THE COMPANY

Lanbo Financial Group Inc. ("Lanbo," "we," "our" or "us"), through our wholly owned subsidiary New Star Real Estate Development Co. ("Newstar" or "Xinxing"), is principally engaged in the construction, development and sale of residential real estate units in the People's Republic of China (the "PRC" or "China"). Newstar originally operated as a state-owned enterprise, during which time it completed a number of significant real estate development and construction projects in Xi'an, including the Xinxing Great Wall Building, Xinxing Residential Community, Xinxing Mansion and Xinxing Merchants Square. Newstar has a leading position in the regional Xi'an real estate market, and we intend to continue investing in the Xi'an market, as well as neighboring areas.

We intend to use the strength of our Newstar real estate business to capitalize on the continued privatization trend in residential housing and other state-owned enterprises in China. We believe that our management's experience in acquiring state-owned enterprises, coupled with greater access for Chinese businesses to public capital markets, will provide a competitive advantage. We have entered into letters of intent for three business acquisition opportunities. We prefer to concentrate on the acquisition of additional state-owned and private enterprises, focusing on businesses engaged in real estate development, customer electronics and the manufacturing and distribution of industrial products.

From 1999 through 2004, our sales from property development grew from approximately $2.4 million to approximately $40.3 million, and net income has grown to over $4.5 million from a loss in 1999.

Our corporate offices are located at 6 East Friendship Road, Han Garden 4th Floor, Xi'an, China. Our telephone number at that location is 86-29-8258-2644. We also have an office in the United States at c/o West Windsor Professional Center, 51 Everett Drive, Suite A-20, West Windsor, NJ 08550. Our telephone number at that location is 609-799-1889.

Background and History

Our company was organized under the laws of the State of Nevada on February 11, 1998. On September 29, 2004, we entered into a Share Exchange Agreement (the "Exchange Agreement") with Lanbo Financial Investment Company Group Limited ("LFIC"), all of the stockholders of LFIC (the "LFIC Stockholders"), and Keating Reverse Merger Fund, LLC, a Delaware limited liability company ("KRM Fund"). Under the Exchange Agreement, we acquired all of the outstanding capital stock of LFIC in exchange for our issuance to the LFIC Stockholders and KRM Fund of 19,285,714 shares of our common stock.

LFIC and Newstar

LFIC was incorporated in September 2003 in the territory of the British Virgin Islands. The authorized capital of LFIC is $10,800,000 divided into 10,800,000 registered shares with a par value of $1.00 per share. LFIC is an investment holding company and does not have any activities other than some general administrative expenses. As of September 30, 2004, LFIC through its wholly owned subsidiary, Newstar, principally engaged in the construction, development, and sale of residential units in China.

Newstar was established during May 1992 as a state-owned enterprise, whose former name is Xian New Star Group Real Estate Development Co. Ltd, and was formerly subjected to logistics department of LAN Zhou Military area of the People's Liberation Army of China. Newstar was reorganized as a limited company with equity capital invested by management personnel in September 1999. Newstar is a Chinese registered limited liability company with a legal structure similar to a regular corporation and a limited liability company. Its Articles of Association provide for a 54 year term beginning September 7, 1999 with registered capital of approximately US$3,140,000 (RMB 26,000,000). On March 28, 2002, the registered capital of Newstar was increased to approximately US$6,050,000 (RMB 50,000,000).

On September 16, 2003, LFIC acquired 100% interest in Newstar for US$6,840,000 (RMB 56,505,430). In accordance with laws governing foreign acquisitions of a Chinese registered limited liability company, there are two payment terms for this purchase. The first payment of 15% of the total purchase price of Newstar was paid on December 31, 2003, and the second payment on the remaining balance will be payable by June 30, 2005. Lanbo obtained the approval of the Foreign Trade and Economic Cooperation Commission of Xi'an City on December 22, 2003. The business term is 50 years starting on December 24, 2003. Newstar's registered capital is $6,050,000 (RMB 50,000,000) and total investment is approximately $6,840,000 (RMB 56,505,430). The first payment of $1,080,000 was made on December 30, 2003 from Lanbo to Newstar. This payment was in accordance with the requirement of the acquisition, but the funds have not been disbursed to the previous stockholders of Newstar.

Reverse Merger/Takeover

On November 3, 2004, we consummated the transactions contemplated by the Exchange Agreement, dated as of September 29, 2004 and subsequently amended on October 18, 2004, by and among our company, LFIC, the LFIC Stockholders and KRM Fund.

