Form 10KSB NORTH AMERICAN GAMING & ENTERTAINMENT CORP - NAGM Filed: November 14, 2009 (period: December 31, 2008) Annual report filed by small businesses

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2008

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period _________________  to  _________________

Commission file number 0-5474

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

---------------------------------------------------

(Name of small business issuer in its charter)

Delaware                       75-2571032

-------------------------------         -------------------

(State or other jurisdiction of        (I.R.S. Employer

incorporation or organization)        Identification No.)

Seventeen Floor, Xinhui Mansion, Gaoxin Road,

Hi-Tech Zone, Xi'An P. R. China  710075

-----------------------------------------------------

(Address of principal executive offices)   (Zip Code)

Issuer's telephone number, including area code: (86) 29-88331685

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

Securities  registered  pursuant to Section 12(g) of the Act: Common Stock, par

value $.01 per share

Check whether the issuer is not required to file reports pursuant to Section 13

or 15(d) of the Exchange Act. Yes [ ]  No [X]

Check whether the issuer  (1) filed all reports required to be filed by Section

13 or 15(d) of the Securities  Exchange  Act  of 1934 during the past 12 months

(or  for  such  shorter  period  that  the  issuer  was  required  to file such

reports),and (2) has been subject to such filing requirements  for the  past 90

days. YES [X] NO [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of

Regulation S-K contained herein, and none will be contained,  to  the  best  of

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. [X]

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2 of the Exchange Act).   Yes [ ]No [X]

The issuer's revenues for its most recent fiscal year were:  $-0-.

The aggregate market value of the voting common stock held by non-affiliates of

the  issuer,  based  on  the  average  bid  and asked price of such stock,  was

$242,161 at December 31, 2008.

At December 31, 2008, the registrant had outstanding  24,216,058  shares of par

value $.01 common stock.

DOCUMENTS INCORPORATED BY REFERENCE:  None

Transitional Small Business Disclosure Format (check one):  Yes ___  No   X

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FOR FISCAL YEAR ENDED DECEMBER 31, 2008

FORM 10-KSB ANNUAL REPORT

INDEX

PART I                                                                                                                      

Item 1.        DESCRIPTION OF BUSINESS

2

Item 2.        DESCRIPTION OF PROPERTY

20

Item 3.        LEGAL PROCEEDINGS

21

Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

21

PART II                                                                                                                     

Item 5.        MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY

21

                   SECURITIES

Item 6.        MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

21

Item 7.        FINANCIAL STATEMENTS

30

Item 8.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

30

Item 8A(T).    CONTROLS AND PROCEDURES

31

Item 8B.       OTHER INFORMATION

31

PART III                                                                                                                    

Item 9.        DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

31

Item 10.       EXECUTIVE COMPENSATION

32

Item 11.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

33

Item 12.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

35

Item 13.       EXHIBITS

36

Item 14.       PRINCIPAL ACCOUNTANT FEES AND SERVICES

37

SIGNATURES

43

FINANCIAL STATEMENTS                                                                                                          

Reports of Independent Registered Public Accounting Firms

F-1

Consolidated Balance Sheets

F-3

Consolidated Statements of Operations

F-4

Consolidated Statements of Stockholders' Equity

F-5

Consolidated Statements of Cash Flows

F-6

Notes to Consolidated Financial Statements

PART I

ITEM 1.DESCRIPTION OF BUSINESS

                           DESCRIPTION OF BUSINESS

GENERAL

North  American  Gaming  and  Entertainment Corporation ("North American")  was

incorporated under the laws of  the  State  of  Delaware  in 1969.  The Company

changed its name from Western Natural Gas Company to North  American Gaming and

Entertainment  Corporation  on October 17, 1994 in connection with  its  merger

with OM Investors, Inc.  Until  August 20, 2001, the Company was engaged in the

video  gaming  business  through  its  partial  ownership  of  three  operating

companies  that  operated  video poker  machines  located  in  truck  stops  in

Louisiana.  Effective August  20,  2001,  the Company sold all of the Company's

interest in the three operating companies.   The Company did not liquidate as a

result of the sale of its assets but began to  seek  business  and  acquisition

opportunities,  leading  to  the  Transactions. Effective February 4, 2008,  we

acquired a controlling interest in Shaanxi Chang Jiang Si You Neng Yuan Fa Zhang

Gu Feng You Xian Gong Si ("Chang Jiang"),  a China corporation, in exchange for

a controlling interest in the Company.

Since  our  acquisition  of  Chang  Jiang  our  primary  business  activity  is

exploration and we expect to begin mining,  processing  and  distributing gold,

zinc,  and  lead  in  2009.   Currently  all of our business is in the  Shaanxi

Province,  China  .  We have engaged in exploration  and  expect  to  begin  to

operate mines in the  Qinba Mountain Area at a geologic junction of "Shan, Zha,

Zhen, Xun", which are the  four  primary  metallogenic prospective areas in the

Shaanxi Province. This region has historically contained reserves of high-grade

minerals of gold, lead and zinc. As this has  traditionally been a mining area,

we  believe  we can meet our requirements for experienced  miners  and  general

labor teams at an attractive cost.

Chang Jiang was  incorporated  in  the name of Weinan Industrial and Commercial

Company Limited as a limited liability  company  in  the PRC on March 19, 1999.

The  Company  became a joint stock company in January 2006  with  its  business

activities as an  investment  holding  company and development of theme park in

Xi'An, PRC. Beginning in August 2005, Chang  Jiang  contributed  $7,928,532  by

injection  of certain land use rights in lieu of cash to the registered capital

of Shaanxi Huanghe  Wetland  Park  Company  Limited  ("Huanghe"),  representing

92.93% of the equity of Huanghe.

In  2007  Chang  Jiang  engaged  in a series of acquisitions, divestitures  and

exchanges  that  reorganized  the  company  so  that  its  operations  are  now

principally mining lead, zinc and gold  in  an  67.82  sq. km area in Jiao Shan

Zhai,  Guo  Jia Ling, Xunyang County, in the Shaanxi Province  of  China.   The

transactions and history of the Company is as follows.

On February 5,  2007,  Chang Jiang entered into an agreement with a third party

to  acquire 40% of the equity  interest  in  Dongfang  Mining  Company  Limited

("Dongfang  Mining") at a consideration of $3,117,267 payable in cash. Dongfang

Mining has engaged  in exploration for lead, zinc and gold mining near the city

of  Xi'An in the Shaanxi Province of the, PRC.

On March 22, 2007, Chang  Jiang  entered into an agreement with a related party

of  the Company to exchange its 92.93%  interest  in  Huanghe  for  20%  equity

interest in Dongfang Mining owned by the related party.

On August  15,  2007,  97.2%  of the stockholders of Chang Jiang entered into a

definitive agreement with Tai Ping  Yang  and the stockholders of Tai Ping Yang

in which they disposed their ownership in Chang  Jiang to Tai Ping Yang for 98%

of  ownership  in Tai Ping Yang and cash of $1,328,940  payable  on  or  before

December 31, 2007.

Hongkong Wah Bon  Enterprise  Limited ("Wah Bon") was incorporated in Hong Kong

on July 7, 2006 as an investment  holding  company  and  wholly  owned  foreign

enterprise  ("WOFE".) On September 2, 2007, Wah Bon acquired 100% ownership  of

Tai Ping Yang at a consideration of $128,205 in cash.

As a result of  these  various  transactions,  the  resulting company as of 31/12/2008

is as follows:

       a.     Wah Bon owns 100% of Tai Ping Yang;

       b.     Tai Ping Yang owns 97.2% of Chang Jiang; and

       c.     Chang Jiang owns 60% of Dongfang Mining.

The members have limited liability for the obligations or debts of the entity.

The resulting corporate structure is diagrammed below:

                                                        

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On February 4, 2008, we completed the Exchange pursuant to the Plan of Exchange

(the  "Exchange"),  by   and  among  us,  Chang  Jiang,  and  the  Chang  Jiang

Shareholders. Under the Agreement,  the  Wah  Bon shareholders received 500,000

shares  of  Series  C  Convertible Preferred Stock.  The  shares  of  Series  C

Preferred Stock each carry  the  right  to  1,218  votes  per share and will be

convertible into common stock at a rate sufficient to yield an aggregate of 609

Million  pre-split  common  shares  upon  conversion,  as  set  forth   in  the

Certificate of Designations.

To  comply  with  requirements  of  Chinese  law  (referred  to  as "WOFE"), we

established the acquisition of Wah Bon and Tai Ping Yang to serve  as  offshore

foreign  entities  for  the  purpose  of  consummating  the acquisition. In the

opinion  of our Chinese counsel this permits the transfer  of  at  least  97.2%

shares of  Chang  Jiang  to  the  first  WOFE entity (Tai Ping Yang), then 100%

shares of Tai Ping Yang to the second WOFE  entity  (Wah Bon.) Then 100% of the

shares  of Wah Bon can be conveyed to NAGM, indirectly  making  Chang  Jiang  a

foreign entity.  For  purposes of the acquisition, all of Chang Jiang's rights,

responsibilities and benefits  are  assigned  to  and  assumed by Wah Bon. This

procedure  requires  several  stages  of  governmental approval  by  provincial

authorities in the PRC. As of the Closing Date  all required approvals had been

obtained.

North American, Wah Bon, Tai Ping Yang, Chang Jiang  and  Dongfang  Mining  are

hereafter referred to as (the "Company").

Sales and Marketing

Although  we  have  not yet begun to extract minerals from the property we have

established a sales and  marketing  department.  These persons have focused on

identifying and establishing relationships with Companies  that  are  likely to

require  our products. Lead and zinc can be freely sold and marketed throughout

the PRC. As China remains a net importer of these metals, we believe a customer

base exists within China.  

Industry

General

Our primary  business  activity  is  anticipated  to  be mining, processing and

distributing  gold, zinc, lead, and other mineral products  for  which  China's

modernizing economy has experienced rapid growth in its manufacturing capacity.

Despite high rankings  in world production of nonferrous metals, China is still

a net importer of nonferrous  metals  including  lead and zinc. China's natural

resources  include  coal,  iron  ore,  petroleum, natural  gas,  mercury,  tin,

tungsten, antimony, manganese, molybdenum, vanadium, magnetite, aluminum, lead,

zinc, and uranium.  There are governmental restrictions on foreign ownership of

mines for gold and an outright ban on foreign ownership of mines for uranium.  

We believe the increasing industrial capacity  of  China will continue to cause

increased demand for industrial raw materials such as  non-ferrous  metals.  We

expect the price of zinc and lead will rebound in the near future, and continue

to increase although prices may experience significant fluctuation.

 Mineral Deposits

Dongfang  Mining obtained the exploration rights to the Dongfang Parcel on Sep.

19th, 2003.  In  the same year, they finished 1/10,000 geological rough survey,

geochemical profile survey and trench exploration on lead & zinc and gold mines

in Dong Er Gou, Xunyang County within the area of 1.15 sq.km. by consigning the

first geological team  of  Geology  and  Mineral Bureau of Shaanxi. Lead & zinc

mineralization   clues   had  been  found  and  efforts   began   to   evaluate

reconnaissance and prospecting.

During 2005-2006, the company  dug  a  prospecting hole with a spatial depth of

more than 60 meters and a test trench with  240m3  in  the  region of Jiao Shan

Zhai,  and  discovered  five  gold mine veins, each with a length  of  over  30

meters.  Analyzed  on  the  mineral   information  obtained,  there  are  still

relatively large gold deposits in this  mining area. At the end of August 2007,

three lead and zinc ore bodies and a gold ore body was preliminarily proven up,

as indicated in the exploration information of the geological team.

At the end of 2008, the company finished the round survey of gold within the total

area of .6.8 sq.km. And Began the particular survey on Feb 2009 by signing agreement

with the No.1 exploration team of the geologic and mining exploration bureau of Shaanxi

Province During the year, three valuable gold mines, located in the Jiao shan zhai

have been identified. The design of the particular survey on these 3 gold mines

has been prepared and the company commenced the gold lode exploration before the year end.

The Company were on the rough survey stage on the zinc and lead in 2008. In Wei jia shan,

Jiao shan zhai, and Shun jia he, where the rough survey had finished, 5 valuable

Zinc and lead mines had identified to further survey. In other location within the

Area, survey route had been identified and general forecast had been concluded.

 

The mining area covered by the Dongfang Parcel can be divided into three areas.

Gold deposits are known in the area and management  has estimated gold reserves

at about 3-5 tons. Total reserves of lead and zinc ore  in  this  region is 3-5

million tons, whose average grade is 8-15% and some even can reach  as  high as

45% based on the geologic studies

According to the report of May 16,2008, compiled by the No.1 exploration team of the

geologic and mining exploration bureau of Shaanxi Province. the gold mine in Jiao

shan zhai can reach the value of RMB 230,000,000 with the latest unit price of RMB 200

per gram. The potential value of the zinc and lead within the area can reach

RMB 4,800,000,000 with the latest unit price of 16,000 per ton.

As a result, the total potential value of the mines can reach RMB 5,000,000,000.

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Nonferrous Metals - Zinc

Lead  and zinc resources are relatively abundant around the world. There is  no

deposit  only of zinc under natural conditions, and ordinarily zinc exists with

metals such  as lead, copper, or gold, in the form of polymetallic ore. China's

mining sector  has  experienced  strong growth since 2001. Investment in mining

exploration totaled 316.2 billion yuan (42.6 billion U.S. dollars) in the first

nine months of 2007 according to Wang Min, Vice Minister of Land and Resources.

At the China Mining Conference 2007  (sponsored by China's Ministry of Land and

Resources), it was reported that China's  mining output doubled to $190 Billion

for the period 2000-2005. Iron ore production increased 38% to 406 Million tons

and nonferrous metals increased 18% during that period.   Nonetheless, China is

still a net importer of lead and zinc.

Zinc is a soft metal used to makes brass when  mixed  with Copper. Zinc is used

in the automotive and construction industries to galvanize  steel, create metal

alloys  and in certain chemical processes. Research is being conducted  in  the

area of zinc-air batteries.

According  to  the  NONFERROUS  METALS  OUTLOOK,  YEAR  2007  published  by the

Department  of  Natural  Resources  for  the  Canada  Ministry of Public Works,

deficits  have  occurred  in  each  of  the past  five years  for  concentrate.

Stockpiles have fallen and prices have risen  as  a  result.  In September 2006

China eliminated its 5% export rebate on refined lead  and  zinc  in September,

resulting in increased costs for metal exported from China. Chinese exports had

increased 16% in 2006 from the same ten months period in 2005.

On August 1, 2008, China eliminated the 5% export tax rebate on #0 zinc, which

decreases the export of zinc, increases the provide and ultimately worsen the market.

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In 2007 China ranked 1st in the world both in zinc and lead production. The zinc

output in China reached 3.72 million tons in 2007. increasing 17.8% compared to

that of 2006 Calculated by the data in 2007, zinc output  in  China  took up about

32.55% of the total global output

Worldwide zinc usage has increased from approximately 6.1 Million tons in 1985

to 11 Million tons in 2005. But only slightly increased to 11.4 million in 2007, and

11.75 million tons in 2008.Refers to the report of institute, CHR, the demand of zinc

in 2010 may slightly decrease to 11.1 million tons.

The recession of zinc partly because of the financial crisis, partly came from the

immoderate Development in the past several year. And the recession was considered the

natural adjustment Of the industry. In the long run ,the demand increase will recover.

Average settlement prices for high grade zinc are listed below.

LONDON METAL EXCHANGE FOR HIGH GRADE ZINC  (ANNUAL  AVERAGE  SETTLEMENT  PRICES

2004    $1047.83          

2005    $1381.55      

2006    $3275.00

2007    $3250.00

2008    $1925.00                                                               

(US DOLLARS PER TON)

The 3 months zinc closing price of London metal exchange in March 12, 2009 was only

$ 1,215 per ton, decreasing 46%, comparing that of 2008.

The  bid/ask  price for 15 months zinc the London Metals Exchange on May 17, 2009

was $1,320 for bid and $1,325 for ask.       Source – London Metal Exchange

There are 433 above-surface  mine  enterprises  in  China,  distributing  in 24

provinces,  cities  and  autonomous  regions all over the country, including 37

enterprises whose respective annual output  of zinc concentrate is more than 10

thousand tons and the total output of which takes up 45% of the nation's total.

In the first half of year 2008, zinc concentrate output of China was  1,430,700  tons

and zinc output was 1,920,200 tons, increasing 6.11% and 21.13% respectively compared

to those of 2007.

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Lead

Lead is the heaviest common metal known for malleability. Lead is  resistant to

corrosion  and  used  for  protection  against  harmful  X-Rays  and radiation.

According  to  the  Nonferrous  Metals  Outlook published by the Department  of

Natural Resources for the Canada Ministry  of Public Works, 75 % of the world's

demand  for  lead  is  for  lead  acid batteries for  use  in  the  automobile,

industrial and consumer sectors. It  is  also  used to attenuate radiation from

radioactive sources and to provide corrosive resistant finishes to roofing.

World lead usage has increased from 4 Million Tons  in  1985  to 5  1/2 Million

Tons  in  2001.  The  forecasts  are for increased usage up to approximately  6

Million tons. Usage slowed slightly  from 1999 to 2004 as lawsuits in the U. S.

over lead based paints and emissions forced  closures  and damages. Exide, a U.

S.  lead  acid  battery  producer,  was  forced into bankruptcy  and  the  Lead

Industries  Association in the U. S. ceased  its  operations.  Both  cited  the

lawsuits as the primary factor.

