vary for post-production
                      phase
                      stripping costs incurred. Some mining companies defer the costs
                      in the
                      post-production phase and expensing stripping costs may result
                      in the reporting
                      of greater volatility in period to period results of operations.
                      Full amount of
                      post-production stripping costs incurred will not be expensed
                      until the end of
                      mine life.
 
 During
                      the period, the Company capitalized all the stripping costs
                      in the balance sheet
                      as the Company believed that these costs can benefit the exploration
                      and
                      production of minerals in subsequent periods. Such costs amounted
                      to
                      Rmb8,000,000 (US$966,184) in the period. These stripping costs
                      are amortized
                      over their useful lives using units of production method, consistent
                      with the
                      method used in mineral interests amortization.
 
 **Reclamation
                      and remediation costs**
 Estimated
                      future reclamation and abandonment costs are based principally
                      on legal and
                      regulatory requirements and are accounted for in accordance
                      with Statement of
                      Financial Accounting Standards (“SFAS”) No. 143, "Accounting for Asset
                      Retirement Obligations". At the balance sheet date, such costs
                      have not been
                      provided because the costs involved are insignificant under
                      the current legal
                      and regulatory requirements in the PRC.
  
 F-21
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 **2.**
                            **SUMMARY
                                OF SIGNIFICANT ACCOUNTING POLICIES
                                (CONTINUED)**
 
 **Impairment
                      of long-lived assets**
 Long-lived
                      assets are evaluated for impairment whenever events or changes
                      in circumstances
                      indicate that the carrying amount of an asset may not be recoverable
                      in
                      accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
                      Long-Lived Assets”. An asset is considered impaired if its carrying amount
                      exceeds the future net cash flow the asset is expected to generate.
                      If such
                      assets are considered to be impaired, the impairment to be
                      recognized is
                      measured by the amount by which the carrying amount of the
                      asset exceeds its
                      fair market value. The recoverability of long-lived assets
                      is assessed by
                      determining whether the unamortized balances can be recovered
                      through
                      undiscounted future net cash flows of the related assets. The
                      amount of
                      impairment, if any, is measured based on projected discounted
                      future net cash
                      flows using a discount rate reflecting the Company’s average cost of
                      capital.
 
 **Net
                      sales**
 The
                      Company recognizes revenue when there is persuasive evidence
                      of an agreement
                      with customers, with a fixed fee that is collectible and when
                      delivery has
                      occurred.
 
 **Cost
                      of sales**
 Costs
                      classified as cost of sales relate to the mining of minerals
                      and producing of
                      granite slabs and include such items as material cost, depreciation
                      of fixed
                      assets, amortization of mineral interests and deferred stripping
                      costs, direct
                      labor costs and other production costs.
 
 **Income
                      taxes**
 Income
                      taxes are provided under the provisions of SFAS No. 109, which
                      requires
                      recognition of the estimated future tax consequences attributable
                      to differences
                      between the financial statement carrying amounts of existing
                      assets and
                      liabilities and their respective tax bases and net operating
                      loss carryforwards
                      under the liability method. Deferred tax assets and liabilities
                      are measured
                      using expected tax rates in effect for the period in which
                      those temporary
                      differences are expected to be recovered or settled.
 
 **Comprehensive
                      income**
 The
                      Company has adopted SFAS No. 130 “Reporting Comprehensive Income”, which
                      requires the disclosure of comprehensive income, which includes
                      net income
                      (loss), unrealized gains and losses on marketable securities
                      classified as
                      available-for-sale and foreign currency translation adjustments.
                      Comprehensive
                      income for the period only consisted of net income for the
                      period.
 
 **Foreign
                      currency translation**
 The
                      Company considers Renminbi as its functional currency as the
                      Company’s business
                      activities are based in Renminbi.
 
 Transactions
                      in currencies other than the functional currency during the
                      period are
                      translated into the functional currency at the applicable rates
                      of exchange
                      prevailing at the time of the transactions. Monetary assets
                      and liabilities
                      denominated in currencies other than functional currency are
                      translated into the
                      functional currency at the applicable rates of exchange in
                      effect at the balance
                      sheet date. Exchange gains and losses are recorded in the statement
                      of
                      operations.
  