Pursuant to the terms of the Exchange Agreement, we acquired all of the outstanding capital stock of LFIC in exchange for our issuance to the LFIC Stockholders and KRM Fund of 19,285,714 shares of our common stock. Immediately following the closing of the Exchange Agreement, we issued an additional 13,928,571 shares of our common stock to various individuals and entities (the "New Stockholders") who had provided consulting, legal and advisory services to LFIC. The issuance of our shares of common stock to the LFIC Stockholders and the New Stockholders was exempt from registration under the Securities Act of 1933, as amended ("Securities Act") pursuant to Section 4(2) thereof.

Immediately following the closing of the Exchange Agreement, LFIC became our wholly-owned subsidiary and we had a total of 35,714,285 shares of its common stock issued and outstanding. LFIC Stockholders owned approximately 54.0% of the issued and outstanding shares of our common stock, our stockholders of immediately prior to the closing (the "Existing Stockholders") owned approximately 7.0% of the shares of our issued and outstanding common stock, and the New Stockholders owned approximately 39.0% of our issued and outstanding common stock.

Effective as of the closing of the Exchange Agreement, Kevin R. Keating resigned as our sole director. Our current board of directors consists of Pingji Lu, Xiaohong Feng, Yaru Du and Genxiang Xiao (the "Management Members"). Pursuant to the Exchange Agreement and a certain Voting Agreement by and among LFIC, the LFIC Stockholders, the New Stockholders and KRM Fund (the "Voting Agreement"), one of the vacant director positions will be filled by a person designated by KRM Fund, which person shall be an independent director and a financial expert, qualified and available to serve on our audit and compensation committee, and otherwise acceptable to the LFIC Stockholders ("KRM Fund Designee"). Under the terms of the Voting Agreement, the LFIC Stockholders and the New Stockholders have agreed to vote their shares of our common stock to elect the KRM Fund Designee to our board of directors for a period of one year following the closing of the Exchange Agreement. Under the terms of the Exchange Agreement, the remaining two vacant director positions will be filled by a persons selected by the Management Members and will be independent directors.

Industry and Market Overview

People's Republic of China

China has experienced rapid economic growth in the last twenty years. According to China's Department of Commercial Affairs, China's gross domestic product ("GDP") achieved an annual growth rate of 9.7% from 1980 to 1999. According to the National Statistics Bureau of China, the GDP of China in 2004 was RMB 13,651.5 billion, up 9.5% over the previous year.

We believe that the primary reasons behind China's strong economic growth are (i) a robust domestic consumer demand resulting from rising consumer confidence and disposable income, (ii) increasing foreign direct investment after accession into the World Trade Organization, (iii) surging investments in real estate and infrastructure, as exhibited by a boom in the real property market. We believe that a paradigm shift is taking place in China, characterized by some major economic and political improvements, such as a de-politicization of Chinese society, growing private business, an emerging unified national market and integration into the global value chain.

Real Estate Industry

China is in the midst of a rapid urbanization process. There are now over 400 million Chinese living in urban areas. Despite policies to limit population growth, China's urban population has been increasing and real estate investment has been thriving. Real estate investment has grown considerably, but not at a rate we believe is excessive relative to GDP growth. We believe that there is still strong growth potential in Chinese real estate investments. According to the National Statistics Bureau of China, real estate investment in China increased from RMB 15,000 million in 1978 to RMB 401,017 million in 1999. Southnet News reports in China's Youth Newspaper that from the late 1990s to 2004, there was an annual average growth rate of approximately 20% in real estate investments.

Since the late 1990s, Chinese government reforms in urban and rural housing policies have promoted the concept of the family residence in allowing individuals to purchase their own homes, and opportunities for financing such purchases through banks and other funds have become available to individuals. Previously, homes were owned by companies for their employees, and there was no market for real estate at the individual level. A viable and vibrant real estate market has emerged with these reforms. The effect of the emerging housing industry on the financial sector was considerable. According to the National Statistics Bureau of China, in 2004 individuals accounted for 93.3% of the total sales of commercial buildings.

Geographically, our core property business is based in Xi'an, the industrial heartland of western China. Xi'an is an ancient city, well known for its terracotta soldiers. Xi'an is also the largest city in western China with a population of eight million and is an important technological, commercial and cultural center. Xi'an plays an important strategic role in the Chinese government's "Going West" policy.

Acquisition Opportunities

We believe that the economic growth in China opens acquisition opportunities. We believe that diversification by acquisition of undervalued, privately-owned, small and mid-sized enterprises (SMEs) and former state owned enterprises (SOEs) in businesses with potentially high growth is an effective strategy to profit from the economic growth in China. In particular, we believe that we can take advantage of such opportunities in the consumer electronics sectors.

China is undergoing a national privatization scheme for SOEs. The Chinese government is encouraging private and foreign investors to take over SOEs at attractive valuations (less than net book value in some cases) despite the fact that some SOEs are in good operating condition. The Chinese government has promulgated a series of incentive policies for foreign investment in China like tax rebates. We believe that a cost-effective acquisition of undervalued SOE assets has significant potential for future capital gains. Xi'an is also known for its concentration of SOEs, which we believe creates acquisition opportunities for us as these SOEs become privatized by the Chinese government.