In 2007 China  ranked  the first in the production of lead with the total output

Of 2,757,400 tons which accounted for 34% of the global output.  The Worldwide demand

is expected to be stable in the future several years.

In the first half of 2008, the lead output of China reached 1,453,500 ton, slightly increasing 7.42% comparing those of 2007.

The average closing prices  for  lead  on  the  London  Metals  exchange are as

follows:

LONDON METAL EXCHANGE FOR LEAD

2006                        2007                      2008         

$1,355                     $2,375                    $2,175

(ANNUAL AVERAGE SETTLEMENT PRICES, (US DOLLARS PER TON)

Though the average settlement prices in 2008 still stayed above $ 2,000 per ton, actually the price at the end of 2008

has lower than $1,000, and fluctuate between $950 and $ 1,300 during the first quarter of 2009. The settlement price is

$1,230 at March 12,2009.

The bid/ask price for 15 months lead on the London Metals Exchange on May  17,  2009

was $1,312 for bid and $1,317 for ask.  Source - london Metal Exchange.

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Gold

In  2008,  the  gross industrial output value realized by gold enterprises over

the country was 282 ton,  with  a growth of 4.26% compared to the same period

of last year; and the gross production had growed for 2005,2006 and 2007, with

the grow rate of 5.51%,7.15% and 12.67%.

Gold is the rare metal, which makes it impossible to fluctuate much higher or lower

in supply. The market forcasts the slight increase of supply in the near future.

It is estimated  that gold consumption in China will increase from previous 200

tons per year to 400-500  tons over the next several years, which may influence

the international gold market price to a certain extent.

Despite the recession of the global economy in 2008, the gold price increased from

$833 per ounce in the beginning year to $880 per ounce at year end, with the higest

Price of $1,032 per ounce. Going with the economy depression, more and more investors

choose the gold as the priority.

LONDON METAL EXCHANGE FOR GOLD

2004                2005              2006         2007           2008

$435                $513              $632         $833           $880

Competition

Our competitors in the nonferrous  metals markets are expected to be local  and

regional mining enterprise. Other companies in China that mine  lead  and  zinc

include Dongshengmiao  Mining  Industry  Co,  Ltd,  Wancheng  Trading &  Mining

Co., Ltd., Xinjiang Wuqia Tianzhen Mining Co., Ltd., and  Wulatehouqi  Qingshan

Nonferrous Metal Development Co., Ltd.   These competitors have more experience

in the operation of mines and mining activities  and  have  superior  financial

resources than we do. China is still a net importer of lead and zinc along with

the markets for many other non-ferrous metals. Since  supply  in general cannot

meet  demand  we  do  not  expect  that  we  will have difficulty  selling  our

ore for the near future. The gold market on a worldwide basis  has  seen  large

increases in demand since  2001, resulting in more than threefold  increase  in

prices per ounce, from $435 in 2004 to $872 in 2008, according  to the London

Metals Exchange.  China has traditionally  protected  its  metallurgy industry

with high tariffs, import quotas and restrictions on foreign ownership.

These  tariffs  and  import  quotas  were  adopted  to  provide  protections to

companies  such  as  ours  that  were  part of the domestic industry in  China.

Due to WTO membership, China will lower tariffs, eliminate  import  quotas  and

permit more foreign  competition, resulting in reduced  protection  for Chinese

companies against foreign   competitors. To  maintain its WTO membership, China

must gradually  reduce  these  tariffs  and  quotas  and commitments and permit

foreign enterprises opportunities  to  sell and distribute in China. Eventually

they  will  be  eliminated altogether. This is expected to increase  the effect

of foreign competition  and  the importation of foreign products. We are unable

to predict the effect these  changes  may  have  on  our   business,  earnings,

financial condition or the value of our properties and securities.

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Government Regulation

We  are  subject  to  strict  regulations imposed on mining companies in China.

Regulations are issued or implemented  by the Ministry of Land and Resources, a

division of the China State Council, and  similar land use offices at the local

level. These regulations cover virtually all  aspects of exploration and mining

of natural resources in China.

Chinese  mining  companies  must  obtain two separate  permits  from  the  land

resource divisions of the Provincial  government.  The  first  permit  must  be

obtained  before  a  mining  enterprise  can  conduct exploring activities. The

Company has obtained this license. The regulations also require a second mining

license for extraction activities. We have obtained the first license for zinc,

lead and gold.  To  maintain the licenses  the  Company  must  follow prescribed

procedures in its exploring  or mining activities.

Chinese  regulations governing Work  Safety  require  that  we  have  a  safety

certification.  These  are  administered  by  the Administration of Work Safety

before  it can engage in either mining or extracting  activities.  All  of  our

operating  subsidiaries have obtained appropriate safety certification from the

Administration  of  Work Safety of local governments. We also have been granted

environmental certification from China Bureau of Environmental Protection.

Regulations governing the mining business in China include:

       Exploration and  Mining  Regulation  (1958),  amended  to  allow foreign

investment in 1996;

       Exploration and Mining and Transfer of Rights Regulation (1998);

as well as numerous regulations governing safety by the China Mine  Safety  Law

and environmental feasibility studies required by China Environmental Law.

The  Chinese  legal system is still developing and there is often confusion and

uncertainty about  the  scope,  interpretation  and enforcement of its laws and

regulations. The mining industry has been under scrutiny  for  its  safety  and

environmental  record  and  we  cannot  predict  whether new laws or changes in

interpretation  and scope of existing laws may adversely  affect  our  intended

operations.

The Company has applied for excavation licenses in area for gold zinc and lead

mining within the  land  use  area.  The geographical locations for these sites are:

Eastern longitude: 109* 26' 30'' - 109* 38' 30''

Northern latitude: 32* 55' 45''  -  33 * 01 ' 00 ''

We expect to make application for  the  final required permits of gold by and expect to

obtain final approval during 2009. Upon approval,  we  will  have  the right to

mine the specified areas. We expect to apply for additional extraction licenses

within the land use area that have yielded positive results upon the conclusion

of the exploration.

Summary of the Exploration Works in the Dongfang Mining

8 | Page

Geological Survey

The company commissioned a geological report from the First Geological Research

Team  of Shaanxi Geological and Mineral Department. A report dated October  26,

2007 was  obtained  that  showed favorable results in several areas of the land

use area. The report is summarized as follows:

1, Summary of the Geological  Survey  Report  by  the First Geological Research

Team of Shaanxi Geological and Mineral Department dated January 13, 2008.

GEOLOGICAL CHARACTERISTICS OF THE MINING AREA

       a. Stratum

       The  surveyed  area  is mainly composed of metamorphic  rock  formed  in

       middle-to-upper Silurian  period  and lower Devonian period. Most of the

       rocks are phyllite, sandstone, calcirudite rock, lime and dolomite.

       b. Structure

       The surveyed area is situated in the  northern margin of the draped belt

       formed by Baishui River and Bai River.  The  frame  of  the structure is

       composed  by  Tizi  Rock-Shuhe  faultage, which extends by an  east-west

       position. The Nan Yangshan faultage  runs  through  the northern part of

       the  surveyed area. The main structure consists of on-growing  fractures

       and draped belts.

      CHARACTERISTICS OF ORE / MINERALIZING ORE

      Ore -containing  layer  of  lead-  zinc  ore  is explored out through the

      stratigraphic  identified by 1:10000 Geological  Survey.  In  the  fourth

      lithologic section  of  middle  Silurian  period at Shuanghe town and the

      merger layers of upper Silurian period at Shuidong  channel,  the  mining

      sections  are  mainly  composed of brown ferruginous sandstone, siltstone

      and grey-yellow powder phyllite  containing  sodium..  According  to  the

      survey, three lead-zinc mines and one gold mine were pitched:

       a. Lead zinc mine

          Mine  KH1  situates  at  Guan Men Zi Ya-Cai Miao Ya district and it's

          1.0-1.5 meters wide, 700 meters long and averagely 0.76 meters thick.

          The  average grade of mineralization  is  Pb1.22%,  Zn0.67%.  Control

          Engineering: TC9, TC3, YK1, TC6, TC18. The shape of the area is : 215

          o -32 o {angle} 12 o -32 o.

          Mine KH2  is shown in the Wang Jia Cao area and its 2.10 meters wide,

          100 meters  long and averagely2.06 meters thick. The average grade of

          mineralization  is  Pb0.85%  Zn0.23%.  Control  Engineering: CK1. The

          shape of the area is: 325 o {angle} 16 o. (Note:  Single  engineering

          control)

          Mine  KH3  is  shown in the Gangou area and its 1-2 meters wide,  100

          meters long and  averagely1.19  meters  thick.  The  average grade of

          mineralization is Pb0.71% Zn0.02%. Control Engineering:  D34 sampling

          point.  The  shape of the area is: 350 o {angle} 32 o. (Note:  single

          engineering control)

       b. Gold Mine

          Mine KH is shown  in  the  Dong Gou area and its 0.50 meter wide, 100

          meters long and averagely 0.50  meter  thick.  The  average  grade of

          mineralization  is  Au1.01g / t. Control Engineering: sampling point,

          20 meter in the North  of  D206.  The  shape  of  the area is : 340 o

          {angle} 17 o. (Note: single engineering control)

9 | Page

     THE CHARACTERISTICS OF THE PROPOSED MINES

     The study revealed approximately 16 gold minerals, primarily  in  4  large

     deposits  located  at  areas  denoted  as K1, K2 ,K3 and K11. Samplings in

     others areas are all single engineering control sites:

     a. K1

           The surface is controlled by six trenching  structures.  The  length

        are  360  meters  and  the  thickness  is  0.29-4.30 m, with an average

        thickness of 1.23 m. Ore body grade is 1.24  - 10.06 g / t ,the average

        grade of mineralization is 2.7 g/t and the ore  body occurrence  is1* -

        356 * {angle} 11 * - 50 *.

     b. K2

        Being  controlled  by three trenching structures. The  length  are  130

        meters and the thickness  is  0.22-0.89 m, with an average thickness of

        0.55 m. Ore body grade is 1.29-9.51  g / t. , the average grade is 5.71

        g / t and the ore body occurrence  is 24 * - 320 * {angle} 9 * - 24 * .

     c. K3

           Being controlled by two trenching structures.  The  length  are  100

        meters  and  the  thickness  is  0.43-3.48 m, with an average thickness

        of1.96  m. The Ore body grade  is  5.10-12.94 g / t , the average grade

        is  2.7 g / t and the ore body occurrence  is -310 * - 320 * {angle} 20

        * - 24 *.

     d. K11

         Being controlled by 1 trenching engineering  and 2 pitting structures.

         The length are 100 meters and the thickness is   0.13-1.62  m, with an

         average thickness of0.86  m. The average grade is  4.86-7.76  g  /  t,

         and the ore body occurrence  is 225 * -255 * {angle} 16 * -24 *

     GEOLOGICAL CONDITIONS OF THE ENGINEERING

     The  roof  and  floor  of the mines in the area mainly consist of sericite

     phyllite and sandstone.  The  fresh bedrock structure is dense. The cracks

     and holes show minimal changes, indicating a stable rock layer. This layer

     provides a very suitable foundation  for  excavation. During the course of

     construction there may be some small-scale  breaks and cracks that need to

     be  fortified.  The  transportation system is convenient  and  the  water,

     electricity resources are sufficient to meet the construction needs.

     ESTIMATION OF RESOURCES

     Chang Jiang Shi You Neng  Yuan  Gong  Si currently owns 3 main rich mining

     areas with large-scale gold reserves. It is primarily estimated that there

     are3-5 tons of gold reserves and there are 300 - 500 million tons of lead-

     zinc reserves. The average grade is 8-15%,  with  some  ranging as high as

     45%.

10 | Page

     BASIS

     The  estimation of resources methods and requirements of this  exploration

     is  based  on  GB/T17766-1999"  CLASSIFICATION  FOR  RESOURCES/RESERVES OF

     SOLID  FUELS  AND  MINERAL  COMMODITIES  "  and GB/T13908-2002  "  General

     requirements  for  solid mineral exploration" DZ/T0214-2002  "  Geological

     prospecting  criterion   for   copper,  lead,  zinc,  silver,  nickel  and

     molybdenum ore", "Reference manual  of the mineral resource standard  "and

     combined with the "opinion to the gold  ore industry standard in `Shaan Xi

     Xun Yang Guo Jia Ling- Jiao Shan Zhai lead, zinc, gold ore exploration'" by

     Shaan Dong Kuang Fa*2007*002.to make out the industry standard to Jiao Jin

     Shan gold ore exploration.

    Cutoff Grade  0.5 g / t

    Minimum Industrial Grade 1.2 g / t

    The average grade of ore deposit 1.6 g / t

    The Minimum Mining Thickness  *0.8 M

    Thickness of the Interlayer to be Eliminated  *2.0 M

    When  the  ore  body  thickness is smaller than  the  Minimum  Mining  Thickness,

    using m {multiply} g / t.

    RESOURCE ESTIMATION RESULTS

    As  mines K2 and K11 are  relatively  small,  so  we  just  made  resource

   estimation to K1 and K3 getting the intrinsic economic resources (334) .The

   ore is  69460.43 tons and the metal is 244.31 kg. The ore in K1 is 43639.07

   TONS, AND  THE  metal  is103.26 kg; The ore in K3 is 25821.36 TONS, AND THE

   metal is 141.05 kg;

    MINERALIZATION FORECAST

      The exploration area is  located  in  the  northern  margin  of  southern

   Qinling,  Indo-  Fold  Belt  Baishui Jiang- Bai He Fold Belt; the South East

   edge of Shan Zha Xun Chen Ji Pen Di. The area mainly exposes the sedimentary

   of paleozoic shallow metamorphised  clastic  rocks  and  carbonate rocks. Da

   Yang Synclinorium, Xun Yang anticline and Nan Yang Shan fault,  Da  Ling-Shu

   He  fault  form the the backbone of this area. The structure line lies  from

   east to west.  The  characteristics of the rocks are easy of deformation and

   weak of metamorphism.

   1:50000 stream sediment survey and 1:10000 soil measurement fix a 5 km long,

   four km wide gold anomalies  area around Jiao Yang Shan Zhai about 15 square

   kilometres, and the anomaly area  is  about 0.11-3.15 square kilometers with

   abnormal value as high as 2900 PPbin the  centrel concentration and 277.1ppb

   for an average value.

11 | Page

Environmental Regulation

Environmental protection laws in China are established  on  a national basis by

the   State   Environmental  Protection  Administration.  Provincial  and local

authorities can  set  local  regulations which may be more restrictive than the

national  standards.  Environmental  standards  govern  a  variety  of  matters

including disposal of solid waste, discharge of contaminated water and handling

of gases, and emissions.  The  local  authorities generally monitor and enforce

the regulations, including the assessment  and  collection  of  fees, fines and

administrative orders.

We  have  only been engaged in exploration efforts to date so our environmental

impact has  been  limited.  If  we  are successful in commencing our extraction

operations, we expect to generate waste  water,  gases and solid waste. We will

therefore  be  subject  to all national and local regulations  governing  these

activities.

We will likely require a  license  for  the disposal of water and solid wastes.

Licenses must be renewed annually. We expect  to  be  able  to  comply with the

regulations including the rules governing water and solid waste disposal.

Research and Development

With  the acquisition of Dong Fang we now have land use rights in  67.82  sq.km

parcel  located in Xunyang County, Shaanxi Province, PRC. We believe we can use

a portion  of the surface of the Dong Fang parcel to grow agricultural products

which would be available for processing.

Employees

        As of  March  31, 2009, we have 16 full-time employees. This includes 2

people in marketing, 1  in  manufacturing, 4  in  research  and development and

quality control, 2 in financial and accounting, and 7 in general  management.

A breakdown of employees by subsidiary is below.

Full-time

Marketing

Research and

Financial and

Manufacturing

Management

development     accounting

CHANG JIANG

10

2

0

2

0

6

DONG FANG

6

0

4

0

1

1

TAI PIN YANG

0

0

0

0

0

0

WAHBON

0

0

0

0

0

0

TOTAL

16

2

4

2

1

7           

RISK FACTORS

Our  Company  and  its  securities  are  subject  to  significant  risks to its

business, operations and financial condition. You should carefully consider the

risks described in this section as well as the remainder of the information  in

this report.  If we are unable to manage these risks or if any of the risks are

realized,  our  business,  operations, and financial condition and the value of

our stock would likely suffer.  In  that  event  our investors and stockholders

could lose all or part of their investment.

RISKS RELATING TO OUR BUSINESS

WE  ARE  AN  EARLY STAGE EXPLORATION COMPANY FACING SIGNIFICANT  FINANCIAL  AND

OPERATING RISKS.

We operate in  two segments: the development of a theme park and an exploration

stage mining company  that has acquired land use rights and exploration permits

to a tract of land in an  area  traditionally  associated  with  mining  in the

Shaanxi  Province  of  central  China.  We  are currently focused on the mining

segment, determining the degree of mineralization of lead, zinc and gold within

our properties. While we believe that there may  be  an  opportunity  to obtain

commercially viable amounts of lead, zinc and gold from our property, we  still

face  substantial  hurdles.  The exploration and extraction of mineral deposits

such as lead, zinc and  gold  incur significant financial risks. The results of

exploratory  investigations  are  not  always  reliable  or  accurate  even  if

conducted in strict compliance  with  professional guidelines. Furthermore, the

investment  must  occur over a significant  period  of  time  even  though  the

quantity of minerals  within any property is always finite. Many properties are

unable to develop commercially  viable  mines  even  with  positive exploration

results.  Successful  extraction  depends on very expensive processes  such  as

drilling, mine construction and establishment  of processing facilities.  Mines

are also hazardous and only a limited number of  qualified,  experienced miners

exist.  The Company must obtain additional permits and must ramp  up operations

after permitting to begin extraction. We are unable to assure you that  we will

ultimately  be  successful  in meeting these challenges or, even if so, it will

result in our mining operations  becoming  a  commercial  viable  or profitable

enterprise.  