 F-22
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 **2.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES
                              (CONTINUED)**
 
 **Foreign
                    currency translation (Continued)**
 Translation
                    of amounts from Renminbi into United States dollars ("US$") is
                    for the
                    convenience of readers and has been made at the buying rate in
                    New York City for
                    cable transfers in foreign currencies as certified for customs
                    purposes by the
                    Federal Reserve Bank of New York on December 31, 2003 of US$1.00
                    = Rmb8.28. No
                    representation is made that the Renminbi amounts could have been,
                    or could be,
                    converted into United States dollars at that rate or at any other
                    rate.
 
 **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 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 reporting period. Such estimates include provisions
                    for doubtful
                    accounts, sales returns and allowances, long-lived assets and
                    deferred income
                    taxes. Actual results could differ from those estimates.
 
 **Fair
                    value of financial instruments**
 The
                    estimated fair values for financial instruments under SFAS No.
                    107, “Disclosures
                    about Fair Value of Financial Instruments”, are determined at discrete points in
                    time based on relevant market information. These estimates involve
                    uncertainties
                    and cannot be determined with precision. The estimated fair values
                    of the
                    Company’s financial instruments, which includes cash, accounts receivable
                    and
                    other payables, approximates their carrying values in the financial
                    statements.
 
 **Recent
                    accounting pronouncements**
 In
                    January 2003, the FASB issued Interpretation No. 46 (“FIN 46”) “Consolidation of
                    Variable Interest Entities”. Until this interpretation, a company generally
                    included another entity in its consolidated financial statements
                    only if it
                    controlled the entity through voting interests. FIN 46 requires
                    a variable
                    interest entity, as defined, to be consolidated by a company
                    if that company is
                    subject to a majority of the risk of loss from the variable interest
                    entity’s
                    activities or is entitled to receive a majority of the entity’s residual
                    returns. In December 2003, the FASB issued a revised FIN 46.
                    The revised
                    standard, FIN 46-R, modifies or clarifies various provisions
                    of FIN 46 and
                    incorporates many FASB Staff Positions previously issued by the
                    FASB. This
                    standard replaces the original FIN 46 that was issued in January
                    2003. The
                    Company does not expect the adoption of FIN 46-R will have a
                    material impact on
                    the Company’s results of operations or financial position.
 
 In
                    November 2002, the Emerging Issues Task Force reached a consensus
                    on Issue No.
                    00-21 (“EITF 00-21”), “Revenue Arrangements with Multiple Deliverables”. EITF
                    00-21 provides guidance on how to account for arrangements that
                    involve the
                    delivery or performance of multiple products, services and/or
                    rights to use
                    assets. The provisions of EITF 00-21 will apply to revenue arrangements
                    entered
                    into in fiscal periods beginning after June 15, 2003. The Company
                    does not
                    expect the adoption of EITF 00-21 will have a material impact
                    on its financial
                    position or results of operations.
  
 F-23
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 **2.**
                          **SUMMARY
                              OF SIGNIFICANT ACCOUNTING POLICIES
                              (CONTINUED)**
 
 **Recent
                    accounting pronouncements (Continued)**
 In
                    April
                    2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative
                    Instruments and Hedging Activities”. This statement amends and clarifies
                    financial accounting and reporting for derivative instruments,
                    including
                    derivative instruments embedded in other contracts and for hedging
                    activities
                    under SFAS No. 133. The Company does not expect the adoption
                    of SFAS 149 will
                    have a material impact on the Company’s results of operations or financial
                    position.
 
 In
                    May
                    2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial
                    Instruments with Characteristics of both Liabilities and Equity”. SFAS No. 150
                    establishes standards for how certain financial instruments with
                    characteristics
                    of both liabilities and equity shall be classified and measured.
                    This statement
                    is effective for financial instruments entered into or modified
                    after May 31,
                    2003, and otherwise is effective at the beginning of the first
                    interim period
                    beginning after June 15, 2003. The Company does not expect the
                    adoption of SFAS
                    No. 150 will have a material impact on the Company’s result of operations or
                    financial position.
 