At the same time, China is already becoming a very important global marketplace with its low labor cost and the largest potential consumer market in the world. A large number of small and medium enterprises (including some privatized SOEs) are growing at exponential rates. With such rapid growth, many SMEs are running short of capital and need various alternative financing sources. Given the limited bank resources available to SMEs, equity financing is an alternative way that has provided the private and foreign investors the opportunity to take over substantial portions of equity in these companies at attractive valuations.

Current Projects

Junjing Garden Project

The Junjing Garden project is a community development project with 15 residential buildings in Xi'an City, Shaanxi Province, the People's Republic of China. Construction on the first five buildings of the Junjing Garden project was completed at the end of our fourth quarter for 2004, and construction on the remaining buildings is scheduled for completion at the end of fiscal 2005. The combined salable areas of our Xinxing Gangwan and Junjing Garden projects may reach up to 90,000 square meters. The sale price ranges from $386 to $483 per square meter. The sales for our current projects are subject to factors such as housing design, location, and sales price.

Newstar has entered in a RMB Fund Borrowing Contract, dated November 30, 2004 (the "Loan Agreement"), with the Sub-branch of China Construction Bank located at Xi'an Zhuque Road ("Construction Bank") and a Mortgage Contract, dated November 25, 2004 (the "Mortgage"), with Construction Bank.

The Loan Agreement provides for a loan of RMB 40 million from the Construction Bank to be applied to the construction investment of our Junjing Garden project. The loan was funded on December 7, 2004, has a term of 30 months, and bears a fixed monthly interest rate of 5.76%, calculated on a daily basis. The loan is subject to a fixed monthly interest rate of 11.52% if it is not used for the construction investment of the Junjing Garden project and a fixed monthly interest rate of 8.64% on overdue amounts. Newstar may prepay part of or all of the principal of the loan with 30 days notice to Construction Bank. The Loan Agreement contains customary covenants, including disclosure to Construction Bank of certain of Newstar's financial and accounting information, and customary default provisions. The loan is secured by the property of and work in progress on the Junjing Garden project.

Xidu Tower

Xidu Tower is a 26 floor commercial and residential structure (with two floors underground) situated on 4200 square meters of land in North Jinhua Road in Xi'an City. Newstar entered into a Transfer Agreement, dated November 4, 2004 (the "Transfer Agreement"), with Shaanxi Province International Trust and Investment Co. Ltd. (the "Assignor") and the Xincheng District Commerce and Trade Bureau of Xi'an City (the "Bureau") pursuant to which the Assignor shall transfer Xidu Tower to Newstar for payment of transfer expenses of US$10.8 million and approximately RMB 20.5 million (a total of RMB 110.0 million. Newstar paid an initial installment of US$ 3.6 million and RMB 33.0 million for the transfer as of January 2005, and the Assignor has agreed to accept payments on the remainder of the transfer expenses at a later date than originally provided for in the Transfer Agreement. The planning and architectural design for our project on this land have been completed. We currently anticipate opening quotation and distribution in the second quarter of 2005 and completing the project in fiscal 2005.

Tangdu Machine Factory

In April 2003, Newstar successfully acquired the Tangdu Machine Factory. The Tangdu Machine Factory is situated on more than 60,000 square meters of land on Jiangong Road in Xi'an City. The documentation for the land transfer has been completed. Newstar currently intends to develop as a residential community on this land, and we anticipate that the project will begin in 2007 and be completed in 2009.

Competition

We believe that the economic globality and high growth of China's economy has made market competition more fierce while simultaneously creating opportunities for developing enterprises. Competition is more fierce in industries in China with higher potential for growth. We believe that the real estate development in which we are engaged and customer electronic sectors in which we intend to be engaged in through acquisitions are just such industries.

There are four other real estate companies in Xi'an similar in scale to our subsidiary, Newstar. Competitive factors in our market include the ability to reserve land for development, access capital and develop quality products recognized by consumers. The Chinese government has instituted a "Bid, Auction or Quotation" policy which has increased the cost of land. We believe that we have more advantages and experience than our competitors in obtaining land through the acquisition of state-owned enterprise. For example, we obtained the land for the In Home project through the acquisition of a factory that was an SOE. We have reserved more than 60,000 square meters of land in our acquisition of the Tangdou Machine Factory. The large state-owned real estate development companies in our markets, however, often have a competitive advantage over us in obtaining land through the government.

We also believe that we have advantages over our competitors in obtaining financing. We believe that we have maintained good relations with the banks we have dealt with and, based on our history of good credit, banks have offered us favorable terms on loans. This has reduced our funding cost considerably. Additionally, as a publicly traded company on a United States market, we believe that we have better access to capital markets than our competitors.