OUR INDEPENDENT AUDITORS HAVE NOTED THAT THERE IS SUBSTANTIAL DOUBT  ABOUT  OUR

ABILITY TO CONTINUE AS A GOING CONCERN.

Our independent auditors have noted that there is substantial doubt that we can

continue  as  a  going  concern  As  reflected in the accompanying consolidated

financial  statements,  the  Company has  an  accumulated  deficit  during  the

exploration stage of $13,262,228 at December 31, 2008 which includes a net loss

of $1,467,426 for the year ended  December  31,  2008.  The  Company's  current

liabilities  exceed its current assets by $8,147,385 and the Company used  cash

in operation of  $388,013.  These  factors  raise  substantial  doubt about its

ability  to  continue  as  a  going  concern.  In view of the matters described

above, recoverability of a major portion of the recorded asset amounts shown in

the  accompanying  consolidated  balance  sheet  is  dependent  upon  continued

operations  of the company, which in  turn  is  dependent  upon  the  Company's

ability to raise additional capital, obtain financing and succeed in its future

operations.   The  financial statements do not include any adjustments relating

to the recoverability  and  classification of recorded asset amounts or amounts

and classification of liabilities that might be necessary should the Company be

unable to continue as a going concern.

12 | Page

WE HAVE NOT YET OBTAINED ALL  OF  THE LICENSES FROM THE CHINESE GOVERNMENT THAT

WE WILL NEED TO EXPLOIT ANY MINERALS ON OUR PROPERTIES.

China employs a two stage permitting  process  for  permission  to  explore and

extract  minerals.  The  first  permit  allows  a  mining company to engage  in

exploration  activities, such as boring exploratory holes,  conducting  mineral

assays, field  testing  and  so  on. The Company's subsidiary, Dongfang Mining,

acquired this license in 2003 and  has since engaged in activities to determine

the estimated mineralization of the  property  and  relative  cost  and process

needed to extract.

The  second  permit  is for exploitation, which permits excavation and sale  of

extracted minerals. The  Company are ready to  apply for the gold exploitation

permit, but has not yet obtained. While  government  officials  have  informally

suggested that the permit will be approved, there can be no assurance  that the

Company will successfully obtain the required permit. In that event, the value

of  our  interest  in the properties would be seriously impaired and would like

result in a significant  loss  of value for the Company's assets as well as its

securities.

THERE IS NO ASSURANCE THAT OUR PROPERTY  WILL  CONTAIN SUFFICIENT QUANTITIES OF

COMMERCIALLY MARKETABLE MINERALS FOR US TO BECOME  COMMERCIALLY  VIABLE OR THAT

WE WILL BE ABLE TO ECONOMICALLY EXTRACT THE MINERALS.

We  are  an  exploration  stage  Company and have not yet begun the process  of

excavating minerals from our property. We have engaged in limited investigation

and geologic testing. Based on our  preliminary  findings,  we believe there is

sufficient mineralization to begin a commercially viable mining business. There

can be no assurance however that our exploratory efforts will  prove correct or

that a commercially mineable mineralization exists on our property. Even if the

conclusion  that  a sufficient quantity of minerals exists proves  correct,  it

still may not be economically feasible to profitably extract the minerals for a

wide variety of reasons,  many  of  which  are  beyond the Company's ability to

control. Therefore we can offer no assurance that  a profitable mining business

will result from our efforts.

WE HAVE HAD NO REVENUES, A LIMITED OPERATING HISTORY AND A HISTORY OF OPERATING

LOSSES.

13 | Page

The  Company  was  a  "shell  company"  as defined by 2005  amendments  to  the

Securities Exchange Act.  We had no operations  and  no  significant assets and

existed  only  for  the purpose of locating a business or business  opportunity

with which to join forces.  We  acquired  a  Chinese corporation that has begun

attempts to establish a mine for lead, zinc and gold in February 2008.

The Company, through its subsidiaries, obtained  a  permit to begin exploratory

efforts in 2003 and has not yet commenced actual mining  of the land. We intend

to  commence gold extractions in 2009. We therefore have a very  limited  operating

history upon which to base an evaluation of our business and prospects.

We have had no  revenues  and do not anticipate revenues until the exploitation

permits  are obtained, the mine  infrastructure  has  been  completed  and  the

extraction  of  minerals  has  begun.  As of December 31, 2008 and December 31,

2007, we had operating losses of $1,141,537 and $746,461, respectively. Net losses

at  December 31, 2008 and December 31, 2007  were  $1,467,426  and  $8,959,472,

respectively.  As  of  December  31,  2008  and  December  31,  2007,  we  had

comprehensive losses of $402,514 and $7,788,802, respectively.

These  losses  resulted  from our exploration activities and corporate expenses

including the amortization of our land use right s which must be amortized over

each year of its 50 year life, whether or not exploitation has occurred.

Our  prospects  must  be considered  in  light  of  the  risks,  expenses,  and

difficulties frequently  encountered  by  companies  in  their  early  stage of

development. There can be no assurance that we will be successful in addressing

such  risks and any failure to do so may have a material adverse effect on  our

business, prospects, financial condition, and results of operations.

There is  no  assurance  that  we  will  be  able  to successfully complete the

construction  of our theme park and the value of our  land  use  right  may  be

impaired.

The Company operates in two segments: mining and a proposed theme park business

on the land that  is  subject  to the land use rights. Currently the Company is

focusing its efforts and resources exclusively in the mining segment. There are

many risks and uncertainties associated  with  the  intended  construction of a

theme park such as financing, permitting, contracting, and all  of the risks of

a  new,  start  up  enterprise.  We  cannot  assure  you  that we will ever  be

successful in developing our intended theme park.

In addition, the Company's largest asset is the net land use  rights  which was

valued  at  $17,508,609.  If  we  do  not  successfully  develop the theme park

segment,  there  is  a  risk  that  the value of our land use rights  would  be

impaired or possibly even forfeited.

There are a significant number of risks  associated with operating a theme park

such as risk of injury., any of which would adversely affect revenues.

Theme park operations are subject to a number of factors over which the Company

will have little control. These factors include  competition  from  other  area

entertainment sources, weather, local events, civil unrest and others. There is

a  risk  of injury associated with many attractions at theme parks, which could

give rise  to  liability.  Any  of  these  factors  could negatively affect our

revenues and earnings, if we commence theme park operations.

Theme  parks  have historically been subject to weather  and  seasonality  over

which we have no control.

In the event that  we begin operations in the theme park industry, our revenues

will be subject to a  variety  of  caprices,  such  as  inclement  weather  and

seasonality.  The  vast  majority  of  theme  park  patrons attend only in fair

weather. Since we expect to operate only one theme park  the  risks  associated

with  inclement  weather are not spread over a number of differing geographical

areas. Therefore,  we  expect  that inclement weather will have a significantly

adverse impact our revenues.

14 | Page

DUE TO OUR LIMITED OPERATING HISTORY,  WE WILL BE UNABLE TO ACCURATELY FORECAST

REVENUES.

Due to our limited operating history and  our  planned growth through increased

sales, we are currently unable to accurately forecast  our future revenues. Our

current and future expense levels are largely based on our investment plans and

estimates  of  future  revenues, which are expected to increase.  Revenues  and

operating results generally  depend  on  the  effectiveness  of  our  marketing

strategies  to  penetrate  the  market  and  the  success  of  our research and

development efforts which are difficult to forecast as we are in  a  relatively

new  company.  We  may  be  unable  to  adjust  spending  in a timely manner to

compensate for any unexpected revenue shortfall. Accordingly,  any  significant

shortfall  in  revenues  in relation to our planned expenditures would have  an

immediate adverse effect on  our  business, prospects, financial condition, and

results of operations. Furthermore,  as  a strategic response to changes in our

competitive environment, we may from time  to  time  make  certain  pricing  or

marketing  decisions that could have a material adverse effect on our business,

prospects, financial condition, or results of operations.

15 | Page

WE WILL  NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, AND WE MAY NOT

BE ABLE TO OBTAIN  SUFFICIENT  CAPITAL  AND MAY BE FORCED TO LIMIT THE SCOPE OF

OUR OPERATIONS.

As  of  December 31, 2008 and December 31,  2007,  we  had  current  assets  of

$253,521 and $1,685,789, respectively. The remainder of our assets consists of

land use  rights  that are illiquid. As we begin to implement our strategies to

excavate the property  and exploit the minerals, we will likely experience cash

flow  deficits and increased  capital  needs  that  may  exceed  our  available

capital. We may need to fund our future operations with additional funding. Our

capital  needs  will  depend  on  numerous factors affecting our profitability,

including (i) the time and expense  of  ramp  up  of the extraction activities,

(ii) the amount and quality of minerals extracted, (iii) our ability to contain

expenditures, especially for administrative and transportation  costs, and (iv)

the amount of our expenditures. We cannot assure you that we will  be  able  to

obtain funding in the future to meet our needs.

We  currently  have  no  lines  of credit or other arrangements for capital and

cannot provide any assurance that  additional  funds  will  be available to us.

Even if we locate available capital, it may be on unfavorable terms. Any future

capital investments could dilute or otherwise materially and  adversely  affect

the holdings or rights of our existing shareholders.

FLUCTUATION  OF  THE  CHINESE  CURRENCY  COULD  MATERIALLY AFFECT OUR FINANCIAL

CONDITION AND RESULTS OF OPERATIONS.

We have not yet commenced mining operations and do not have revenues. Since all

of  our  revenues  are  expected  to  be derived and expenses  and  liabilities

incurred are in China, by exchange rate  fluctuations  of  the Chinese currency

will affect our revenues and operating results. Presently we  do  not expect to

sell our products outside of China but we could sell to foreign interests  as a

result of competitive forces or changes to our business plan.  

16 | Page

For  over  a  decade  the value of the Chinese currency was pegged to the U. S.

Dollar and fluctuations  in value were therefore relatively mild. In July 2005,

China abandoned the peg and  changed to a floating exchange rate. The new rates

are market based compared to a  basket  of  foreign  currencies.  These changes

would  likely  strengthen the RMB as compared to the U.  S.  Dollar  and  would

likely make our products more expensive for U. S. and foreign buyers. We cannot

give any assurance  that  the  value  of the RMB will continue to remain stable

against  the  US  dollar or any other foreign  currency.  Accordingly,  we  may

experience economic  losses  and  negative  impacts on earnings and equity as a

result of foreign exchange rate fluctuations.  Furthermore,  any devaluation of

the  RMB  may adversely affect the dividends we may pay to our parent,  thereby

adversely affecting the value of, and dividends payable on, our common stock.

 We expect  our revenues to consist almost entirely of Renminbi or "RMB", which

is the Chinese currency. The RMB is currently not a fully convertible currency.

The Chinese government  may  restrict  future  access to foreign currencies for

current account transactions. This may make it difficult  for  us  to  transfer

money  from  China to other countries on an economically advantageous basis  or

even at all. It  may  also  make it difficult for us to provide a return on the

investment of foreign capital on a liquid basis.

WE MAY BE ADVERSELY AFFECTED BY ENVIRONMENTAL REGULATIONS.

We are subject to PRC national  and  local environmental protection regulations

which currently impose fees for the discharge  of waste substances, require the

payment  of  fines  for  pollution, and provide for  the  closure  by  the  PRC

government of any facility  that  fails  to  comply with orders requiring us to

cease or improve upon certain activities causing  environmental  damage. Due to

the nature of our business, we produce significant amounts of waste water, gas,

and solid waste materials during the course of our production. We  believe  our

environmental  protection  facilities and systems are adequate for us to comply

with the existing national,  provincial,  and  local  environmental  protection

regulations. However, PRC national, provincial, or local authorities may impose

additional  or  more  stringent  regulations  which  would  require  additional

expenditure on environmental matters or changes in our processes or systems.

WE  DEPEND ON OUR SENIOR MANAGEMENT AND KEY EMPLOYEES, THE LOSS OF WHICH  COULD

ADVERSELY AFFECT OUR OPERATIONS.

17 | Page

Much of our success will depend to a large degree upon our ability to identify,

hire,  and  retain  additional  personnel,  particular  experienced  miners and

persons familiar with the marketing, manufacturing and administrative processes

associated  with  mining.   We depend on the skills of our management team  and

current key employees, such as  Mr. Chen Wei Dong, our Chairman, President, and

Chief Executive Officer. We may be  unable to retain our existing key personnel

or attract and retain additional key personnel.

The loss of any of our key employees  or  the  failure  to  attract, and retain

experienced  miners  or additional key employees could have a material  adverse

effect on our business and financial condition.

OUR SENIOR MANAGEMENT TEAM  DOES NOT HAVE ENOUGH  EXPERIENCE IN RUNNING A PUBLIC

COMPANY AND WILL NEED TO PROCURE ASSISTANCE FROM PROFESSIONAL ADVISERS AND THIRD

PARTIES AT ADDITIONAL EXPENSE.

Our management team and current key employees  have not been engaged in similar

capacities with other public reporting companies  and are not familiar with the

multitude  of  filings, regulations and requirements  applicable  to  a  public

company. We will  require the assistance of outside counsel and accountants and

perhaps other third  party  advisers as well. We have no assurance that we will

successfully find qualified, experienced people to perform these tasks. Even if

successful, the fees and expense  for these third parties will be an additional

administrative cost that may not be  shared by our competitors. In addition, if

the advice given or work performed by  these  outside  advisers  proves  to  be

inadequate  or  incorrect, the Company and its management will nonetheless bear

the brunt of the  costs and penalties assessed, with limited avenues of redress

against the outside advisers.

RISKS RELATED TO OUR INDUSTRY

RISKS ASSOCIATED WITH MINING.

The Company's operations  are  subject to all of the hazards and risks normally

incident to the exploration for  and  development  and  production  of precious

minerals, any of which could result in damage for which the Company may be held

responsible. Many hazards are beyond our control, such as unusual or unexpected

rock formations, bad weather, landslides, cave-ins, high water tables, flooding

or  other unfavorable conditions that are unknown until we begin extraction  of

minerals.  If  we  experience  losses  from  these or other risks, it may cause

substantial  delays  and  require  significant additional  expenditures.  These

conditions  would likely adversely affect  the  Company's  business,  financial

condition and the value of our securities.

China has recently  experienced  a  number  of  serious incidents in its mining

industry that resulted in loss of life and serious  personal injury. Some mines

have collapsed or were otherwise forced to close due  to  unsafe conditions. We

would likely suffer material losses if any of these events  were  to occur, and

the effect on our business and the price of our securities would be adverse and

maybe irreversible.  

18 | Page

MARKET PRICES FOR NON-FERROUS METALS FLUCTUATE AND COULD ADVERSELY  AFFECT  THE

VALUE OF OUR COMPANY AND OUR SECURITIES.

Market  prices  for lead, zinc and gold, the metals we primarily intend to mine

experience significant fluctuations in price. We are entering the business at a

time that the prices  of lead and zinc are extraordinarily low, and just one year

ago the price were still on the extraordinarily high level, which means the value

of the lead and zinc shrank 2/3 in a year. The profitability of our operations will

be directly related  to the prices we will be able to obtain in the marketplace.

The market prices of  lead,  zinc, gold and non-ferrous metals are subject to factors

beyond our control. These  factors  include  changes  in legal  and  regulatory  

requirements,  changes  in  the  exchange  rates of the Renminbi and other currencies,

worldwide economic recession, political and economic factors and variations in

production costs among a number of other factors. A reduction in the  price  or demand

for our metals would adversely impact our expected revenues.

THE  CHINESE  GOVERNMENT  OWNS  ALL  LANDS  IN CHINA, AND CHINA ISSUES LAND USE

RIGHTS INSTEAD OF LEGAL TITLE TO THE PROPERTIES. THERE IS NO ASSURANCE THAT OUR

RIGHTS TO THE PROPERTIES WILL NOT BE SUBJECT TO IMPAIRMENT OR LOSS.

Despite modernization efforts in many areas, China still adheres to a communist

scheme for ownership of property that essentially  vests  title  to  the entire

country  in  the  Central  Government.  Rather than deeds or other evidence  of

ownership, land use rights are always subject  to  fixed  periods  of permitted

land use. These periods are frequently 50 years and may be renewable under some

circumstances. Our land use right is 50 years and is amortized over  its  life.

We  recorded  accumulated  amortization  expense  of  $1,638,232  and $1,148,125 at

December 31, 2008 and 2007, respectively.

Disputes over mining claims are common. A loss of our property rights or mining

rights  would likely cause irreversible damage to the Company and the price  of

its securities and could result in the loss of the entire value of our Company.

NONFERROUS MINERALS ARE FINITE AND EACH MINE HAS A LIMITED USEFUL LIFE. WE HAVE

PERFORMED ONLY LIMITED GEOLOGICAL STUDIES, AND OUR PLANS TO EXPLOIT OUR CURRENT

PROPERTIES  FOR  NONFERROUS  METALS  MAY BE CURTAILED OR EXHAUSTED. WE HAVE NOT

ENGAGED  IN  EFFORTS TO INVESTIGATE THE  ACQUISITION  OF  OTHER  AREAS  OR  ANY

EXPANDED POTENTIAL FOR OUR PARCEL.   