 In
                    December 2003 the FASB issued SFAS No. 132 (Revised) (“SFAS No. 132-R”),
                    Employer’s Disclosure about Pensions and Other Postretirement Benefits.
                    SFAS No.
                    132-R retains disclosure requirements of the original SFAS No.
                    132 and requires
                    additional disclosures relating to assets, obligations, cash
                    flows, and net
                    periodic benefit cost. SFAS No. 132-R is effective for fiscal
                    years ending after
                    December 15, 2003, except that certain disclosures are effective
                    for fiscal
                    years ending after June 15, 2004. The adoption of SFAS No. 132-R
                    does not have a
                    material effect on the Company's financial statements.
 
 
 **3.**
                          **INVENTORIES**
 
 Inventories
                    consisted of:
 **As
                              of December 31, 2003***Rmb*
                          
                          *US$*Raw
                              materials
                          
                          
                          686,264
                          
                          
                          82,882Work-in-progress
                          
                          
                          158,225
                          
                          
                          19,109Finished
                              goods
                          
                          
                          102,816
                          
                          
                          12,417947,305
                          
                          
                          114,408
  
 F-24
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 **4.**
                            **PLANT
                                AND EQUIPMENT, NET**
 
 Plant
                      and
                      equipment consisted of:
  **As
                                of December 31, 2003***Rmb*
                            
                            *US$*Leasehold
                                land
                            
                            
                            4,718,108
                            
                            
                            569,820Buildings
                            
                            
                            5,864,854
                            
                            
                            708,316Furniture
                                and equipment
                            
                            
                            7,268,780
                            
                            
                            877,872Motor
                                vehicles
                            
                            
                            198,540
                            
                            
                            23,978Construction-in-progress
                            
                            
                            4,935,580
                            
                            
                            596,085Cost
                            
                            
                            22,985,862
                            
                            
                            2,776,071Less:
                                Accumulated depreciation
                            
                            
                            (975,534
                            )
                            
                            (117,818
                            )Plant
                                and equipment, net
                            
                            
                            22,010,328
                            
                            
                            2,658,253
 
 Depreciation
                      expense amounted to Rmb975,534 (US$117,818) for the period
                      ended December 31,
                      2003.
  **5.**
                            **MINERAL
                                INTERESTS, NET**
 
 Mineral
                      interests represented:
  **As
                                of December 31, 2003***Rmb*
                            
                            *US$*Gross
                                carrying amount
                            
                            
                            13,000,000
                            
                            
                            1,570,048Accumulated
                                amortization
                            
                            
                            (461,775
                            )
                            
                            (55,770
                            )Net
                                book value
                            
                            
                            12,538,225
                            
                            
                            1,514,278
 
 All
                      the
                      mineral interests are in the production stage and amortization
                      expense for the
                      period amounted to Rmb461,775 (US$55,770).
  **6.**
                              **DEFERRED
                                  STRIPPING COSTS, NET**
 **As
                                  of December 31, 2003***Rmb*
                              
                              *US$*Deferred
                                  stripping costs represented:Gross
                                  carrying amount
                              
                              
                              8,000,000
                              
                              
                              966,184Accumulated
                                  amortization
                              
                              
                              (280,311
                              )
                              
                              (33,854
                              )7,719,689
                              
                              
                              932,330
 All
                        the
                        stripping costs are in the production stage and amortization
                        expenses for the
                        period amounted to 280,311 (US$33,854).
 F-25
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 **7.**
                          **ACCRUALS
                              AND OTHER PAYABLES**
 
 Accruals
                    and other payables consisted of:
  **As
                              of December 31, 2003***Rmb*
                          
                          *US$*Wages
                              and bonus
                          
                          
                          215,137
                          
                          
                          25,983Others
                          
                          
                          774,134
                          
                          
                          93,494989,271
                          
                          
                          119,477
  **8.**
                          **INCOME
                              TAXES**
  The
                              Company is subject to the PRC income tax at a rate
                              of
                              33%.
 