On product design, we have employed well-known designers, such as WSP, based in Germany, to develop residential houses with attractive ergonomics, technology and health and environmental protection for our consumers. Our company has won numerous awards for our projects, including for our Xinxing-Mingyuan and Xinxing-Junjingyuan projects, which we believe demonstrate our innovation and ability to satisfy consumer requirements and give us a competitive advantage in the real estate industry in the Shaanxi province.

In the consumer electronic industry, we will face two major types of competitors in China if we succeed in expanding our business into that industry. First, foreign companies founded by well-known international electronic companies will have significant market shares with strong capital and technology support from their parent companies. Second, Chinese domestic electronic companies, which are not as advanced as their international competition in technology, may have competitive advantages in manufacture and marketing. We cannot assure that we will be able to successfully compete against the greater resources of the foreign companies or the focus of the domestic companies.

Business Strengths

Innovative Financing Plans and Cost Effective Acquisition Strategies. With limited capital resources and land reserves, we have developed real estate projects with innovative financing plans and cost effective acquisition strategies such as land-apartment trade offs and acquisitions of bankrupt SOEs with sizeable land reserves. By the end of 2003, we had completed seven commercial and residential real estate projects. Our sales increased ten fold from $2.35 million in 2000 to $21.24 million in 2003. Our developed areas totaled 70,844 square meters in 2004 and land reserves reached 60,000 square meters. Due to our growing influence in the local market, the Xi'an government is currently seeking collaboration with us on a number of key property development projects such as Xi'an Science and Technology Park and Logistics Park.

Efficiency in quality and cost control. We believe that market share is best attained through high quality products and services. We believe that we have established an all-encompassing approach to quality and cost control over our subsidiaries and subcontractors. From the fundamental corporate level, we utilize statistical methodologies for production efficiency and quality measurement. We implement advanced quality control methods and internal information management systems. We have adopted the ISO9002 ISO9001: 2000 standard operation system and ISO14001: 1994 operation system.

Experienced Management. Our management team is comprised of seasoned professionals in the real estate development industry, who have experience in turning struggling businesses profitable. Approximately, 54% of our staff have master's degrees or above and 60% are experienced in Chinese and international markets. Most of our staff have experience in mergers and acquisitions, venture capital, real estate, infrastructure projects, and high technologies. We believe that the strength of our management team comes from their innovative spirit, entrepreneurial outlook, strong business skills, and relevant expertise.

A Leading Name in the Real Estate Market. In the current Chinese real estate market, we believe that we are strong in adhering to quality control and the client service principle in the properties we develop. We believe that we have developed into a premium image in our operating market, and we have received awards in recognition of our performance. In September 2003, we were awarded "the top ten performance enterprise in Xi'an" by both the Association of Real Estate of Xi'an and the Center of Societal and Economic Development in Xi'an . In December 2004, we were recognized as one of the "Top Ten Flagship Real Estate Enterprises of Shaanxi Province" by the Association of Shaanxi Real Estate. During Newstar's ten years of business, we have received more than 25 awards.

A Successful Track Record of Real Estate Acquisitions. Historically, acquisitions have been an integral part of our property development strategy. Most of our land used and reserves has come from underperformed SOEs located in urban areas of China. We have in the past sought cost effective ways to take over the targeted companies and their land. During the course of our acquisitions, we have accumulated extensive hands-on experience in acquiring SOEs. All of our acquisitions and their ensuing property projects have been profitable to date.

Good Bank Relations. Banking facilities are limited for property development in China because Chinese banks are selective towards real estate developers and private companies. We believe that we have maintained good relations with the banks we have dealt with and, based on our history of good credit, banks have offered us favorable terms on loans. This has reduced our funding cost considerably. Newstar was recognized as a "Good Credit Enterprise" in 2002, 2003 and 2004 by the China Bank Guild, comprised of 27 banks. It was also recognized as a "AAA enterprise in the Shaanxi construction industry" in July 2004 by the Shaanxi Province Enterprise Credit Association.

Comprehensive Acquisition and Risk Management System. We have formed a comprehensive set of acquisition and risk management systems, both on the operational and managerial level. On the operational level, we have a professional and experienced team to screen and select potential projects. On the corporate level, we have a Strategic Decision Committee and Risk Management Committee comprised of experts from specific industry fields and financial and legal advisors in China to evaluate proposed projects. We believe that our board of directors' oversight further enhances the risk management on decision making and supervision of performance. We believe that this system has proven effective in our past projects. Considering the basic elements common to acquisitions of SOEs in China, we believe that this system can be readily applied to acquisitions of companies in other industries.