Mines have limited lives and usually cannot be re-commissioned after exhaustion

of the economically  extractable  minerals. We must continually seek to replace

and  expand our mineralization and reserves  through  the  acquisition  of  new

properties.  Significant  competition  exists for the acquisition of properties

producing or capable of producing gold and  non-ferrous  metals. We may be at a

competitive disadvantage in acquiring additional mining properties  because  we

must  compete  with  other  individuals  and  companies, many of which may have

greater financial resources and larger technical  staffs  than  we  have.  As a

result  of  this  competition,  we  may  be unable to acquire attractive mining

properties on acceptable terms.

CHINA'S GROWTH HAD BEEN RAPIDLY ACCELERATING FOR THE PAST SEVERAL YEARS AND  THE

FINANCIAL CRISIS DIRECTLY DEPRESS THE ECONOMY CURRENTLY, WHICH IMPLYS THE COMING

OF CONTRACTION BUSINESS CYCLE.

Essentially  all  of our business is located in China and will be conducted  in

China. We expect to  sell  all of our extracted minerals in China. The need for

these minerals throughout the  world  is  affected  by the increasing demand in

China. We are therefore depending on the continuation of the economic growth in

China to maintain demand for our lead and zinc and, to  a  lesser extent, gold.

The financial crisis abruptly and sharply slow down China’s growth pace. The economy

Contraction has adversely affected the non-ferrous metals industry. The stock price

Came down with a great extent in a short time. Many Company in the industry had to

Stock up the metals in order to lessen the impact.

Though the Chinese central government has recently stimulated the economy in all

means, which may counteract some adverse effect. But the majority expected that

the lower growth is unavoidable and the bottom of the economy has not yet reached.

If the economic  growth  in China continue to slows or even reverses it would likely

have an adverse effect on our business, its revenues  and  financial  condition,  and

the  value of our properties and securities. We cannot assure you when the economic

turning point will come.

SHORTAGES  OF  CRITICAL PARTS, EQUIPMENT AND SKILLED LABOR MAY ADVERSELY AFFECT

OUR DEVELOPMENT PROJECTS.

The industry has  been  impacted  by  increased  worldwide  demand for critical

resources  such  as  input commodities, drilling equipment, tires  and  skilled

labor. These shortages have caused and may continue to cause unanticipated cost

increases and delays in  delivery times, potentially impacting operating costs,

capital expenditures and production schedules.

RISKS RELATING TO DOING BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA

WE ARE SUBJECT TO THE POLITICAL  AND  ECONOMIC POLICIES OF THE PEOPLES REPUBLIC

OF CHINA, AND GOVERNMENT REGULATION COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR

INTENDED BUSINESS.

All of our assets and operations are in  the  PRC.    As a result our operating

results and financial performance as well as the value  of our securities could

be affected by any adverse changes in economic, political and social conditions

in China.

The  Chinese  government  adopted  an "open door" policy to transition  from  a

planned economy to a market driven economy  in  1978. Since then the economy of

the PRC has undergone rapid modernization although the Chinese government still

exerts  a dominant force in the nation's economy.  This  continues  to  include

reservation  to  the  state of land use rights or mining and exploration rights

and  includes  controls  on   foreign   exchange   rates  and  restrictions  or

prohibitions on foreign ownership in various industries  including mining.  All

lands  in  China  are  state  owned and only restricted "land use  rights"  are

conveyed to business enterprises or individuals.  

All of our intended exploration  and  mining  activities require approvals from

the local government authorities in China.  Obtaining  governmental approval is

typically a lengthy and difficult process with no guaranty  of  success.  Since

the lands where our mines are located were acquired through the grant of a land

use  right,  changes  in government policy could adversely affect our business.

This process may adversely affect our future business expansion.

The Chinese government  operates the economy in many industries through various

five-year plans and even  annual  plans.  A  large  degree  of  uncertainty  is

associated  with  potential  changes in these plans. Since the economic reforms

have no precedent, there can be  no  assurance  that  future  changes  will not

create materially adverse conditions on our business.

Some  of  the  measures  of  The  People's Republic of China are anticipated to

negatively affect on us. For example,  the  government  maintains  control over

capital investments in the mining of various precious metals, including  gold.

While  we  believe we currently comply with all applicable regulations, changes

could be materially  adverse. Also China has recently pronounced changes to tax

regulations and regulations pertaining to business acquisitions.

Due to the limited effectiveness of judicial review, public opinion and popular

voting  there are few avenues  available  if  the  governmental  action  has  a

negative  effect. Any adverse changes in the economic conditions, in government

policies, or  in  laws  and  regulations in China could have a material adverse

effect on the overall economic  growth, which in turn could lead to a reduction

in demand for our products and consequently  have  a material adverse effect on

our business.  

THERE  ARE RISKS INHERENT IN DOING BUSINESS IN CHINA  OVER  WHICH  WE  HAVE  NO

CONTROL.

The political  and  economic  systems  of  the  PRC are very different from the

United  States  and more developed countries. China  remains  volatile  in  its

social, economic  and  political  issues  which  could  lead  to  revocation or

adjustment  of  reforms.   There  are also issues between China and the  United

States that could result in disputes  or  instabilities.  Both domestically and

internationally the role of China and its government  remain  in flux and could

suffer shocks, or setbacks that may adversely affect our business.

THE CHINESE LEGAL SYSTEM IS MUCH DIFFERENT FROM THAT OF THE UNITED  STATES WITH

CONSIDERABLY  LESS  PROTECTION FOR INVESTORS, AND IT MAY BE EXTREMELY DIFFICULT

FOR INVESTORS TO SEEK  LEGAL  REDRESS  IN  CHINA AGAINST US OR OUR OFFICERS AND

DIRECTORS, INCLUDING CLAIMS THAT ARE BASED UPON U.S. SECURITIES LAWS.

All of our current operations are conducted  in  China.   All  of  our  current

directors  and  officers are nationals or residents of China. All of the assets

of these persons  are located outside the United States in China. The PRC legal

system is a civil law  system.  Unlike  the  common  law  system, the civil law

system is based on written statutes in which decided legal  cases  have  little

value as precedents.  As a result there is no established body of law that  has

precedential value as is the case in most western legal systems. Differences in

interpretations and rulings can occur with little or no opportunity for redress

or appeal.

As  a  result,  it  may not be possible to effect service of process within the

United States or elsewhere outside China upon our officers and directors.  Even

if service of process  was  successful,  considerable  uncertainty exists as to

whether Chinese courts would enforce U. S. laws or judgments  obtained  in  the

United  States.  Federal  and  state  securities  laws  in  the  U.  S.  confer

substantial  rights  to  investors  and shareholders that have no equivalent in

China. Therefore a claim against us or  our officers and/or directors or even a

final judgment in the U. S. based on U. S.  may not be heard or enforced by the

Chinese courts.

In 1979, the PRC began to adopt a complex and comprehensive system legal system

and has approved many laws regulating economic  and  business  practices in the

PRC including foreign investment. Currently many of the approvals  required for

our  business can be obtained at a local or provincial level.  We believe  that

it is  generally  easier  and faster to obtain provincial approval than central

government approval. Changes  to  existing  laws that repeal or alter the local

regulatory authority and replacements by national  laws could negatively affect

our business and the value of our securities.

China's  regulations  and  policies  include  limits  on  foreign   investments

including  investment  in  mining businesses and are still evolving. Definitive

regulations and may affect percentage  ownership  allowed to foreign investment

or even controls on the return on equity. Further,  the  various  proposals are

conflicting and we may not be aware of possible violations.

NEW  CHINESE LAWS MAY RESTRICT OUR ABILITY TO CONTINUE TO MAKE ACQUISITIONS  OF

BUSINESSES IN CHINA.

New regulations on the acquisition of businesses commonly referred to as "SAFE"

regulations  (State Administration of Foreign Exchange) were jointly adopted on

August 8,  2006   by   six  Chinese  regulatory  agencies  with  jurisdictional

authority. Known as the  Regulations  on  Mergers  and Acquisitions of Domestic

Enterprises  by Foreign Investors the new Rule requires  creation  of  offshore

Special Purpose  Ventures, or SPVs, for overseas listing purposes. Acquisitions

of domestic Chinese  companies  require approval prior to listing securities on

foreign exchanges.

We  obtained  the  approvals  that  we  believe  are  required  in  making  the

acquisitions  that formed the present  company.  Nonetheless,  our  growth  has

largely been by  acquisition  and we intend to continue to make acquisitions of

Chinese businesses. Since the "SAFE"  rules  are  very  recent  there  are many

ambiguities  and  uncertainties  as  to interpretation and requirements.  These

uncertainties and any changes or revisions  to  the  regulations could limit or

eliminate  our ability to make new acquisitions of Chinese  businesses  in  the

future.

WE MAY BE AFFECTED  BY  RECENT  CHANGES  TO  CHINA'S FOREIGN INVESTMENT POLICY,

WHICH WILL CHANGE THE INCOME TAX RATE FOR FOREIGN ENTERPRISES.

On January 1, 2008, a new Enterprise Income Tax  Law  took  effect.  The new law

revises  income tax policy and sets a unified income tax rate for domestic  and

foreign companies  at  25  percent.  It  also abolishes favorable treatment for

foreign invested enterprises. When the new  law  takes effect, foreign invested

enterprises will no longer receive favorable tax treatment.   Any  earnings  we

may obtain may be adversely affected by the new law.

CHINA CONTROLS THE CURRENCY CONVERSION AND EXCHANGE RATE OF ITS CURRENCY, WHICH

COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION.

The  Chinese  government  imposes  control  over  the conversion of the Chinese

currency, the Renminbi, into foreign currencies, although recent pronouncements

indicate  that  this  policy  may  be relaxed. Under the  current  system,  the

People's Bank of China publishes a daily exchange rate based on the prior day's

activity  which  controls the inter-bank  foreign  exchange  market.  Financial

institutions are permitted  a  narrow  range  above  or below the exchange rate

based  on  then  current market conditions. Since 1977 the  State  Council  has

prohibited restrictions  on  certain  international  payments  or transfers for

current account items. The regulations also permit conversion for distributions

of dividends to foreign investors. Investment in securities, direct investment,

and loans, and security investment, are still subject to certain restrictions.

For  more than a decade the exchange rate for the Renminbi ("RMB")  was  pegged

against  the  United States dollar leaving the exchange rates relatively stable

at roughly 8 RMB for 1 US Dollar. The Chinese government announced in 2005 that

it  would begin  pegging  the  Renminbi  exchange  rate  against  a  basket  of

currencies,  instead  of  relying  solely on the U.S. dollar. This has recently

caused the dollar to depreciate as against  the  RMB.  As of December 31, 2008,

the rate was 6.8346 RMB for 1 US Dollar.  Since all of our  expected operations

are in China, significant fluctuations in the exchange rate may  materially and

adversely affect our revenues, cash flow and overall financial condition.

CHINESE LAW REQUIRES APPROVAL BY CHINESE GOVERNMENT AGENCIES AND COULD LIMIT OR

PROHIBIT  THE PAYMENT OF DIVIDENDS FROM ANY PROCEEDS OBTAINED FROM  LIQUIDATION

OF OUR ASSETS.

All of our assets are located inside the Peoples Republic of China. Chinese law

governs the  distributions  that  can  be  made  in the event of liquidation of

assets of foreign invested enterprises.  While dividend distribution is allowed

it is subject to governmental approval.  Liquidation  proceeds  would  also  be

subject  to  foreign  exchange control. We are unable to predict the outcome in

the event of liquidation insofar as it affects dividend payment to non- Chinese

nationals.

CHINA HAS BEEN THE LOCALE  FOR  THE OUTBREAK OF VARIOUS DISEASES AND A PANDEMIC

CAUSED BY DISEASES SUCH AS SARS,  THE AVIAN FLU, OR SIMILAR DISEASES COULD HAVE

A MATERIALLY ADVERSE EFFECT ON OUR  WORKERS  AND  EVEN  THE  CHINESE ECONOMY IN

GENERAL, WHICH MAY ADVERSELY AFFECT BUSINESS.

 The World Health Organization reported in 2004 that large scale  outbreaks  of

avian  flu  throughout  most  of  Asia,  including  China,  had nearly caused a

pandemic that would have resulted in high mortality rates and which could cause

wholesale  civil  and  societal  disruption.   There  have  also  been  several

potential outbreaks of similar pathogens in China with the potential  to  cause

large  scale  disruptions,  such  as  SARS, pneumonia and influenza. Any future

outbreak which infiltrates the areas of  our  operations  would  likely have an

adverse effect on our ability to conduct normal business operations.

RISKS RELATING TO OUR COMMON STOCK

THERE  IS  CURRENTLY  A  LARGE  MARKET OVERHANG IN OUR COMMON STOCK AND  FUTURE

CONVERSIONS AND SALES OF OUR COMMON  STOCK  COULD  DEPRESS THE MARKET PRICE AND

DIMINISH THE VALUE OF YOUR INVESTMENT.

The Company has issued 500,000 shares of Series  C  Convertible  Preferred

Stock  in  the  exchange  of  securities  that  acquired our current assets and

operations. Each share of Series C Preferred Stock  carries  the right to 1,218

votes per share. If each share is converted, the Series C Convertible Preferred

Stock will be convertible into common stock at a rate sufficient  to  yield  an

aggregate  of  approximately  609 Million  common  shares. Future conversion and

sales of shares of our common stock or securities that are convertible into our

common stock, could adversely affect the market price  of  our common stock. If

any of our principal stockholders sells a large number of shares or if we issue

a  large  number of  shares,  the  market  price  of  our  common  stock  could

significantly decline. Moreover, the perception in the public  market  that our

principal stockholders might  sell shares of common stock could further depress

the  market  for  our common stock.

THERE IS  A  LARGE  NUMBER  OF  PREFERRED  SHARES OUTSTANDING THAT WILL RECEIVE

PREFERENCES  OVER  THE  COMMON  STOCK  IN  THE  DISTRIBUTION  OF  DIVIDENDS  OR

LIQUIDATED ASSETS AND VOTING RIGHTS, WHICH WILL LIMIT THE ABILITY OF THE COMMON

STOCKHOLDERS TO HAVE AN EFFECTIVE VOICE IN THE MANAGEMENT OF THE COMPANY.

The  Company has 500,000 shares of Series  C  Convertible  Preferred stock outstanding

at the year end. Each  of  the  preferred  shares  is  entitled  to  receive

preferential   treatment   in   connection   with  the  payment  of  dividends,

distributions upon liquidation and voting rights.  Each preferred share carries

the  right  to  vote  the  equivalent  of  1,218 votes of common  shares.  Each

preferred share will be automatically converted  into  1,218 common shares upon

approval and an amendment to the Certificate of Incorporation  to  increase the

number  of authorized shares.  This effectively eliminates the ability  of  the

common stock  holders  to participate in the management of the Company, such as

the election of directors and corporate changes or conversions.

THE MARKET FOR SHARES OF  OUR  COMMON  STOCK HAS BEEN LIMITED AND SPORADIC, AND

THERE IS NO GUARANTEE THAT A MARKET WILL  BE  AVAILABLE  FOR  YOU  TO SELL YOUR

SHARES.

Shares  of our common stock are not listed on any exchange but are sporadically

traded in over the counter transactions or in inter-dealer quotations from time

to time.  Currently there are several market makers who have posted bid and ask

prices for  our shares but there is no guarantee that they or any other brokers

will continue  any  activities. Our stock has been very thinly traded and there

are many days or weeks  that  the  shares  have  not traded at all. There is no

assurance that any market will exist at the time that  a  shareholder wishes to

sell the shares and there is no assurance that any market will continue.

OUR COMMON STOCK PRICE COULD BE VOLATILE AND MAY NOT APPRECIATE IN VALUE.

The market price of shares of our common stock has fluctuated  and is likely to

continue to fluctuate significantly. Fluctuations could be rapid and severe and

may provide investors little opportunity to react. Factors such  as  changes in

commodity  prices,  conversion  of  our  preferred  shares,  results  from  our

operations,  and  a  variety  of  other  factors,  many of which are beyond the

control of the Company, could cause the market price  of  our  common  stock to

fluctuate substantially. Also, stock markets in penny stock shares tend to have

extreme  price  and  volume  volatility.  The  market  prices of shares of many

smaller public companies securities are subject to volatility  for reasons that

frequently  unrelated  to the actual operating performance, earnings  or  other

recognized measurements  of value. This volatility may cause declines including

very sudden and sharp declines  in  the  market  price  of our common stock. We

cannot assure investors that the stock price will appreciate  in  value, that a

market  will  be  available  to resell your securities or that the shares  will

retain any value at all.

BECAUSE OUR SHARES ARE DEEMED HIGH RISK "PENNY STOCKS," YOU MAY HAVE DIFFICULTY

SELLING THEM IN THE SECONDARY TRADING MARKET.

The Commission has adopted regulations  which  generally define a "penny stock"

to be any equity security that has a market price  (as  therein  defined)  less

than  $5.00  per  share or with an exercise price of less than $5.00 per share,

subject to certain  exceptions.  Additionally,  if  the  equity security is not

registered or authorized on a national securities exchange, the equity security

also  constitutes  a  "penny  stock."  As  our  common stock falls  within  the

definition of penny stock, these regulations require the delivery, prior to any

transaction  involving  our  common  stock,  of  a  risk   disclosure  schedule

explaining  the  penny  stock  market and the risks associated with  it.  These

regulations generally require broker-dealers  who  sell penny stocks to persons

other  than  established  customers  and  accredited  investors  to  deliver  a

disclosure schedule explaining the penny stock market and  the risks associated

with  that  market.  Disclosure is also required to be made about  compensation

payable to both the broker-dealer and the registered representative and current

quotations for the securities.  These  regulations  also  impose  various sales

practice  requirements  on broker-dealers. In addition, monthly statements  are

required to be sent disclosing  recent  price information for the penny stocks.