 The
                              reconciliation of the PRC income tax rate to the effective
                              income tax rate
                              based on income before income taxes is as
                              follows:
 **Period
                                  from**
                                **January
                                  9, 2003**
                                **(date
                                  of**
                                **incorporation)
                                  to**
                                **December
                                  31, 2003**%PRC
                                  income tax rate
                              
                              
                              33Effective
                                  income tax rate
                              
                              
                              33
 
 Deferred
                    tax assets and liabilities have not been provided as there are
                    no temporary
                    differences existed during the period and at the balance sheet
                    date.
  **9.**
                          **STOCKHOLDERS’
                              EQUITY**
 
 On
                    incorporation, the shareholders of the Company contributed a
                    total of
                    Rmb5,000,000 (US$603,865) to the Company as registered capital.
                    In addition to
                    the contribution to registered capital, the Company's shareholders
                    also
                    contributed Rmb18,110,284 (US$2,187,232) in value of fixed assets,
                    inventories
                    and mineral interest to the Company. The amount is valued at
                    the shareholders'
                    historical cost basis and is recorded as additional paid-in
                    capital.
 
 The
                    Company's income is distributable to its shareholders after transfer
                    to
                    dedicated reserves as required under relevant PRC laws and regulations
                    and the
                    Company's Articles of Association. Dedicated reserves include
                    statutory surplus
                    reserve and statutory public welfare fund.
 F-26
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 
 **9.**
                          **STOCKHOLDERS’
                              EQUITY (CONTINUED)**
 
 Statutory
                    surplus reserve represents the appropriation of 10% of income
                    after taxation
                    calculated in accordance with PRC accounting standards and regulations
                    and the
                    Articles of Association of the Company. The appropriation may
                    cease to apply if
                    the balance of the statutory surplus reserve has reached 50%
                    of the Company's
                    registered capital. According to the Company's Articles of Association,
                    statutory surplus reserve can be used to make up prior year losses,
                    to expand
                    production operation or to increase registered capital.
 
 Statutory
                    public welfare fund represents the appropriation of income after
                    taxation
                    according to the requirements of the Company's Articles of Association
                    and the
                    PRC laws and regulations. According to the requirements, the
                    Company transfers
                    5% to 10%, at the discretion of directors, of income after taxation
                    calculated
                    in accordance with PRC accounting standards and regulations.
                    The fund can only
                    be utilized for capital expenditure on employees' collective
                    welfare facilities
                    and cannot be used in staff welfare expenses. The statutory public
                    welfare fund
                    is not distributable to shareholders other than in liquidation.
  **10.**
                          **COMMITMENTS
                              AND CONTINGENCIES**
 At
                      the
                      balance sheet date, the Company had capital expenditure commitments
                      in respect
                      of granite slabs production facilities contracted for, but
                      not provided for, net
                      of deposits paid, amounting to Rmb2,270,000 (US$274,155).
  The
                      Company has made full tax provision in accordance with relevant
                      national and
                      local laws and regulations of the PRC. However, the local tax
                      authority granted
                      the Company certain tax allowances and exemption and collected
                      less than the
                      full amount from the Company. This is not in compliance with
                      national laws and
                      regulations. Accordingly, despite the fact that the Company
                      has made full tax
                      provision in the financial statements, the Company may be subject
                      to penalty
                      ranging from 50% to 500% of the underpaid tax amount, plus
                      a default interest on
                      the unpaid amount calculated on a daily basis. The exact amount
                      of penalty
                      cannot be estimated with any reasonable degree of certainty.
                      The board of
                      directors considers it is not probable that the tax penalty
                      will be imposed as a
                      result of tax concession/exemption, which may not be in compliance
                      with relevant
                      national laws and regulations, provided by the local tax authority.
 
 **11.**
                          **RETIREMENT
                              PLAN AND POST-EMPLOYMENT
                              BENEFITS**
 
 The
                    Company has no retirement plan or post-employment benefits for
                    its
                    employees.
 