Depth of Human Capital. Newstar, our operating company, was originally an affiliated company of the PRC army. We have transitioned into a private company while still retaining key management members who used to work in a military environment. As such, we have applied some approaches from this military background to our business operations regarding target orientation, efficiency and discipline. We believe that this corporate culture is critical for a holding company managing different subordinate entities and projects.

Business Strategy

Continue Growth of Core Real Estate Development Business. We intend to continue to grow our core real estate development business. Simultaneously continuing our residential real estate development work, we intend to also focus on the operational development and utilization of land and carry over our business strategy from residential development into land operation projects. With land operation projects, we would focus on commercial and tourism related project development. We intend to continue the steady development of Xi'an as our home base, but we intend to gradually penetrate and expand our business into second class cities in the Yangtze Delta and Bo Sea Bay.

With economic growth, the Chinese government has implemented new investment policies that allow for certain credit lines to finance real estate projects, allow certain enterprises to use their equity as collateral to finance projects and encourage companies to attract foreign capital. Land developers will have alternative ways of financing real estate development. We believe that we will be able to take advantage some of these opportunities in the future. Additionally, our clients are increasingly financing their purchases through mortgages and installment payment plans with favorable low interest rates financed by banks, and borrowing from the Chinese government's housing reserve funds.

Diversification through Strategic Acquisitions. We intend to evolve into a diversified industrial conglomerate through low cost acquisition strategies focusing selectively on SOEs and SMEs in high growth sectors in China. We intend to acquire strategic assets in the fast growing electronic consumer industry in order to establish a counter-cyclical and complementary asset portfolio. We currently have letters of intent for three acquisitions of Chinese companies, subject to our obtaining financing for these acquisitions.

Investment in Long-Term Growth Opportunities. We believe our core competency lies in the acquisition and management skills evidenced in our past history of successful executions of real estate acquisitions. Given the long-term return nature of the real estate business, our strategy is to acquire SOEs and recently privatized companies at attractive valuations, and then grow the business.

We divided our procedure of strategic buyouts into three parts. First, we intend to target companies with large potential markets, strong competitive advantages and the potential for high growth. Second, through horizontal consolidation and vertical consolidation, we intend to continue to complete our internal management, generate our corporate culture, develop our company into a profitable and strong diversified investment holding company. Thirdly, we intend to expand our market share, enhance dominance in the industries we enter and utilize economies of scale to generate core competitive advantages in China.

Recent Developments

We entered into three letters of intent, each dated November 30, 2004, for the acquisition of 55% of the business of Nanjing Damei Real Estate Development Co., Ltd. ("Nanjing Damei"); 65% of the business of Shenzhen Qingbao Science and Technology Co., Ltd. ("Shenzhen Qingbao") and 60% of the business of Weifang Gongda Tele-communications Co., Ltd. ("Weifang Gongda"). Under the terms of the letters of intent, the closing of the transactions are anticipated to occur in the first half of 2005, subject to our obtaining financing. In each transaction, we have agreed to pay consideration in the form of stock to certain of the target company's stockholders and make a capital contribution to a joint venture to be formed by the target company and us.

We cannot make any assurances that each of the acquisitions will close. The closing of each of the acquisitions remains subject to our obtaining financing for the capital contributions we will be obligated to make to the joint ventures we will form with each of the target companies. Additionally, the closing of each acquisition remains subject to the negotiation and execution of a definitive agreement, the completion of due diligence in all respects satisfactory to us, the completion of a certified audit of the target company according to U.S. GAAP and the receipt of all required approvals and consents from governmental authorities and agencies and third parties. The final purchase price for each acquisition will be subject to adjustments according to a financial valuation of each target company.

Nanjing Damei is a privately-held real estate development company in Nanjing, Jiangsu Province, China, mainly engaged in residential real estate development since its inception in 1994. The Nanjing Damei letter of intent anticipates that we will acquire 55% of the business of Nanjing Damei in consideration for the issuance of $1.0 million in convertible preferred stock of our company (bearing 5% interest per annum) to the Nanjing Damei stockholders and a capital contribution of $12.0 million in cash to a joint venture to be created by Nanjing Damei and us. It is anticipated that $2.0 million will be paid at the closing, $2.436 million will be paid within six months after the closing, and the balance to be paid within twelve months after the closing. $0.5 and $0.5 million of the convertible preferred stock will be issued as series A and series B, respectively (each series is further described below).

Shenzhen Qingbao is a privately-held technology firm focused on manufacturing various cards used in computers, such as sound cards and display cards. Shenzhen Qingbao also engages in system integration and design of networking systems, application of networking production, development of software and hardware, and the assembly and marketing on an agency basis of computers and their accessories and electronic components. The Shenzhen Quingbao letter of intent anticipates that we will acquire 65% of the business of Shenzhen Quingbao in consideration for the issuance of $2.0 million in convertible preferred stock of our company to the Shenzhen Quingbao stockholders and a capital contribution of $5.12 million in cash to a joint venture to be created by Shenzhen Quingbao and us. It is anticipated that $1.68 million will be paid at the closing, and the balance will be paid within six months after the closing. $1.0 and $1.0 million of the convertible preferred stock will be issued as series A and series B, respectively.