The ability of broker/dealers to sell our  common  stock  and  the  ability  of

shareholders  to sell our common stock in the secondary market is limited. As a

result, the market  liquidity  for  our  common stock is severely and adversely

affected. We can provide no assurance that trading in our common stock will not

be subject to these or other regulations in  the future, which would negatively

affect the market for our common stock.

19 | Page

WE  MAY  INCUR  SIGNIFICANT  COSTS  TO ENSURE COMPLIANCE  WITH  U.S.  CORPORATE

GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We  expect  to  incur significant costs  associated  with  our  public  company

reporting  requirements,  costs  associated  with  newly  applicable  corporate

governance requirements, including requirements under the Sarbanes-Oxley Act of

2002 and other  rules implemented by the SEC. We expect all of these applicable

rules and regulations  to increase our legal and financial compliance costs and

to make some activities  more  time-consuming  and  costly. We also expect that

these  applicable  rules and regulations may make it more  difficult  and  more

expensive for us to  obtain director and officer liability insurance and we may

be required to accept reduced policy limits and coverage or incur substantially

higher costs to obtain  the  same  or  similar coverage. As a result, it may be

more difficult for us to attract and retain  qualified  individuals to serve on

our  board  of directors or as executive officers. We are currently  evaluating

and monitoring  developments  with respect to these newly applicable rules, and

we cannot predict or estimate the  amount  of  additional costs we may incur or

the timing of such costs.

WE DO NOT FORESEE PAYING CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

We have not paid cash dividends on our stock and  we  do  not  plan to pay cash

dividends  on  our  stock in the foreseeable future.  We intend to  retain  any

earnings  to  expand  our   operations   and   explore   additional  areas  and

opportunities in our industry. Therefore an investment in  our  common stock is

not appropriate for investors who require regular and periodic returns on their

investments.

ITEM 2.

DESCRIPTION OF PROPERTIES

All  land  in  China  is  owned  by  the  State. Individuals and companies  are

permitted  to  acquire  rights to use land or  land  use  rights  for  specific

purposes. In the case of land used for commercial purposes, the land use rights

are granted for a period  of  50  years.  This  period  may  be  renewed at the

expiration of the initial and any subsequent terms. Granted land use rights are

transferable and may be used as security for borrowings and other obligations.

CORPORATE  HEADQUARTERS  Because of the maturity of the old lease, Our  corporate  

headquarters  removed to the the opposite mansion.   The new location consists

of  554  square  meters located at Seventeen Floor, Xinhui Mansion, Gaoxin Road,

Hi-tech Zone, Xi'An,  Shaanxi  Provence  PRC, Postcode:710075. Our  Telephone  number

Still is (86) 29-88331685 and  our fax  number of  (86)29-88332335 has not changed.

The headquarters are leased from February, 2009 to January 31, 2011 at a rental rate

$11,029 per year.

20 | Page

THE DONGFANG PARCEL

Xunyang  County  in the Shaanxi Province of southwestern China has an extensive

history in mining.  Called the "Golden State" in ancient times it is located in

the Qinba Mountain Area at a geologic junction of "Shan, Zha, Zhen, Xun", which

are the four primary  metallogenic  prospective  areas in the Shaanxi Province.

This area, having been likened to China's "Ural" is  the resources reserve area

of  several  metals in China including gold, silver, copper,  iron,  lead,  and

zinc. Over 30  different  minerals  have  been  proven  up  in  Xunyang County,

including reserves of basic raw materials such as lead & zinc, gold,  mercury &

antimony, and limestone.

Our  subsidiary  Dongfang Mining,  obtained the mining rights to a 67.82  sq.km

parcel in the Jiao  Shan  Zhai  Mining  Area, located in Xunyang County-Guo Jia

Ling, Xunyang County, Shaanxi Province (the  "Donfang Parcel.") Approval of the

exploration rights was granted by appropriate authorities in certificate number

is 6100000720386.

The Dongfang Parcel is located in the Guo Jia  Ling- Jiao Shan Zhai Mining Area

is located in eastern Xunyang County, under the  jurisdiction  of  Shuhe  Town,

Guankou  Town  and  Gouyuan  Village,  Xunyang  County,  and  Shaanxi  Province

according  to  its  administrative  division. The North end of this mining area

starts at Cai Jia Gou, at the south end  at  Cai Miao Ya. It begins in the east

from Shi Jia Gou Nao and ends at Si Ren Gou in  the  west, with a whole area of

67.82 sq.km. Longitude, 109*26*30*--109*38*30*, and North Latitude, 32*55*45*--

33*01*00*.

Mineral Deposits

Dongfang Mining obtained the exploration  rights  to  the  Dongfang  Parcel  on

September 19, 2003.  In  the same year, they finished 1/10,000 geological rough

survey, geochemical profile survey and trench exploration on lead  &  zinc  and

gold mines in  Dong  Er  Gou, Xunyang  County within the area of 1.15 sq.km. by

consigning the first  geological team of Geology and Mineral Bureau of Shaanxi.

Lead  &  zinc mineralization   clues   had   been   found   and  efforts  began

to  evaluate reconnaissance and prospecting.

During 2005-2006, the company dug a prospecting  hole  with  a spatial depth of

more  than 60 meters and a test trench with 240m3 in the region  of  Jiao  Shan

Zhai, and  discovered  five  gold  mine  veins,  each  with a length of over 30

meters.  Analyzed  on  the  mineral  information  obtained,  there   are  still

relatively large gold deposits in this mining area. At the end of August  2007,

three lead and zinc ore bodies and a gold ore body was preliminarily proven up,

as indicated in the exploration information of the geological team.

The mining area covered by the Dongfang Parcel can be divided into three areas.

Gold  deposits are known in the area and management has estimated gold reserves

at about  3-5  tons.  Total reserves of lead and zinc ore in this region is 3-5

million tons, whose average  grade  is 8-15% and some even can reach as high as

45% based on geologic studies.

ITEM 3.

LEGAL PROCEEDINGS

We  are not presently involved in  any  litigation  that  is  material  to  our

business.  We  are not aware of any pending or threatened legal proceedings. In

addition, none of  our  officers,  directors,  promoters or control persons has

filed or been involved for the past five years:

   -   in any bankruptcy petition,

   -   in any conviction of a criminal proceeding  or involved in a pending

       criminal proceeding (excluding traffic violations and minor offenses),

   -   is  subject  to  any  order,  judgment or decree enjoining,  barring

       suspending  or  otherwise limiting their  involvement  in  any  type  of

       business, securities, or banking activities,

   -   or has been found  to have violated a federal or state securities or

       commodities law.

21 | Page

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

       None.

Item 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL

BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

The Company's  Common Stock is  traded over-the-counter and quoted from time to

time  in  the  OTC  Bulletin   Board   under   the  trading  symbol  "NAGM.OB".

Consequently, there is currently  no  established public trading market for the

Company's Common Stock. The following table  sets  forth  the range of high and

low bid prices as reported by the OTC Bulletin Board for the periods indicated.

Such quotations represent inter-dealer prices without retail  markup, markdown,

or commission, and may not necessarily represent actual transactions

CALENDAR YEARS

BY QUARTER

BID PRICE

--------------

----------

--------------

HIGH

LOW

-----

-----

2008

First

$0.035

0.01

Second

0.07

0.01

Third

0.14

0.05

Fourth

0.09

0.015

2007

First

$0.023

0.08

Second

0.023

0.48

Third

0.03

0.10

Fourth

0.02

0.065

Item 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION        

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Forward Looking Statements

We  make  certain  forward-looking statements in this report. Statements   that

are  not  historical   facts   included  in  this Form 8-K are "forward-looking

statements"  within the meaning  of  the  Private  Securities Litigation Reform

Act  of 1995 that  involve  risks and uncertainties  that  could  cause  actual

results  to differ from projected  results. Such statements address activities,

events  or   developments   that   the  Company   expects,  believes, projects,

intends or anticipates will or may occur,  including   such   matters as future

capital,    debt   restructuring,    pending   legal   proceedings,    business

strategies,  expansion  and  growth of the Company's operations, and cash flow.

Factors  that could cause actual  results  to  differ  materially  ("Cautionary

Disclosures")  are  described  throughout this Form 8-K. Cautionary Disclosures

include, among  others:  general   economic  conditions in China and elsewhere,

the  Company's  ability  to  license, extract, refine  and  sell  minerals  and

precious metals through our intended  operations  in  China,  the  strength and

financial   resources   of   the   Company's   competitors,  environmental  and

governmental regulation,  labor relations,  availability and cost of employees,

material    and    equipment,   regulatory   developments    and    compliance,

fluctuations  in  currency  exchange  rates and legal  proceedings.  Statements

concerning our future operations, prospects,  strategies,  financial condition,

future  economic performance (including growth and earnings),  demand  for  our

services,  and  other  statements  of  our  plans,  beliefs,  or  expectations,

including   the   statements  contained  under  the  captions  "Risk  Factors,"

"Management's Discussion  and  Analysis  or Plan of Operation," "Description of

Business," as well as captions elsewhere in  this document, are forward-looking

statements. In some cases these statements are  identifiable through the use of

words such as "anticipate," "believe," "estimate,"  "expect," "intend," "plan,"

"project,"  "target,"  "can,""could,"  "may," "should,"  "will,"  "would,"  and

similar expressions. We intend such forward-looking statements to be covered by

the safe harbor provisions contained in  Section  27A  of the Securities Act of

1933, as amended (the "Securities Act") and in Section 21E  of  the  Securities

Exchange  Act  of  1934, as amended (the "Exchange Act"). All written and  oral

forward-looking statements  attributable   to   the   Company   are   expressly

qualified  in  their  entirety  by  the  Cautionary  Disclosures.  The  Company

disclaims  any obligation to update or revise any forward-looking statement  to

reflect  events   or  circumstances  occurring  hereafter  or  to  reflect  the

occurrence of anticipated or unanticipated events.

22 | Page

The  nature of our business makes predicting the future trends of our revenues,

expenses, and net income difficult. Thus, our ability to predict results or the

actual  effect  of  our future plans or strategies is inherently uncertain. The

risks and uncertainties  involved  in  our  business  could  affect the matters

referred  to  in  any  forward-looking statements and it is possible  that  our

actual results may differ  materially from the anticipated results indicated in

these forward-looking statements.  Important  factors  that  could cause actual

results to differ from those in the forward-looking statements include, without

limitation,  the factors discussed in the section entitled "Risk  Factors"  and

the following:

   *  the effect of political, economic, and market conditions and geopolitical

      events;

   *  legislative and regulatory changes that affect our business;

   *  the availability of funds and working capital;

   *  the actions and initiatives of current and potential competitors;

   *  investor sentiment; and

   *  our reputation.

We do not undertake  any  responsibility  to  publicly release any revisions to

these forward-looking statements to take into account  events  or circumstances

that occur after the date of this report. Additionally, we do not undertake any

responsibility  to  update  you  on the occurrence of any unanticipated  events

which may cause actual results to differ from those expressed or implied by any

forward-looking statements.

The following discussion and analysis  should  be  read in conjunction with our

consolidated financial statements and the related notes  thereto  as filed with

the SEC and other financial information contained elsewhere in this Form 10-K.

OVERVIEW

We are an exploration stage mining company and we have had no revenues  and  do

not  expect  revenues  until  we begin the process of extracting minerals which

will not start until 2009, if at  all.   We  have sustained considerable losses

from our exploration and other activities to date.

Effective  August  20, 2001, the Company sold its  interests  in  video  gaming

business for cash and notes receivable. During 2003, the Company sold the notes

receivable for cash.  As  a  result,  the Company had no on-going operations or

revenues.  Thereafter the Company was a  "shell"  as  defined by Rule 405 under

the Securities Act and Rule 12b-2 under the Exchange Act. Its only activity was

to explore for acquisition opportunities and the financing  required buying and

supporting an operating business.

On  February  4,  2008,  (the  "Closing  Date")  we acquired HONGKONG  WAH  BON

ENTERPRISE LIMITED ("Wah Bon") and its three subsidiaries:   SHAANXI  TAI  PING

YANG  XIN  NENG  YUAN  DEVELOPMENT  COMPANY LIMITED ("Tai Ping Yang "); SHAANXI

CHANG JIANG SI YOU NENG YUAN FA ZHANG  GU  FENG  YOU  XIANG  GONG  SI   ("Chang

Jiang")  and DONGFANG MINING COMPANY LIMITED ("Dongfang Mining".) Wah Bon  owns

100% of Tai Ping Yang. Tai Ping Yang owns 97.2% of Chang Jiang; and Chang Jiang

owns 60% of  Dongfang  Mining.  The  minority  interests represent the minority

shareholders' 2.8% and 41.68% share of the results  of Chang Jiang and Dongfang

Mining respectively.

23 | Page

Our subsidiary, Chang Jiang, had acquired a 60% interest  in Dongfang Mining in

two  separate transactions.  On February 5, 2007 we acquired  40%  of  the  net

assets  of  Dongfang  Mining.  The  acquisition  of  40% of Dongfang Mining was

accounted  for  as  a  purchase  under  SFAS  No.  141, Business  Combinations.

Accordingly, the 40% of operating results of Dongfang Mining have been included

in the consolidated statements of operation and comprehensive  losses after the

effective date of the acquisition of February 5, 2007.

    The  preliminary  allocation  of  40% of the net assets of Dongfang  Mining

    acquired is as follows:

Cash and cash equivalents

$

227,233

Other receivables and prepaid expenses

46,309

                                                

----------------

Total current assets

273,542

Fixed assets, net

7,432

Total assets

280,974

Less: Accounts payable and accrued liabilities

(3,223)

            Due to a stockholder

(273,444)

----------------

Net assets acquired

4,307

Minority interests

(1,723)

Additional paid in capital

(861)

Less: Consideration for acquisition

(3,117,267)

----------------

Goodwill

$     (3,115,544)

================

    Analysis of the net outflow of cash  and cash equivalents in respect of the

    business combination is as follows:

Total cash consideration

$        3,117,267

Less: cash consideration payable

(1,872,131)

------------------

Cash consideration paid

1,245,136

Less: cash and cash equivalents acquired

(227,233)

------------------

Net cash outflow

$        1,017,903

==================

    The acquisition of 40% of Dongfang Mining  was  accounted for as a purchase

    under  SFAS  No.  141,  Business  Combinations.  Accordingly,  the  40%  of

    operating results of Dongfang Mining have been included in the consolidated

    statements of operation and comprehensive loss after  the effective date of

    the acquisition of February 5, 2007.

    The  following table reflects the unaudited pro forma combined  results  of

    operations  for  the  years  ended  December 31, 2007 and 2006, assuming the

    acquisition had occurred at the beginning of 2007 and 2006.

24 | Page

2008

2007

2006

-----------

-----------

-----------

Revenues

$ -

$ -

$ -

-----------

-----------

Net loss

$(1,467,426)

$(8,959,472)

$(1,676,333)

-----------

-----------

Net loss per share – basic

$(0.061)

$ -

$ -

-----------

-----------

Net loss per share – diluted

$ -

$  (0.02)

$ -

-----------

-----------

     In accordance with SFAS No. 142 "Goodwill  and  other  intangible assets",

goodwill  is  not  amortized  but  is  tested  for impairment. The  Company are

going to perform an assessment on goodwill arising from  the  acquisition  of

Dongfang Mining as the price of non-ferrous metals are going down and the

whole industry are stagnant. We cannot conclude that there was no impairment

    to the carrying value of the goodwill in this reporting period.

On  March  22, 2007, the Company entered into an  agreement  with  a  principal

stockholder of the Company to exchange the Company's 92.93% interest in Huanghe

for 20% equity  interest  in  Dongfang  Mining  owned  by the stockholder.  The

acquisition of 20% of Dongfang Mining from the related party  was accounted for

as  a  purchase  under  common  control.  As a result of these transactions,  we

recorded goodwill of $3,115,544 in the balance sheet of the Company.

   The operations of Huanghe have been reclassified  as discontinued operations

   in the consolidated statements of operations for the year ended

   December 31, 2006 and are summarized as follows:

Operating expenses

$

(282,728)

Loss from operations

$

(291,885)

Net loss

$

(291,885)

    The detailed information on the loss on disposal of Huanghe is as follows:

Cash and cash equivalents

$ 1,406,430

Other current assets

31,687

Fixed assets, net

349,024

Land use rights

8,987,826

-----------

Total assets

10,774,967

Less: Accounts payable and accrued liabilities

(205,800)

            Due to related parties

(1,618,037)

            Due to a stockholder

(4,726)

            Minority interests

(918,343)

-----------

Book value of net assets disposed

8,028,061

20% of book value of net assets of Dongfang Mining exchanged

(827)

-----------

Loss on disposal of Huanghe

$ 8,027,234

===========

Net cash outflow on disposal of subsidiary

Proceed from disposal

$         -

Cash and cash equivalent disposed

(1,406,430)

-----------

Net cash outflow

$(1,406,430)

===========

We have land use rights for a 67.82 sq.km parcel in the  Jiao  Shan Zhai Mining

Area, located in Xunyang County in the Shaanxi Province of China.  Our land use

rights  are  amortized  over  fifty years of the term of the leases.   We  have

performed  tests  on the site but  we  have  not  begun  mining  activity.   We

originally planned  to  construct  a theme park business on the parcel but have

delayed those plans while we direct  our resources on the mining opportunities.