 F-27
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 **12.**
                            **RELATED
                                PARTY TRANSACTIONS**
  During
                                the period, the Company had the following transactions
                                with related
                                parties.
 
 (1)
                            Related
                                party transactions during the period are as
                                follows:
 
 During
                      the period, the Company acquired a mineral interest from one
                      of its shareholders
                      at a consideration of Rmb7,000,000 (US$845,410), which was
                      transferred at
                      cost.
 
 As
                      disclosed in note 9, the shareholders contributed certain assets
                      to the Company
                      in addition to the registered capital. Included in such assets
                      is a mineral
                      interest acquired from one of the Company’s shareholders at a consideration of
                      Rmb6,000,000 (US$724,638), which was transferred at cost.
 
 One
                      of
                      the Company’s bank accounts is in the name of one of its staff members,
                      who
                      holds the bank account in trust for the Company. Settlement
                      received from
                      customers of the Company deposited into this bank account and
                      payment for
                      expenditures of the Company withdrawn from this bank account
                      during the period
                      amounted to Rmb23,780,260 (US$2,872,012). The Company has a
                      bank account opened
                      in the name of the staff member because it is much easier to
                      deposit and
                      withdraw funds for an individual than a corporation in the
                      PRC. This bank
                      account was closed in December 2003 and the Company now uses
                      its own bank
                      account for funds deposits and withdrawals.
 (2)
                              Balances
                                    with related parties are as
                                    follows:
 **As
                                of December 31, 2003***Rmb*
                            
                            *US$*Due
                                to a shareholder
                            
                            
                            750,000
                            
                            
                            90,580
 
 The
                      amount due to a shareholder represented the unsettled balance
                      of acquisition of
                      a mineral interest from this shareholder.
 
 The
                      outstanding balance is unsecured, interest-free and has no
                      fixed repayment
                      terms. In December 2003, the Company and the shareholder mutually
                      agreed to
                      extend the repayment period from the original maturity date
                      of December 31,
                      2003.
 
 **As
                                of December 31, 2003***Rmb*
                            
                            *US$*Due
                                to a former director
                            
                            
                            1,000,000
                            
                            
                            120,773
 
 The
                      amount due to a former director, who is also a shareholder
                      of the Company,
                      represented short-term financing to the Company for operating
                      purposes.
 
 The
                      outstanding balance is unsecured, interest-free and has no
                      fixed repayment
                      terms.
 F-28
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
 
 **13.**
                        **SEGMENT
                            INFORMATION**
 The
                    Company adopted SFAS No. 131 “Disclosures About Segments of an Enterprise and
                    Related Information”, in respect of its operating segments. The Company’s
                    reportable segments are granite mining (sale of granite blocks)
                    and production
                    of granite slabs. All of the Company’s operating activities and customers are
                    located in the PRC.
  These
                    segments are managed separately because each business requires
                    different
                    technology and marketing strategies. The Company evaluates performance
                    based on
                    operating earnings of the respective business units. The accounting
                    policies of
                    the segments are the same as those described in the summary of
                    significant
                    accounting policies. The corporate assets primarily include cash
                    and cash
                    equivalents and deposits and other receivables. There were no
                    significant
                    inter-segment transactions during the period. In determining
                    operating
                    income/loss by reportable segment, general corporate expenses,
                    other income and
                    expense items of non-operating nature are not considered, as
                    such items are not
                    allocated to the Company’s segments. Segment information for the period are as
                    follows:
  (a)
                        Net
                            sales:
 **Period
                              from January 9, 2003**
                            **(date
                              of incorporation) to**
                            **December
                              31, 2003***Rmb*
                          
                          *US$*Granite
                              mining
                          
                          
                          20,230,745
                          
                          
                          2,443,327Production
                              of granite slabs
                          
                          
                          5,024,768
                          
                          
                          606,85625,255,513
                          
                          
                          3,050,183
 
 (b)
                        Net
                            income:
 **Period
                              from January 9, 2003**
                            **(date
                              of incorporation) to**
                            **December
                              31, 2003***Rmb*
                          