Weifang Gongda is a Sino-foreign joint venture specializing in manufacturing Electrets Condenser Microphones (ECM). Weifang Gongda microphones can be found in a wide number of products ranging from audio and video conferencing systems to computer monitors and cellular phones. The microphones are also used with different Bluetooth technology items. The Weifang Gongda letter of intent anticipates that we will acquire 60% of the business of Weifang Gongda at closing in consideration for the issuance of $2.4 million in convertible preferred stock of our company (bearing 5% interest per annum) to the Weifang Gongda stockholders and a capital contribution of $2.6 million in cash to a joint venture to be created by Weifang Gongda and us. It is anticipated that $0.9 million will be paid at the closing, and the remaining $1.7 million will be paid within six months after the closing. $1.2 and $1.4 million of the convertible preferred stock will be issued as series A and series B, respectively.

The convertible preferred stock to be issued in the acquisitions will be divided into two classes, with series A convertible preferred stock redeemable one year after the closing of the applicable acquisition, and series B convertible preferred stock redeemable twenty-four months after the closing of the applicable acquisition.

Government Regulation

We are subject to all applicable laws, policies and regulations that govern the financial guarantee industry in China adopted by China's central bank, the People's Bank of China ("PBOC"), which sets monetary policy and, together with the State Administration of Foreign Exchange, foreign-exchange policies. According to the 1995 Central Bank law, the State Council maintains oversight of PBOC policies. As a U.S. public company, we are also subject to Federal and state securities laws.

Employees

As of December 31, 2004, we had 84 full-time employees. Our employees are not represented by a labor union and are not covered by a collective bargaining agreement. We believe that our employee relations are good. We contract with third parties on various aspects of our land development projects, such as design and construction.

RISK FACTORS

In addition to the other information in this annual report, our business is subject to numerous risks which should be considered carefully in evaluating our business and prospects. The following matters, among others, may have a material adverse effect on our business, financial condition, liquidity, results or operations or prospects, financial or otherwise. Reference to this cautionary statement in the context of a forward-looking statement or statements shall be deemed to be a statement that any one or more of the following factors may cause actual results to differ materially from those in such forward-looking statement or statements.

Risks Related to Our Business

Our revenues may vary from quarter to quarter due to when our real estate projects are completed.

We sell residential real estate units in real estate development projects. We recognize revenue when a sale is consummated, which only occurs when a project is completed. As with revenue, we recognize cost of sales when a sale is consummated, which we recognize only when a project is completed. Our sales are not verified until the completion of our real estate development projects. Our revenues are subject to the timing of when our projects are completed. Additionally, fluctuating or inconsistent demand for our products by our customers may affect our revenues.

Our growth strategy to acquire companies may not be successful, and if it is not, our ability to generate revenues through these vehicles may be impaired.

One component of our growth strategy is to evolve into a diversified industrial conglomerate through low cost acquisition strategies focusing selectively on SOEs and SMEs in high growth sectors in China. There can be no assurance that we will be able to successfully identify, acquire on favorable terms or integrate such companies. If any acquisition is completed, there can be no assurance that such acquisition will enhance our business, results of operations or financial condition. Any such future acquisitions may be subject to a number of risks, including:

o the diversion of management time and resources;

o the difficulty of assimilating the operations and personnel of the acquired companies;

o the potential disruption of our ongoing business;

o the difficulty of incorporating acquired technology and rights into our products and services;

o unanticipated expense related to technology integration;

o difficulties in maintaining uniform standards, controls, procedures and policies;

o the impairment of relationships with employees and customers as a result of any integration of new management personnel;

o potential unknown liabilities associated with acquired businesses.

Further, in connection with these acquisitions we may issue shares of our common stock or securities convertible into our common stock. If the value of our stock declines, or other adverse circumstances arise, we face the risk that the parties to these acquisitions or joint ventures may seek ways to terminate the transaction, or may hinder or prevent us from accessing important information regarding the financial and business operations of these companies. Any rights we may have to specific performance, or to seek an injunction under Chinese law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. Moreover, the resources expended in identifying and consummating acquisitions may be significant. Any acquisitions we decide to pursue may be subject to the approval of the relevant Chinese government authorities, as well as any applicable Chinese rules and regulations. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

We may in the future face increased competition for acquisition opportunities, which may inhibit our ability to consummate suitable acquisitions on terms favorable to us. We may require additional debt or equity financing for future acquisitions or joint ventures, which financing may not be available on terms favorable to us, if at all. We have entered into letters of intent for the acquisition of Nanjing Damei, Shenzhen Qingbao and Weifang Gongda. The closing of each of the acquisitions remains subject to our obtaining financing for the capital contributions we will be obligated to make to the joint ventures we will form with each of the target companies. While we expect these acquisitions to strengthen our company, the anticipated benefits of these acquisitions may not be achieved.