Therefore  most  of  our assets are recorded  in  the  theme  park  segment  of

financial statements although  this  is  no  longer  the  primary  focus of the

Company.

25 | Page

    The following is a summary of land use rights at December 31, 2008:

Cost

$        19,146,841

Less: accumulated amortization

(1,638,232)

-------------------

Land use rights, net

$        17,508,609

===================

The  land use rights are amortized over fifty years of the term of leases.  The

amortization expense for the year ended December 31, 2008 and December 31, 2007

was $490,108 and $367,480, respectively.

From 2003  until  the  present,  Dongfang  Mining  has  held  licenses  for  the

exploration  of  minerals  and  precious  metals in the Shaanxi Province of the

People's Republic of China.  Dongfang Mining  was  granted an exploration right

to the lead, zinc and gold mines located at Gan Gou  and  Guan  Zi Gou, Xunyang

County,  Shaanxi  Province,  PRC,  on  December 31, 2006.  The Company  engaged

Geology and Mineral Bureau of Shaanxi to  conduct  a  preliminary  survey which

reported preliminary positive findings for gold, lead and zinc deposits  in the

mines.

As reflected in the accompanying consolidated financial statements, the Company

has  an  accumulated  deficit  during  the  exploration stage of $13,262,228 at

December 31, 2008, which includes a net loss of  $1,467,426  for  the year ended

December 31, 2008. The Company's current liabilities exceed its current  assets

by  $8,147,385  and  the  Company  used  cash of $388,013 in operations. These

factors  raise  substantial doubt about its ability  to  continue  as  a  going

concern.  In view  of  the  matters  described above, recoverability of a major

portion of the recorded asset amounts  shown  in  the accompanying consolidated

balance sheet is dependent upon continued operations  of  the company, which in

turn  is  dependent  upon  the  Company's ability to raise additional  capital,

obtain  financing  and  succeed  in  its   future  operations.   The  financial

statements do not include any adjustments relating  to  the  recoverability and

classification  of  recorded  asset  amounts  or amounts and classification  of

liabilities that might be necessary should the Company be unable to continue as

a going concern.

Theme Park Segment

We planned to become a shareholder of  a theme park business before the first

half year of 2009, but the theme park business shall not occupy much of our

resources for it shall not be controlled by us.

The Huanghe, a related Company, is one of our target enterprise. After about 4

years construction on the theme park located in the wetland of Huanghe River,

the Company was expected to generate revenue in 2009.

PLAN OF OPERATIONS

Our efforts over the next twelve months will be directed towards completing the

licensure  process  to  begin  the  extraction operations from the mines and to

acquire the equipment and personnel necessary to commence mining operations. We

have applied for, but not yet obtained,  an additional license that will permit

the excavation and extraction of the parcel.  We  expect to obtain that license

before the end of 2009 and expect to commence extraction operations shortly

thereafter.

To  date  we  have  financed our activities from loans  received  from  related

parties. Until we begin  to  generate revenues we expect to continue to rely on

loans from our directors and related parties. Our directors have indicated that

they will continue to make loans  for  the next twelve (12) months or until the

Company begins to generate revenues, whichever  first  occurs.   Other than the

oral assurances given by the directors, we have no other sources of capital and

there can be no guarantee that the Company will be able to meet its obligations

or  obtain sufficient capital to complete its plan of operations for  the  next

twelve (12) months.

Our  plan  for  2009  is  to finish reconnaissance  and  evaluation  and  begin

prospecting the known ore bodies  and  controlling  the  trench exploration, in

addition, enter in to new energy industry by acquisition ,such as electric

power. We intend to stress deep drilling and tunnel exploration validation.

We hope this will allow us to enlarge the ore body scale and prove up the anomalous

regions. We expect to accomplish this primarily with drilling and tunnel exploration.

Specific implementation methods are as follows:

   -   Enhance  the  validation  of  geophysical  prospecting  abnormities,

       especially of the I and II class abnormities, make a conclusion  on them

       as soon as possible to provide basis for next work;

   -   Carry   out  geological  investigation  in  adjacent  regions,  with

       attention to the lead & zinc ore bodies;

   -   Investigate  other  metallogenic areas, mainly through surface work,

       which may be combined with limited tunnel exploration and drilling;

   -   Finish the rough survey of lead and zinc over the 6.8 square meter area;

-

Complete the particular survey of gold and obtain the exploitation licence

Before year end.

Enter into electric power industry by controlling the Changjiang electric

Power & new emerge Co., ltd.

We believe we can find adequate skilled mining personnel  in the region. We are

also exploring possible joint venture or similar arrangements  with  one of the

existing, competitive mining companies that are already operating in the mining

area  near  our  parcel.   If  so,  we  would  reduce  our need for the initial

expenditures and the delay in commencing mining operations may be shortened.

RESULTS OF OPERATIONS

COMPARISON OF THE YEARS ENDED DECEMBER 31, 2008 AND DECEMBER 31, 2007

       The Company is an exploration stage company and  has  not yet generated

any revenue and consequently has also not generated any gross profit.

       OPERATING EXPENSES. Total operating expenses for the year ended December

31, 2008 increased to $1,141,537,from $746,461 for the year ended  December  31,

2007. Overall expenses before taxes and minority interests, for the year ended

December 31, 2008 was $1,526,199 as compared to the year ended December 31, 2007,

of $988,673.  The  difference of $537,526 or approximately 54% over the prior

period, the overall increase in expenses is due to the following increases in:

   .  A reduction of general  and  administrative  expenses from  $349,269  for

      the year ended December 21, 2007 to $260,590 for the year ended  December

      31, 2008.

      A $449,224 increase of legal and professional for 2008 comparing with that

 of 2007.

 

   .  Other expense,  which  increased from $242,212 for the year ended December

      31, 2007 to $384,662 for the year ended December 31, 2008.

   .  An increase in imputed interest expense from $243,337 to $353,951 which is

      reflected  in  the  increase  in  other expenses. Total  imputed interest

      recorded as additional paid-in  capital  amounted to $353,951 and $243,337

      for the years ended December 31, 2008 and 2007, respectively.

   .  Depreciation  increased slightly from $29,712 for the year ended December

      31, 2007 to $35,779 for the year ended December 31, 2008.

   .  Amortization of land use rights increased  from  $367,480  for  the  year

      ended December 31, 2007 to $395,944 for the year ended December 31, 2008.

26 | Page

       NET LOSS. Our net loss for the year ended December 31, 2008 decreased to

$1,467,426 from $8,959,472  for  the  year ended December 31, 2007. The overall

decrease in net loss of $7,492,046, almost  a  five fold  decrease,  over the

prior  year  period, is primarily due to $8,027,234 loss on disposal of subsidiary

occurred in 2007.

       COMPREHENSIVE LOSS.  Our  comprehensive loss for the year ended December

31, 2008 decreased to $402,514 from  $7,788,802  As the $ 1,064,912 foreign currency

Translation gains of 2008 just slightly decreased comparing with $1,170,670 of 2007.

The reason for great decrease of comprehensive loss came to the same reason for the

net loss.

       

STOCKHOLDERS'  EQUITY.  Stockholders'  equity increased by $281,935 to

$14,415,425 as of December 31, 2008, or approximately  2%  from $14,133,490 as

of  December  31,  2007.  The  increase  was  primarily  due to a $489,258 repurchasing

of common stock  during the year ended December 31, 2007.  In addition, the $353,951

imputed interest was adjusted to the paid-in capital, which also help to increase the

stockholders’ equity.

LIQUIDITY AND CAPITAL RESOURCES

       GENERAL.   Overall, we had an increase in net loss of $1,467,426 for the

year ended December  31, 2008. Net cash used in operating activities of $388,013,

net  used in investing activities  of  $1,512,396  and  net  cash  provided  by

financing  activities of $1,115,410. At December 31, 2008, our cash balance was

$23,961 as  compared to $479,241 for the prior year, a decline of $455,280

or approximately 95%.

       CASH FLOWS  FROM  OPERATING  ACTIVITIES. Net  cash  used  in  operating

activities  of  $388,013 for  the  year  ended December 31, 2008 was primarily

attributable to a net loss from the operations.  The  adjustments  to reconcile  

the  net  loss  to net cash, including depreciation  expense of $35,779,

amortization  of  land  use  rights  of  $395,944, imputed interest  expense

of $353,951, adjustment for minority interests of $(58,773), a decrease in current

assets and prepayments of $303,024 and other payables of $49,488.

       CASH  FLOWS FROM  INVESTING  ACTIVITIES.  Net  cash  used  in  investing

activities of  $1,181,898  for  the  year ended December 31, 2008 was primarily

attributable to:

          -   Net  cash  outflow from  the  acquisition of a subsidiary of $292,629

          -   $883,124 from related parties; and

          -   Purchase of furniture and equipment of $6,145.

       CASH FLOWS FROM FINANCING ACTIVITIES. Net cash of $1,445,908 provided by

financing activities in the year ended December 31, 2008 was primarily due to a

$538,343 and a $935,268 increase of due to shareholder and due to related parties,

respectively.

       FINANCING.  We have not generated any revenues  as of  December 31, 2008

and so are considered an exploration stage company. We ended 2008 with $23,961

of  cash  and  equivalents on our balance sheet. Given our current  cash  usage

rate, a risk exists  that our available cash on hand and the cash we anticipate

generating  from operating  activities  will  be  insufficient  to  sustain  our

operations.   Our auditors have expressed substantial concern as to our ability

to continue as a going concern.

       We have historically been able to issue shares, preferred stock or stock

options to pay  for  certain  operating expenses. We believe that our pro-forma

working capital on hand as of the  date  of this report, along with our ability

to raise capital and meet certain operating  expense  obligations  through  the

issuance  of  stock  or  stock equivalents, will provide us with the capital we

need  through year end 2009.  In  addition,  our  directors  have  indicated  a

willingness  to  make loans to the Company to cover expenses, although there is

no assurance that  they  will  do  so.  However, we believe that our ability to

operate beyond the end of 2009 will require  us to raise additional capital, of

which there can be no assurance. We are, therefore, actively seeking additional

debt or equity financing until we become cash flow positive.

       INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our

operations, if and when they commence, will meet  the requirements of our daily

operations  in  the  future. In the event that funds from  our  operations  are

insufficient to meet our  operating  requirements,  we  will need to seek other

sources of financing to maintain liquidity.

  

       EXTERNAL  SOURCES  OF  LIQUIDITY.  We  intend  to pursue  all  potential

financing  options  in  2009  as  we look to secure additional  funds  to  both

stabilize and grow our business operations and begin extraction. Our management

will  review  any financing options at  their  disposal  and  will  judge  each

potential source  of  funds on its individual merits. We cannot assure you that

we will be able to secure  additional  funds  from debt or equity financing, as

and when we need to or if we can, that the terms  of  such  financing  will  be

favorable to us or our existing shareholders.

       INFLATION. Our management believes that inflation has not had a material

effect on our results of operations, and does not expect that it will in fiscal

year  2009.

       OFF-BALANCE  SHEET  ARRANGEMENTS.  We  do not have any off-balance sheet

arrangements.

RECENT DEVELOPMENTS

On February 4, 2008, we closed an acquisition of  Hongkong  Wah  Bon Enterprise

Limited ("Wah Bon"). On September 2, 2007, Wah Bon had acquired 100%  ownership

of  Tai  Ping  Yang  at  a consideration of $128,205 in cash. We issued 500,000

shares of series C convertible  preferred  stock  in  exchange  for  all of the

outstanding  shares  of  Wah  Bon.   This  transaction was treated as a reverse

merger for accounting purposes and we have therefore  presented  all  financial

data in consolidated form, except where otherwise noted.

Financial Condition

We had total assets of $ 23,379,269 and $21,797,756 as of December 31, 2008 and

December  31, 2007, respectively. Most of this reduction was the result of an adjustment  for

discontinued operations and disposal of a subsidiary.

The largest part of our assets is the Land Use Rights  we  hold.  Net land use

rights were $17,508,609 as of December 31, 2008, increased from $16,743,482 for

the year  ended  December 31, 2007.  The reason for this increase was that the

appreciation of RMB contributed more to the balance than the depreciation of

the Land Use Right did.

In order to carry out the Corporate  Strategy  of developing the Petroleuem and

New  Energy, the Company invested RMB 2,000,000($293,328)  to  establish  a new

company   named  Shaanxi  Changjiang  mining   and  New  Energy  Co.,  Ltd  in

September,  2008, with  Shaanxi Changfa Industry Stock Co.,Ltd  (the "Changfa"),

The registered  capital  totals    RMB  10,000,000(USD  293,328),  in which the

Company   owns  20%, and   Changfa  the  other  80%   share.  The  Company  has

significant  influence  on  the  new  Company as it assigned finance and  Other

directors in the new Company, and has recorded  the investment under the  equity

method. The new Company had no income for  the  year ended December 31,2008  and

as the expense was not material, no adjustment has been made .

Our current liabilities were $8,400,906 as of December 31, 2008.  $3,446,160 and

$434,137 are due to related companies and notes payable, respectively, along with

$2,396,560 due to stockholders. Our other payables and accrued expenses were

$2,124,049.

27 | Page

Tax Liabilities

Neither North American Gaming nor Wah Bon had income for income tax purposes in

2008 and 2007. Wah Bon is a Hong Kong corporation and  therefore  is subject to

Hong  Kong profits tax. All of the subsidiaries of Wah Bon are incorporated  in

the PRC  and  therefore  are  subject  to  income  tax  in  China.  The current

applicable  tax rate has been 25% and no tax benefit is expected from  the  tax

credits in the  future.  There  is  no provision for income tax expense for the

years ended December 31, 2008 and December 31, 2007.  

The Company has deferred tax assets at  December  31, 2008 which consist of net

operating loss carry forwards calculated using statutory  effective  tax rates.

Due  to  its  history of losses, realization of its net deferred tax assets  is

unlikely.   Consequently,  the  Company did not record the deferred tax asset

at the year end of 2007 & 2008 in the balance sheet. According to the China Tax

Regulations, the operating loss carryforwards can be deducted in the taxable

profit within 5 years.

 

The reconciliation  of  income taxes computed at the statutory income tax rates

to total income taxes for the year ended December 31, 2008 is as follows:

North American                                  

Income tax computed at the federal statutory rate

34%

State income taxes, net of federal tax benefit

0%

---

        Valuation allowance

(34%)

===

Wah Bon                                 

        Profits tax computed at the applicable tax rate

17%

---

        Valuation allowance

(17%)

===

Tai Ping Yang, Chang Jiang and Dongfang Mining                                  

        Income tax computed at the applicable tax rate

25%

---

        Valuation allowance

(25%)

===

Total deferred tax asset

0%

===

    

    Other  payables and accrued liabilities at December 31, 2008 consist of the

    following:

Other payables

$

159,440

Consideration payable to a former owner of Dongfang Mining

1,827,898

Accrued wages

1,990

Statutory staff welfare

1,876

Other tax payable

57

Accrued expense

45,000

---------------

$      2,124,049

===============

28 | Page

Lease

The Company  moved to a new office located in Floor 17,Block B, Xinhui Building, #33

Gaoxin Road, Gaoxin District, Xi’an in Feb, 2009. The new office consists of  554  

square  meters, bears RMB75,000($10,974) per year from Feb 1^, 2009 to Jan 31,2011

As  of  December  31, 2009 and 2010, the Company had outstanding commitments of

$13,717 and $10,974, respectively, with  respect to above operating leases.

Critical Accounting Policies

Impairment:  We review all assets to be held and used in the Company's business

for impairment, whenever events  or  changes in circumstances indicate that the

related  carrying  amount may not be recoverable.   When  required,  impairment

losses on assets to  be held and used are recognized based on the fair value of

the assets.

RECENT FINANCIAL ACCOUNTING PRONOUNCEMENTS

In May 2008, the FASB released SFAS No. 162, “The Hierarchy of Generally Accepted Accounting

Principles”. This statement identifies the sources of accounting principles and the framework

for selecting the accounting principles used in the preparation of financial statements of

nongovernmental entities that are presented in conformity with generally accepted accounting

principles in the United States. SFAS No. 162 is effective 60 days after the SEC’s approval

of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning

of Present Fairly in Conformity with Generally Accepted Accounting Principles”.  The Company

does not expect the implementation of this guidance to have a material impact on the consolidated

financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. SFAS No. 161 gives financial statement users better information about the reporting entity's hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 and interim periods within those years. The Company does not expect the adoption of SFAS No. 161 to have a material effect on the consolidated financial statements.

In September 2006, FASB issued Statement 157, "Fair Value Measurements”. This  statement

defines  fair  value  and  establishes  a framework for measuring   fair  value  in  generally

accepted  accounting  principles ("GAAP").  More   precisely,   this  statement  sets

forth  a  standard definition of fair value as it applies  to  assets  or  liabilities, the

      principal  market  (or  most  advantageous market) for determining  fair value (price), the market

participants,  inputs  and  the application of the  derived fair value to those assets and

liabilities.  The  effective date of  this  pronouncement is for all full fiscal and interim

periods beginning after November 15, 2007.  The  Company  does  not  expect  the adoption  of  

SFAS  No. 157  to  have  an impact on the Company's results of operations or financial condition.