                          *US$*Granite
                              mining
                          
                          
                          15,674,243
                          
                          
                          1,893,025Production
                              of granite slabs
                          
                          
                          1,101,027
                          
                          
                          132,97416,775,270
                          
                          
                          2,025,999Reconciliation:Net
                              income for reportable segments
                          
                          
                          16,775,270
                          
                          
                          2,025,999Unallocated
                              corporate income and expenses
                          
                          
                          (4,662,272
                          )
                          
                          (563,076
                          )12,112,998
                          
                          
                          1,462,923
  
 F-29
  **Laizhou
                  Jia Sheng Stone Company Limited**
 
 **Notes
                  to and forming part of the Financial Statements**
 
  **13.**
                        **SEGMENT
                            INFORMATION****(CONTINUED)**
  (c)
                        Assets:
 
 **As
                            of****December
                            31, 2003***Rmb*
                        
                        *US$*Granite
                            mining
                        
                        
                        27,626,146
                        
                        
                        3,336,491Production
                            of granite slabs
                        
                        
                        8,450,451
                        
                        
                        1,020,58636,076,597
                        
                        
                        4,357,077Reconciliation:Total
                            assets for reportable segments
                        
                        
                        36,076,597
                        
                        
                        4,357,077Other
                            corporate assets
                        
                        
                        9,504,743
                        
                        
                        1,147,91645,581,340
                        
                        
                        5,504,993
 All
                  of
                  the Company’s identifiable assets are located in the PRC.
 
 (d)
                        Other
                            items:
 
 **Period
                            from January 9, 2003**
                          **(date
                            of incorporation) to**
                          **December
                            31, 2003***RMB*
                        
                        *US$*Depreciation
                            of fixed assets:Granite
                            mining
                        
                        
                        503,172
                        
                        
                        60,770Production
                            of granite slabs
                        
                        
                        217,005
                        
                        
                        26,208Unallocated
                            corporate assets
                        
                        
                        255,357
                        
                        
                        30,840975,534
                        
                        
                        117,818Capital
                            expenditures for fixed assets:Granite
                            mining
                        
                        
                        7,833,819
                        
                        
                        946,114Production
                            of granite slabs
                        
                        
                        5,747,244
                        
                        
                        694,112Unallocated
                            corporate assets
                        
                        
                        9,404,799
                        
                        
                        1,135,84522,985,862
                        
                        
                        2,776,071Amortization
                            of mineral interests:Granite
                            mining
                        
                        
                        461,775
                        
                        
                        55,770Amortization
                            of stripping costs
                        
                        
                        280,311
                        
                        
                        33,854
  
 F-30
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 **13.**
                        **SEGMENT
                            INFORMATION****(CONTINUED)**
  (e)
                        Major
                            customers
 
 Major
                            customers for the period which accounted for more than
                            10% of total
                            revenues are as follows:
 **Period
                              from January 9, 2003 (date of incorporation)**
                            **to
                              December 31, 2003**Granite
                              mining
                          2
                              customers accounted for 10% and 13% of total revenues,
                              respectivelyProduction
                              of granite slabs
                          1
                              customer accounted for 12% of total
                              revenues
 
 
 **14.**
                        **OPERATING
                            RISK**
  (a)
                        Country
                            risk
  The
                  Company’s operations are conducted in the PRC. Accordingly, the Company’s
                  business, financial condition and results of operations may be
                  influenced by the
                  political, economic and legal environments in the PRC, and by the
                  general state
                  of the PRC economies.
 
 The
                  Company’s operations in the PRC are subject to special considerations and
                  significant risks not typically associated with companies in North
                  America and
                  Western Europe. These include risks associated with, among others,
                  the
                  political, economic and legal environments and foreign currency
                  exchange. The
                  Company’s results may be adversely affected by changes in the political
                  and
                  social conditions in the PRC, and changes in governmental policies
                  with respect
                  to laws and regulations, anti-inflationary measures, currency conversion
                  and
                  remittance abroad, and rates and methods of taxation, among other
                  things.
 