If our customers do not accept our proposed designs, our revenue will be adversely affected.

We dedicate personnel, management and financial resources to developing and designing residential housing projects for our customers. Our time frame for the development and construction of major real estate projects typically ranges from one to three years. If our customers do not accept our proposed designs, we will fail to capitalize on the invested resources, time and effort that we expended on a project and our revenue would be adversely affected.

Our growth and ability to generate revenue could be curtailed if we are unable to obtain required additional financing.

We have entered into three letters of intent for the acquisition of Nanjing Damei, Shenzhen Qingbao and Weifang Gongda. The closing of each of the acquisitions remains subject to our obtaining financing for the capital contributions we will be obligated to make to the joint ventures we will form with each of the target companies. We cannot make any assurances that each of the acquisitions will close or that we will achieve our investment objectives. We will need to raise additional funds through public or private financing, which may include the sale of equity securities. The issuance of these equity securities could result in dilution to our stockholders. If we are unable to raise capital when needed, our business strategy will be affected, which could severely limit our ability to grow the company and our ability to generate revenue.

Additionally, if we are unable to achieve our investment objectives, your investment in our company will be concentrated in a relatively small number of projects and industry sectors in China. Such concentration in projects and sectors may compound any negative impact to our business, financial condition and results of operations by factors adversely affecting our industry or market.

Our investment objectives may subject you to risks in multiple industries.

We are looking to acquire companies operating in various industries. If we achieve our investment objectives, your investment in our company will be subject to the risks of industries beyond real estate. While we believe that diversification will help establish a counter-cyclical and complementary asset portfolio, we cannot assure you that this will be the case.

Moreover, if we achieve our investment objectives, we currently plan on maintaining the current management teams of the acquired companies because we believe they know their company's business and industry well. We cannot, however, eliminate the risks of our management's oversight of subsidiaries operating in diverse industries which they may not be familiar with.

We may increase our indebtedness to fund our operations and investment objectives, which could adversely affect our financial condition.

To fund our operations and investment objectives, including our current real estate development projects and future acquisitions, we may need to raise additional funds through public or private financing, including taking on additional indebtedness. We cannot assure you that we will incur indebtedness on commercially reasonable terms or at all. Additional indebtedness we take on may make us more vulnerable to general adverse economic and industry conditions; require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, future investments, capital expenditures and other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; place us at a competitive disadvantage compared to our competitors that have less debt; and limit our ability to borrow additional funds. Additionally, the instruments or agreements for indebtedness that we may incur may limit our ability to operate, change or expand our business, make future investments and make dividends and distributions to our stockholders.

Our investment in current and future subsidiaries not listed on any stock exchange could impair our exit from such investments.

Our current investment in our subsidiaries are not, and if we meet our investment objectives, our future investment in subsidiaries will not be, in companies listed on any stock exchange, and we cannot assure you that any such subsidiaries will be listed on a stock exchange in the future. The liquidity in our investments is and will be limited. This could impair our exit from our current and future investments.

The industry in which we compete is highly concentrated.

We expect competition to persist and intensify in the future. There are four other real estate companies in Xi'an similar in scale to our subsidiary, Newstar. Competitive factors in our market include the ability to reserve land for development, access capital and develop quality products recognized by consumers. We believe that we have more advantages and experience than our competitors in obtaining land through the acquisition of state-owned enterprise. The large state-owned real estate development companies in our markets, however, often have a competitive advantage over us in obtaining land through the government. We also believe that we have advantages over our competitors in obtaining financing and in product design. However, competitive pressures from current or future competitors could cause our products to lose market acceptance or require us to significantly reduce the price of our services to keep and attract clients. These factors may adversely affect our business, financial condition and results of operations.

Our success is highly dependent upon the continuing service of our officers, management team and other personnel, including our Chairman of the Board and Chief Executive Officer, Pingji Lu.

Competition in our industry for executive-level personnel is strong, and recruiting, training, and keeping qualified key personnel with both technical and market expertise are important factors in our ongoing success and survival. Pingji Lu, our Chairman of the Board and Chief Executive Officer, is key to our management and direction. We have an employment agreement with Mr. Lu which continues through December 31, 2006. Should key employees like Mr. Lu leave we may lose both an important internal asset and revenues from customer projects tied to those employees. We cannot assure you that we would be able to find a replacement for Mr. Lu with his equivalent business experience and skills.