       

In February 2007, the FASB released SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. The standard is effective for fiscal years beginning after November 15, 2007. The standard provides entities the ability, on an elective basis, to report most financial assets and financial liabilities at fair value, with corresponding gains and losses recognized in current earnings. The Company did not elect the fair value option under SFAS 159 as of January 1, 2008 for any of our financial assets and liabilities that were not already fair valued. The Company will consider applying the fair value option to future transactions as provided by the standard. The Company does not expect SFAS 159 to have a material impact on the consolidated financial statements.

In December 2007, the FASB released SFAS No. 141(R), “Business Combinations”. This standard revises and enhances the guidance set forth in SFAS No. 141(R) by establishing a definition for the “acquirer,” providing additional guidance on the recognition of acquired contingencies and non-controlling interests, and broadening the scope of the standard to include all transactions involving a transfer in control, irrespective of the consideration involved in the transfer. SFAS No. 141(R) is effective for business combinations for which the acquisition date occurs in a fiscal year beginning on or after December 15, 2008. Although the standard will not have any impact on the current consolidated financial statements, application of the new guidance could be significant to the Company in the context of future merger and acquisition activity.

       

In December 2007, the FASB released SFAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect the standard to have a material impact on the consolidated financial statements.

29 | Page

                        OFF BALANCE SHEET ARRANGEMENTS

        None.

Item 7.      FINANCIAL STATEMENTS

The full text of our audited consolidated  financial  statements for the fiscal

years ended December 31, 2008 and 2007 begin on F-1 of this report.

Item 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON  ACCOUNTING  AND

FINANCIAL DISCLOSURE

Previous Principal Independent Accountants

Began from the second quarter, we dismissed Jimmy C.H. Cheung & Co. as our

principal independent accountants,  and  engaged BROCK,SCHECHTER & POLAKOFF,LLP

as our new  principal independent accountants to perform  procedures  related

to  our financial  statements  for  the  fiscal  year  ended  December 31, 2008,

to be included on our Form 10-KSB under Section 13(a) or 15(d) under the Exchange

Act of 1934, as amended, and for the fiscal quarterly reports.

As  described  below, the change in our principal independent accountants was not

the result of  any  disagreement with Jimmy C.H. Cheung & Co.

In July 2008, pursuant to  approval  by management  and the Board  of  Directors,

we  dismissed  Jimmy C.H. Cheung & Co.  as  our principal independent

accounting firm. Management and the Board of Directors  at  that  time participated

in and approved the decision to change principal independent accounts.  Our  financial

statements  for  as  of December  31,  2007,were  prepared by Jimmy C.H. Cheung & Co.

And that as of December 31,2006, 2005,  2004 and 2003 were prepared by Sartain Fischbein &

Company, CPA.

Jimmy C.H. Cheung & Co.’s reports on the financial statements did not contain

an adverse opinion or disclaimer  of opinion and was not modified as to

uncertainty, audit scope, or accounting principles,  except  that  the  reports

contained  an  explanatory  paragraph  indicating that substantial doubt exists

about our ability to continue as a going concern.

We have had no disagreements with Jimmy C.H. Cheung & Co. on  any matter  of  accounting

principles or practices, financial statement disclosure, or auditing scope  or  procedure,

which  disagreements  if not resolved to the satisfaction of Jimmy C.H. Cheung & Co.  would

have  caused  it to make reference  to the subject matter of any such disagreements in

their reports  on the financial statement for the periods ended December 31, 2007.

We requested  that  Jimmy C.H. Cheung & Co. furnish a letter addressed to the Securities and

Exchange Commission stating that it is not in a position to agree or disagree with the

above statements.

New Principal Independent Accountants

Effective as of the closing  date  of August 11, 2008, our Board of Directors

engaged  BROCK,SCHECHTER & POLAKOFF,LLP as our new  independent  registered  public

accounting firm. The Company had  not  consulted  with  BROCK,SCHECHTER & POLAKOFF,LLP

prior to that time regarding (i) the application of accounting  principles to a

specific completed or contemplated transaction, the type of audit  opinion that

might  be  rendered on our financial statements, or any written or oral  advice

that was an  important  factor considered by us in reaching a decision as to an

accounting, auditing or financial  reporting issue; or (ii) any matter that was

the subject of a disagreement.

30 | Page

ITEM 8A.

See below.

ITEM 8B. OTHER INFORMATION.

      None.

32

Item 9.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  following table sets forth the existing  officers  and  directors  of  the

Company.  

DIRECTOR

AGE

POSITION AND OFFICE TO BE HELD WITH THE COMPANY

NAME OF PERSON

Chen Wei Dong

39

President, Chief Executive Officer and Chairman

of the Board

Xu Wei

33

Financial Supervisor

Zhang Hong Jun

42

Director

Wang Sheng Li

42

Director

Li Pin

33

Director and Chief Financial Officer

Tian Hai Long

36

Director

Each director  of  the  Company  will serve until its next annual shareholders'

meeting and until his successor is appointed.  Subject to employment agreements

that they may have, the officers serve  at  the  discretion  of  the  board  of

directors of the respective companies.

BIOGRAPHICAL INFORMATION OF-OFFICERS AND DIRECTORS OF THE COMPANY

Listed  below  is biographical information for each of the foregoing designated

new directors and  officers  of  the  Company following the Exchange, including

their  principal  occupations  during  the   past  five  (5)  years  and  other

affiliations:

CHEN WEI DONG - President and Chief Executive Officer

Mr. Chen serves as our President and Chief Executive Officer and as a Director.

Mr. Chen was named as Chairman of Changjiang Mining & New Energy in March 2006.

Prior to that, he was General Manager of Du Kang Trading  Company  from 2001 to

2006 and was a Bank Director of Branch Bank of China Agriculture Bank  from  May

1991 to January  2001.   He  served in the army of the People's Republic of China

from October 1985 to March  1990.   Mr.  Chen  studied  in  Northern West University

Management School, majoring in Enterprise Management.  

XU WEI - Financial Supervisor

Ms. Wei was named as CFO of Changjiang Mining & New Energy  Development  

Stock Co. Ltd.  in  March  2006.  From 1900 to 1998, she was deputy section chief

of  the accounting department  of  Shaanxi Weinan Textile Factory.  In 1999, she

worked in Shaanxi Hui Huang Construction  and  Building Material Company as manager

of the accounting department.  She passed the  Adult  Self  Study  Examination  in

Shaanxi Province in 1990 with a major in Accounting.  

31 | Page

ZHANG HONG JUN - Director

Mr. Zhang was named as a director of Changjiang Mining & New Energy in April 2006.  Prior

to  that,  he  was  Chairman and CEO of Shaanxi Baishui Dukang Liquor Co. since

2002-2005.   He  is  the   Executive  Commissioner  of  Shaanxi  Federation  of

Industry & Commerce, an academician  of  the  China  Academy  of  Management of

Science,  the  Shaanxi  Deputy  of  the  National  People's  Congress,  Shaanxi

Executive Commission of the Political Consultation Committee, the Vice Chairman

of  Wei  Nan  Federation  of  Industry & Commerce, the Vice Chairman of Beijing

Federation of Shaanxi Commerce  and the Chairman of Shaanxi Du Kang Alcohol Co.

Ltd. Education.  

On  April 2,  2007, Mr. Zhang was named  as  Executive  Commission  of  Shaanxi

Federation of Industry &  Commerce,  academician of China Academy of Management

of Science, Shaanxi Deputy of the NPC,  Shaanxi  Executive  Commission  of  the

Political  Consultation  Committee,  Vice  Chairman  of  Wei  Nan Federation of

Industry &  Commerce,  Vice Chairman of Beijing Federation of Shaanxi  Commerce

and named as Chairman of Shaanxi Du Kang Alcohol Co. Ltd.

He received his MBA from the China Academy of Management of Science.

WANG SHENG LI - Director

Mr. Wang was named a director  of Changjiang mining & new energy in March 2006.  Prior to

that, he was the manager of Xi Deng Hui Alcohol Co. Ltd. from 1998 to 2006.  He

studied in Xi'an Petroleum University Electron Construction School from 1995 to

1998, majoring in computers.

LI PIN - Director

Mr. Li was named a director and Chief Financial Officer of Changjiang  Mining &

New Energy  in  March 2006. He was an officer of Wei Nan branch company of China

2005.

Life Insurance Company  from 2000 to Mr. Li studied in the Shaanxi Finance

2006.

and Economics from 1994  to  1996, majoring in Finance and Economics Management.

TIAN HAI LONG - Director

Mr.  Tian  was named as director of Changjiang mining & new energy in March 2006.  He was

the sales manager  of  Xi  Deng  Hui  Alcohol  Co.  Ltd. from 1998 to 2006.  He

studied in the West Industry University Electronic Information School, majoring

in e-commerce.

Item 10.     EXECUTIVE COMPENSATION

No compensation was awarded to, earned by, or paid to any executive officer or

director of the Company during the years 2008， 2007, 2006, and 2005.

The following table and the accompanying notes provide summary  information for

each  of the last three fiscal years concerning cash and non-cash  compensation

paid or accrued.

SUMMARY COMPENSATION TABLE

Name and

Year

Salary

Bonus

Other

Restricted

Securities

LTIP

Other

Principal Position

(5)

Annual

Stock Award(s)

Underlying Options

Payouts

($)

($)

Compensation ($)($)            (#)                ($)    ($)

Chen Wei Dong

2006

675

0

0

0

0

0

0

(Chariman of board & CEO)

2007

0

0

0

0

0

0

0

2008

585

0

0

0

0

0

0

Xu Wei, Financial officer

2006

257

0

0

0

0

0

0

2007

0

0

0

0

0

0

0

2008

298

0

0

0

0

0

0

Yang Yi Jun

2006

0

0

0

0

0

0

0

2007

406

0

0

0

0

0

0

2008

439

0

0

0

0

0

0

E. H. Hawes

2006

0

0

0

0

0

0

0

2007

0

0

0

0

0

0

0

2008

0

0

0

0

0

0

0

Richard Crane

2006

0

0

0

0

0

0

0

2007

0

0

0

28,000

0

0

0

2008

0

0

0

0

0

0

0

1.  Compensation  paid  in  RMB  has  been converted at the rate of $1 USD =

       7.398 RMB.

   2.  Mr.  Crane  was granted options  on   January   20,   2000  to  purchase

       1,000,000 shares   of  common  stock  at  an  exercise  price of $.03125

       per  share,  the approximate  fair  market  value  on  such  date,  with

       such  options  vesting  immediately and having a term of five years from

       the  date  of grant.  In  March  2006,  the options were extended for an

       additional five year period,  expiring March 29, 2011.  This resulted in

       compensation expense of $28,000, representing  the  estimated fair value

       of these options at the date these options were extended.   The  options

       were fully vested at the date of this award.

   3.  The  Company  reimburses  the  directors  for  their  expenses  (if any)

       incurred in connection with their duties as directors.

   4.  No cash compensation has been paid to any of our directors during  these

       periods  other than the stock option grants which were commenced in 2000

       and extended  in  2005... The compensation of the Board of Directors has

       not been established  by  any  policy  or  amount.  We  have no standard

       arrangements  under  which  we will compensate our directors  for  their

       services provided to us.

32 | Page

EMPLOYMENT AGREEMENTS

The Company has no employment agreements.

Item 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

AND RELATED STOCKHOLDER MATTERS

 The following table sets forth certain  information  regarding  the beneficial

ownership  of  our  common  stock, as of the Closing Date, by (i) each  person,

including  any "group," as that  term  is  used  in  Section  13(d)(3)  of  the

Securities Exchange  Act  of 1934, who is known by us to own beneficially 5% or

more of

our  preferred and common stock, (ii) each of our directors and named executive

officers,  and  (iii)  all  of our directors and executive officers as a group.

Unless otherwise indicated, all persons listed below have sole voting power and

investment power with respect to the shares owned by them.

SERIES C PREFERRED STOCK OWNERSHIP

NAME AND ADDRESS OF BENEFICIAL OWNER

AMOUNT AND NATURE

PERCENTAGE

OF BENEFICIAL OWNERSHIP

(2)(3)

CHEN WEI DONG

499,630

96%

VOTING POWER OF SERIES C PREFERRED  STOCK  OWNERSHIP  AND  BENEFICIAL OWNERSHIP

ASSUMING FULL CONVERSION OF ALL PREFERRED SHARES AND GIVING EFFECT TO A ONE FOR

TEN REVERSE STOCK SPLIT

NAME AND ADDRESS OF BENEFICIAL OWNER

AMOUNT AND NATURE

PERCENTAGE

OF BENEFICIAL OWNERSHIP

                                         

(2)(3)

(Class Series C Preferred Stock )            

CHEN WEI DONG

608,549

1%

ZHANG HONG JUN

35,174,152

57.8%

WANG SHENG LI

7,442,558

12.23%

LI PIN

6,079,408

9.99%

TIAN HAI LONG

6,079,408

9.99%

XU WEI

0

0

CHEN MIN

5,470,859

8.99%

OFFICERS AND DIRECTORS AS A GROUP (6PERSONS)

60,854,934

100%

33 | Page

(See Footnotes Below)

(1)   The address for each beneficial owner is attached.  Each of  these persons can also be reached through the Company's address

      which is listed c/o North American Gaming and Entertainment Company,  Fifth  Floor,  High-Tech Mansion, Gaoxin Road, Hi-tech

      Zone, Xi'an P.R. China.

      Chen Wei Dong, Address: BeitangXi'Ang 11#, Linwei District, Weinan City, Shaanxi, China.

      Xu Wei Address: Xi'An Ning Zhong Lu 5#, Xi'an, Shaanxi, China

      Zhang Hong Jun, Address: Duqiao Paichusuo, Xiyi Road, Linwei District, Weinan City, Shaanxi, China.

      Wang Sheng Li, Address: Yun Yang, Jin Yang Xi'An, Wei Nan City, Shaanxi, China.

      Li Pin Address: Jie Fang Lu 132#, Wei Nan City, Shaanxi, China

      Tian Hai Long, Address:, Sinancun Erzu, Jiaqv Xiang  Lin Wei District, Wei Nan City, Shaanxi, China.

(2)   As  used  herein,  a  person is deemed to be the "beneficial owner" of a security if he or  she  has  or  shares  voting  or

      investment power with respect  to  such security, or has the right to acquire such ownership within sixty (60) days. As used

      herein, "voting power" includes the  power  to  vote  or to direct the voting of shares, and "investment power" includes the

      power to dispose or to direct the disposition of shares, irrespective of any economic interest therein.

(3)   Except as otherwise indicated by footnote, the persons named in the table have sole voting and investment power with respect

      to all Common Stock beneficially owned by them.

34 | Page

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a)  of the Securities Exchange Act of 1934, as  amended  (the  "1934

Act"), requires the Company's directors and executive officers, and persons who

own more than ten  percent  of  a  registered  class  of  the  Company's equity

securities,  to file with the SEC initial reports of ownership and  reports  of

changes in ownership  of  common  stock  and  other  equity  securities  of the

Company.  Officers,  directors  and  greater  than ten percent stockholders are

required  by  SEC  regulation  to  furnish  the  Company  with  copies  of  all

Section 16(a) forms they file.

To the Company's knowledge, based solely on a review  of  the  copies  of  such

reports  furnished  to  the  Company  and written representations that no other

reports  were required, during the fiscal  year  ended  December 31,  2008  all

Section 16(a)  filing  requirements  applicable  to its officers, directors and

greater than ten percent beneficial owners were complied with.

Item 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  related  parties  owed  the Company $1,754,586 as  of  December  31,  2008

including nine related companies  and  four  related  persons  owed  the Company

amounts  totaling  $1,355,694 and $398,892, respectively, for advances made  on  an

unsecured basis, repayable on demand and interest free.

The Company owed $2,396,560 to  two  former  stockholders of Chang Jiang as of

December 31, 2008 for advances made on an unsecured  basis, repayable on demand

and interest free. Imputed interest is charged at 7% per  annum  on the amounts

due.

38

The  Company  owed $3,446,160 to seven related parties as of December  31,  2008

including six  related  companies  and  one  related  person  owed the Company

amounts totaling $2,086,486 and $1,359,674, respectively, for advances  made  on an

unsecured  basis,  repayable  on  demand and interest free. Imputed interest is

charged at 7% per annum on the amount due.

Total  imputed interest recorded as  additional  paid-in  capital  amounted  to

$353,951 and $243,337 for the years ended December 31, 2008 and 2007, respectively.

Consulting  Fees. E.H. Hawes, II is the former Chairman of the Board, President

and Chief Executive  Officer of the Company. Mr.  Hawes has provided consulting

services to the Company  and was paid $-0- in consulting fees during 2008,2007, 2006

and $-0- in 2005. He did not  receive  a  salary  from the Company and had been

owed a maximum of $50,000 for consulting services and expense reimbursements.

At closing the sum of $170,000 was paid to eliminate  any  outstanding debts of

the Company with the balance payable to Mr. Hawes in satisfaction  of  all sums

due  him  as  well as any other claims. Mr. Hawes retained the assignment of a

note payable from Daylighting, Inc.

At closing the  Company  paid  Capital Advisory Services, Inc. $200,000 and 370

shares of Series C Preferred Stock.  Stanley  F.  Wilson,  Esq.  is  the CEO of

Capital  Advisory  Services  and  a  licensed attorney at law with 30 years  of

experience.  From  2006  until  closing,  Capital  Advisory  Services  provided

consultation to the Company in connection with its business plan, evaluation of

companies for potential mergers, and assistance  to  management  in  completing

required tasks necessary for securities law compliance.  

All  shares  exchanged  are restricted securities and may not be resold without

registration or an exemption from registration from the Securities Act of 1933.