 (b)
                        Industry
                            risk
 
 The
                  Company operates in business segments which requires the use of
                  specialized
                  facilities and technology. The Company relies heavily on such facilities
                  and
                  technology to maintain its production level. The cash flow and
                  profitability of
                  the Company’s current operations are significantly affected by the market price
                  of granite which are affected by numerous factors beyond the Company’s control.
                  As mentioned in Note 2 to the financial statements, the Company's
                  mining rights
                  are subject to renewals by the relevant governmental authority.
                  Despite the
                  Company has received written confirmation from the governmental
                  authority, there
                  is no guarantee that the Company will be granted the renewals.
 
 (c)
                        Concentration
                            of credit risk
 
 As
                  of
                  December 31, 2003, two customers had accounts receivable balances
                  representing
                  86% and 14% of total accounts receivable balance, respectively.
                  No other
                  customer had an accounts receivable balance that exceeded 10% of
                  the total
                  accounts receivable balance.
 
 The
                  Company performs ongoing credit evaluation of each customer's financial
                  condition. It maintains reserves for potential credit losses and
                  such losses in
                  the aggregate have not exceeded management's projections.
 
 
 F-31
 **Laizhou
                    Jia Sheng Stone Company Limited**
 
 **Notes
                    to and forming part of the Financial Statements**
 
 **15.**
                            **SUBSEQUENT
                                EVENTS**
 
 On
                      January 20, 2004, the Company’s shareholders and China Laizhou Bay Mining
                      International Corporation ("Laizhou") entered into an agreement
                      in which Laizhou
                      Bay would acquire all the shares in the Company from its shareholders
                      for cash
                      consideration. Laizhou Bay is a limited liability corporation
                      incorporated in
                      the British Virgin Islands. After the acquisition, the Company
                      became a
                      wholly-owned subsidiary of Laizhou. As a result of the acquisition,
                      the Company
                      becomes a foreign wholly-owned enterprise, it is exempted from
                      income tax for
                      the first two years from the change of company status, followed
                      by a 50%
                      reduction of income tax from the third to fifth year, subject
                      to formal approval
                      from tax authority.
 
 On
                      February 5, 2004, China Granite Corporation (formerly Arbor,
                      Inc.) ("China
                      Granite"), a corporation organized under the laws of Nevada,
                      United States of
                      America, a certain principal China Granite shareholder, Laizhou
                      and Laizhou’s
                      shareholders entered into a Stock Exchange Agreement and Plan
                      of Reorganization,
                      in which China Granite would receive from the Laizhou's shareholders
                      all of the
                      issued and outstanding common stock of Laizhou in exchange
                      for a majority of the
                      shares in China Granite. As a result of the stock exchange,
                      the Company became a
                      wholly-owned subsidiary of China Granite.
 F-32
 EXHIBIT
            INDEX
 
 3.1*
                  Amended
                      and Restated Articles of Incorporation (incorporated by reference
                      to
                      exhibit 3.1 to the Company's current report on Form 8-K filed
                      on February
                      20, 2004).3.2*
                  Amended
                      and Restated Bylaws (incorporated by reference to exhibit 3.1
                      to the
                      Company's current report on Form 8-K filed on February 20,
                      2004).4.2*
                  Form
                      of Subscription Agreement10.3 Consulting Agreement10.4*
                  Stockholder
                      Transfer Agreement31.1
                  Certification
                      of Chairman and Chief Executive Officer Pursuant to Section
                      302 of the
                      Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350) (transmitted
                      herewith).31.2
                  Certification
                      of Vice Chairman and Chief Financial Officer Pursuant to Section
                      302 of
                      the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sec. 1350) (transmitted
                      herewith).32.1
                  Written
                      Statement of Chairman and Chief Executive Officer Pursuant
                      to Section 906
                      of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
                      (transmitted
                      herewith).32.2
                  Written
                      Statement of Vice Chairman and Chief Financial Officer Pursuant
                      to Section
                      906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)
                      (transmitted herewith).
  31