Risks Associated with Doing Business in Greater China

All of our current, as well as near-term future revenues, are expected to be derived from China. There are substantial risks associated with doing business in greater China, as set forth in the following risk factors.

Our operations and assets in greater China are subject to significant political and economic uncertainties.

Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice. In addition, although the Chinese government has in recent years implemented measures emphasizing the reduction of state ownership of productive assets, a substantial portion of productive assets in China remains government-owned. For instance, all lands are state owned and leased to business entities or individuals through governmental granting of State-owned Land Use Rights. The granting process is typically based on government policies at the time of granting, which could be lengthy and complex. This process may adversely affect our future manufacturing expansion. The Chinese government also exercises significant control over China's economic growth through the allocation of resources, controlling payment of foreign currency and providing preferential treatment to particular industries or companies. Uncertainties may arise with changing of governmental policies and measures. In addition, changes in laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition.

Fluctuations in the value of the Chinese currency relative to foreign currencies could affect our operating results.

We have historically conducted transactions with customers, paid payroll and other costs of operations in Chinese national currency, the Renminbi. To the extent our future revenue may be denominated in foreign currencies, we would be subject to increased risks relating to foreign currency exchange rate fluctuations which could have a material adverse affect on our financial condition and operating results. To date, we have not engaged in any hedging transactions in connection with our international operations.

We may have limited legal recourse under Chinese law if disputes arise under contracts with third parties.

The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under Chinese law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

Failure to comply with the United States Foreign Corrupt Practices Act could adversely impact our competitive position and subject us to penalties and other adverse consequences.

We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. We have attempted to implement safeguards to prevent and discourage such practices by our employees and agents. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

Risks Associated with Investing in Our Common Stock

Certain of our stockholders control a significant amount of our common stock.

Certain of our stockholders who were originally shareholders of LFIC prior to the closing of the Exchange Agreement own approximately 54% of our issued and outstanding common stock. Approximately 48% of these shareholders have entered into a voting trust agreement with Pingji Lu, who has sole investment and voting power over their shares of our common stock. As a result, this group has the ability to significantly influence the election of all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit our other shareholders.

Efforts to comply with recently enacted changes in securities laws and regulations will increase our costs and require additional management resources, and we still may fail to comply.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company's internal controls over financial reporting in their annual reports on Form 10-K. In addition, the public accounting firm auditing the company's financial statements must attest to and report on management's assessment of the effectiveness of the company's internal controls over financial reporting. This requirement will first apply to our annual report on Form 10-KSB for our fiscal year ending December 31, 2006. If we are unable to conclude that we have effective internal controls over financial reporting or if our independent auditors are unable to provide us with an unqualified report as to the effectiveness of our internal controls over financial reporting as of December 31, 2006 and future year ends as required by Section 404 of the Sarbanes-Oxley Act of 2002, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities. We have not yet begun a formal process to evaluate our internal controls over financial reporting. Given the status of our efforts, coupled with the fact that guidance from regulatory authorities in the area of internal controls continues to evolve, substantial uncertainty exists regarding our ability to comply by applicable deadlines.

There has not been significant trading in our common stock.

Our common stock is quoted on the Over-the-Counter Bulletin Board and to date, there has been a limited trading market for our common stock. There is a significant risk that our stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:

o variations in our quarterly operating results;

o announcements that our revenue or income are below analysts' expectations;

o general economic slowdowns;

o changes in market valuations of similar companies;

o sales of large blocks of our common stock;

o announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

o fluctuations in stock market prices and volumes, which are particularly common among highly volatile securities of internationally-based companies.

Our common stock is subject to regulations prescribed by the Securities and Exchange Commission relating to "penny stocks".

The Securities and Exchange Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price (as defined in such regulations) of less than $5.00 per share, subject to certain exceptions. Our common stock meets the definition of a penny stock and is subject to these regulations, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investor, generally institutions with assets in excess of $5,000,000 and individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 (individually) or $300,000 (jointly with their spouse).

We do not anticipate paying dividends in the foreseeable future.

We have never declared or paid any cash dividends or distributions on our common stock. We currently intend to retain our future earnings to support operations and to finance expansion and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Our board of directors does not have an audit committee.

The board of directors currently does not have any committees. As a public reporting company listed on the OTC Bulletin Board, we are required to have an audit committee pursuant to the Exchange Act. We have undergone a significant change in management since our recent completion of a reverse merger with a change in control of the reporting company. We intend to begin an active search for individuals who will qualify to serve on our audit committee and as an audit committee financial expert. If we are unable to establish in timely manner an audit committee that complies with the requirements of the Exchange Act, we may face the consequences of being in violation of listing requirements and the U.S. federal securities laws. We are currently listed on the OTC Bulletin Board and are therefore not required to have a nominating committee or a compensation committee. We will evaluate establishing such committees in the future.