35 | Page

Item 13.

EXHIBITS

Exhibit

Number

Exhibit Description

Footnote Reference

-------

-------------------

------------------

3.1.3

Articles of Amendment to Articles of Incorporation

(1)

4.1

Certificate of Designation

(1)

10.1

Plan of Exchange dated May 30, 2008 by and among North

American Gaming and Entertainment Company, and SHAANXI

CHAN JIANG SI YOU NENG YUAN FA ZHANG GUFENG  YOU XIAN

GONG SI

(1)

10.2

Lock Up Agreement among  North American Gaming and

Entertainment Company,  Steven Case and James Bowyer

(1)

10.3

Lock-up Agreement

*

10.4

Mining Exploration Certificate

(1)

10.5

Land Use Right

(1)

10.6

Lease Agreement

(1)

21

Subsidiaries

*

31.1

Certification of Chief Executive  Officer under Section

302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Chief Financial Officer under Section

302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer under 18 U.S.C.

ss. 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002.

32.2

Certification  of Chief Financial  Officer under 18 U.S.C.

ss. 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002.

Filed herewith.

(1)       Incorporated by reference from the Information Statement on Form  8-K

of North American Gaming and Entertainment Company filed  with  the  Securities

and Exchange Commission on February 6, 2008.

36 | Page

Item 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES

On August 12, 2008, the Company filed a Form 8-K which,  in part,  disclosed a

change in auditors as of the closing date. The Company intended to replace  its

previous auditors, Jimmy C.H.  Cheung & Co. and engage BROCK, SCHECHTER &  POLAKOFF,LLP

as  our   new principal  independent  accountants  to   perform  procedures

related to our financial  statements  for  the fiscal year ending December  31,

2008, to  be included on our Form 10-KSB under Section 13(a) or 15(d) under the

Exchange Act.

Jimmy C.H.  Cheung & Co’s reports on the financial statements did not contain

an adverse  opinion  or  disclaimer  of  opinion  and  was  not modified  as to

uncertainty, audit scope, or accounting principles,  except  that  the  reports

contained  an  explanatory  paragraph  indicating that substantial doubt exists

about our ability to continue as a going concern.

We have had no disagreements with Jimmy C.H.  Cheung & Co   on  any matter  of

accounting principles or practices, financial statement disclosure,

or auditing scope  or  procedure,  which  disagreements  if not resolved to the

satisfaction of Jimmy C.H.  Cheung & Co  would have  caused  it to make

reference  to the subject matter of any such disagreements in their reports  on

the financial statement for the periods ended December 31, 2007.

Jimmy C.H.  Cheung & Co  furnish a letter addressed to the Securities

and  Exchange Commission stating that it is not  in  a  position  to  agree  or

disagree with the above statements, dated September 12,  2008. Jimmy C.H.  Cheung

& Co took issue with the following disclosures in the 8-K A as follows:

The report of Cheung on NAGM's consolidated financial statements for the fiscal

years ended  December 31, 2006  and  December 31, 2007  dated  March  22,  2008

noted  that  the  accompanying  consolidated  financial  statements  have  been

prepared   assuming  that  the  Company  will  continue  as a going concern. As

discussed  in  Note  18  to the    consolidated   financial   statements,   the

Company  had  a   net   loss  of $8,959,472,  an accumulated deficit during the

exploration  stage  of  $11,794,802  and  a  working   capital   deficiency  of

$5,358,730  and used cash  in  operations  of  $442,727.  These  factors  raise

substantial   doubt about its ability to continue as  a  going  concern. Except

as stated, the  report  did not contain any other adverse opinion or disclaimer

of opinion and  was  not qualified  or  modified as to uncertainty, audit scope

or accounting principle.  Additionally, Cheung's review of  our interim periods

ending  March 31,  2007  and  first quarter ended March 31, 2008 did not contain

any adverse opinion or disclaimer of opinion and was  not qualified or modified

as to uncertainty, audit scope or accounting principle except as stated.

Jimmy C.H. Cheung & Co billed the Company $30,000 for 2007 audit.  Our  Board  of

Directors engaged Jimmy C.H. Cheung & Co. as  our  new  independent  registered

public accounting firm. The Company had not consulted with Jimmy C.H. Cheung  &

Co. prior to that time regarding (i) the application of  accounting  principles

to a specific completed or contemplated transaction, the type of audit  opinion

that might be rendered on our financial statements,  or  any  written  or  oral

advice that was an important factor considered by us  in  reaching  a  decision

as to an accounting, auditing or financial reporting issue; or (ii) any  matter

that was the subject of a disagreement. Began from the second quarter, we dismissed Jimmy C.H. Cheung & Co. as our

principal independent accountants, and  engaged BROCK,SCHECHTER & POLAKOFF,LLP

as our new  principal independent accountants to perform  procedures  related

to  our financial  statements  for  the  fiscal  year  ended  December 31, 2008,

to be included on our Form 10-KSB under Section 13(a) or 15(d) under the Exchange

Act of 1934, as amended, and for the fiscal quarterly reports.

As  described  below, the change in our principal independent accountants was not

the result of  any  disagreement with Jimmy C.H. Cheung & Co. The Company has paid Brock, Schechter

& Polakoff, LLP fees totaling $37,000 for its services for audit work of the

fiscal  year 2008, report of internal control over financial reporting, and the

review of the 2^nd and 3^rd  quarters.

37 | Page

42

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of  the  Securities

Exchange  Ac t of  1934, the  Registrant  has  duly caused this Form 10-K to be

signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 15, 2009

                North American Gaming and Entertainment Company

By:     

/s/ Chen Weidong

----------------

Chen Weidong,

President and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act  of  1934,

this report has been  signed  by  the  following  persons  on  behalf  of  the

Registrant and in the following capacities on the dates indicated.

Name & Title                                    Date

/s/  Chen Weidong      

-----------------

Chief Executive Officer (Principal

Executive Officer), President, and Director     April 15, 2009

/s/  Li Pin

-----------     

Chief Financial Officer (Principal

Financial Officer)                              April  15, 2009

Management’s Report on Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal

control over financial reporting for North American Gaming and Entertainment

(an exploration company) and subsidiaries (“we” and “our”), as that term is

defined in Exchange Act Rules 13a-15(f). We conducted an evaluation of the

effectiveness of our internal control over our financial reporting as of December

 31, 2008 based on the framework in “Internal Control—Integrated Framework”

issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 Based on that evaluation, we concluded that our internal control over financial

Reporting is effective as of December 31, 2008.

Brock, Schechter & Polakoff, LLP, an independent registered public accounting firm,

has audited the consolidated financial statements included in this Annual Report

and has issued a report on the effectiveness of our internal control over financial

reporting. Their reports follow this statement.

Chen Weridong		Li Pin
President and Chief Executive Officer		Chief Financial Officer
April 15, 2009		April 15, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:

North American Gaming and Entertainment Corporation

(An Exploration Stage Company)

We have audited North American Gaming and Entertainment Corporation (an exploration

 stage company) and subsidiaries internal control over financial reporting as of

December 31, 2008, based on criteria established in Internal Control - Integrated

Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO). The Company’s management is responsible for maintaining effective internal

control over financial reporting and for its assessment of the effectiveness of internal

 control over financial reporting, included in the accompanying Management’s Report on

 Internal Control Over Financial Reporting. Our responsibility is to express an

opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting

Oversight Board (United States). Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether effective internal control over financial

reporting was maintained in all material respects. Our audit included obtaining an

understanding of internal control over financial reporting, assessing the risk that a

material weakness exists, and testing and evaluating the design and operating effectiveness

 of internal control based on the assessed risk. Our audit also included performing such other

procedures as we considered necessary in the circumstances. We believe that our audit provides

a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with generally accepted accounting

principles. A company’s internal control over financial reporting includes those policies

and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

 (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation

of financial statements in accordance with generally accepted accounting principles, and that

receipts and expenditures of the company are being made only in accordance with authorizations of

management and directors of the company; and (3) provide reasonable assurance regarding prevention

 or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that

could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are

subject to the risk that controls may become inadequate because of changes in conditions, or that the

degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over

financial reporting as of December 31, 2008, based on criteria established in Internal Control –

 Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight

 Board (United States), the consolidated balance sheet of North American

Gaming and Entertainment Corporation (an exploration stage company) and subsidiaries

as of December 31, 2008, and the related consolidated statements of operations and comprehensive

loss, changes in stockholders’ equity, and cash flows for the year ended December 31, 2008, and our

report dated April 15, 2009 expressed a qualified opinion on those consolidated financial statements.

/s/Brock, Schechter & Polakoff, LLP

Certified Public Accountants

Buffalo, New York
April 15, 2009

38 | Page

43      

FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firms       F-1

Consolidated Balance Sheets                                     F-3

Consolidated Statements of Operations                           F-4

Consolidated Statements of Stockholders' Deficit                F-5

Consolidated Statements of Cash Flows                           F-6

Notes to Consolidated Financial Statements

                   NORTH AMERICAN GAMING AND ENTERTAINMENT

                         CORPORATION AND SUBSIDIARIES

                        (An Exploration Stage Company)

                      CONSOLIDATED FINANCIAL STATEMENTS

                            AS OF DECEMBER 31, 2008

39 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

                               AND SUBSIDIARIES

                        (An Exploration Stage Company)

                                   CONTENTS

PAGES

_____________________________________________________________________________

Reports of the Independent Registered Public Accounting Firms

1

_____________________________________________________________________________

Consolidated Balance Sheets as of December 31, 2008 and 2007

3

_____________________________________________________________________________

Consolidated Statements of Operations and Comprehensive

Loss for the years ended December 31, 2008 and 2007

4

_____________________________________________________________________________

Consolidated Statements of Stockholders' Equity for

the years ended December 31, 2008 and 2007

5-6

_____________________________________________________________________________

Consolidated Statements of Cash Flows for the years

ended December 31, 2008 and 2007

7

_____________________________________________________________________________

Notes to Consolidated Financial Statements

8 - 17

_____________________________________________________________________________

Brock, Schechter & Polakoff, LLP

Certified Public Accountants

Registered with the Public Company Accounting Oversight Board

40 | Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:

North American Gaming and Entertainment Corporation

(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheet of North American

Gaming and Entertainment Corporation (an exploration stage company) and subsidiaries

as of December 31, 2008 and the related consolidated statements of operations and

comprehensive loss, stockholders' equity and cash flows for the year ended December

31,  2008. 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.

Except as discussed in the following paragraph, we conducted our audit in

accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement.  An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in

the financial statements.  An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as

evaluating the overall financial statement presentation.  We believe that our

audit of the financial statements provides a reasonable basis for our opinion.

We were unable to obtain sufficient evidential matter in connection with the balance of

the Company’s goodwill as of December 31, 2008, and we were unable to satisfy ourselves of

the balance by performing other audit procedures.  Any impairment of this balance would effect

the results of operations for the year ended December 31, 2008.

In our opinion, except for the effects of such adjustments discussed in the previous

paragraph, the consolidated financial statements referred to above present fairly, in

all material respects, the financial position of North American Gaming and

Entertainment Corporation(an exploration stage company) and subsidiaries,

as of December 31, 2008, and the results of its operations and its

cash flows for the year then ended, in conformity with

accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 19 to the consolidated financial statements, the Company had a net loss of $1,467,426 for the year ended December 31, 2008, an accumulated deficit during the exploration stage and a working capital deficiency of $13,262,228 and $8,147,385, respectively, at December 31, 2008, and used cash in operations of $388,013 during the year ended December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern.  Management’s plans concerning this matter are also described in Note 19.  The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States), the Company’s internal control over financial reporting

as of December 31, 2008, based on criteria established in Internal Control – Integrated

Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO), and our report dated April 15, 2009 expressed an unqualified opinion on the

effectiveness of the Company’s internal control over financial reporting.

/s/Brock, Schechter & Polakoff, LLP

Certified Public Accountants

Buffalo, New York

Date: April 15, 2009

726 Exchange Street, Suite 822, Buffalo, New York 14210

Tel: (716) 854-5034   Fax: (716) 854-7195   

Email:  JRW@bspcpa.com

 Website:  www.bspcpa.com

JIMMY C.H. CHEUNG & CO

Certified Public Accountants

(A member of Kreston International)

Registered with the Public Company Accounting Oversight Board

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:

North American Gaming and Entertainment Corporation

(An Exploration Stage Company)

We  have  audited the accompanying consolidated balance sheet of North American

Gaming and  Entertainment  Corporation  (an  exploration stage company) and its

subsidiaries as of December 31, 2007 and the related consolidated statements of

operations, stockholders' equity and cash flows  for  the  years ended December

31,  2007  and 2006. These financial statements are the responsibility  of  the

Company's management.  Our  responsibility  is  to  express an opinion on these

financial statements based on our audits.

We conducted our audits in accordance with the standards  of the Public Company

Accounting  Oversight Board (United States). Those standards  require  that  we

plan and perform  the  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 of the financial statements 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 North American Gaming and

Entertainment Corporation (an exploration stage company)  and its subsidiaries,

as of December 31, 2007, and the consolidated results of its operations and its

cash flows for the years ended December 31, 2007 and 2006,  in  conformity with

accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared  assuming

that the Company will continue as a going concern. As discussed in Note  18  to

the   consolidated  financial  statements,  the  Company  had  a  net  loss  of

$8,959,472,  an accumulated deficit during the exploration stage of $11,794,802

and a working  capital  deficiency of $5,358,730 and used cash in operations of

$442,727. These factors raise  substantial  doubt about its ability to continue

as  a  going  concern.  Management's  plans concerning  this  matter  are  also

described in Note 18.  The accompanying  consolidated  financial  statements do

not  include  any  adjustments  that  might  result  from  the  outcome of this

uncertainty.

/s/ JIMMY C.H. CHEUNG & CO

Certified Public Accountants

Hong Kong

Date: March 22, 2008

 1607 Dominion Centre, 43 Queen's Road East, Wanchai, Hong Kong

 Tel:  (852) 25295500   Fax:  (852) 28651067   Email:

 jchc@krestoninternational.com.hk

 Website:  http://www.jimmycheungco.com

41 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

AND SUBSIDIARIES

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2008 AND 2007

ASSETS

2008

2007

CURRENT ASSETS                                                                  

Cash and cash equivalents

23,961

479,241

Note receivable

-

133,000

Other current assets and prepayments

229,560

532,584

Due from related companies

-

540,964

-------------------------

Total Current Assets

253,521

1,685,789

FURNITURE AND EQUIPMENT, NET

235,800

252,941

LONG TERM INVESTMENTS

292,629

-

LAND USE RIGHTS, NET

17,508,609

16,743,482

GOODWILL

3,334,124

3,115,544

LONG TERM RECEIVABLE

1,754,586

-

-----------------------------

TOTAL ASSETS

23,379,269

21,797,756

==============================

LIABILITIES AND STOCKHOLDERS' EQUITY                                            

CURRENT LIABILITIES                                                                     

Other payables and accrued expenses

2,124,049

2,074,561

Notes payable

434,137

573,146

Due to stockholders

2,396,560

1,858,217

Due to related companies

3,446,160

2,510,892

Preferred stock debenture

-

12,700

Preferred stock dividends payable

-

15,003

-----------------------------

Total Current Liabilities

8,400,906

7,044,519

-----------------------------

COMMITMENTS AND CONTINGENCIES

-

-

---------------------------

MINORITY INTERESTS

562,938

619,747

---------------------------

STOCKHOLDERS' EQUITY                                                                    

Series C convertible preferred stock ($0.01 par value,

10,000,000 shares authorized, 500,000 shares

issued and outstanding as of December 31, 2008)5,000

5,000

Preferential treatment in distributions upon

liquidation

Common stock ($0.01 par value, 200,000,000 shares

         authorized, 24,216,058 shares issued,

         24,216,058 shares outstanding as of both

         December 31, 2008 and December 31, 2007)      417,886

417,886

Additional paid-in capital

24,208,127

23,523,678

Treasury stock, 17,572,494 shares, at cost

(489,258)

(489,258)

Accumulated deficits during the exploration stage

(13,262,228）

(11,794,802)

 

Accumulated other comprehensive income

3,535,898

2,470,986

  

----------------------------

Total Stockholders' Equity

14,415,425

14,133,490

----------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

23,379,269

21,797,756

============================

   The accompanying notes are an integral part of these financial statements

                                                                              

42 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

2008

2007

Accumulated

------------

------------

------------

OPERATING EXPENSES      

General and administrative expenses

260,590

349,269

609,859

Legal and professional fee

449,224

-

449,224

Depreciation

35,779

29,712

65,491

Amortization of land use rights

395,944

367,480

763,424

------------

------------

------------

Total Operating Expenses

1,141,537

746,461

1,887,998

------------

------------

------------

LOSS FROM OPERATIONS

(1,141,537)

(746,461)

(1,887,998）

OTHER INCOME (EXPENSES)

Interest income

2,229

2,692

4,921

Interest expenses

(1,357)

-

(1,357）

Imputed interest expenses

(353,951)

(243,337)

（597,288）

Other expenses

(31,583)

(1,567)

（33,150）

------------

------------

------------

Total Other Expenses

(384,662)

(242,212)

（626,874）

------------

------------

------------

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAX

EXPENSE AND MINORITY INTERESTS

(1,526,199)

(988,673)

(2,514,872）

INCOME TAX EXPENSE

-

-

-

MINORITY INTERESTS

58,773

56,435

115,208

------------

------------

------------

LOSS FROM CONTINUING OPERATIONS

(1,467,426)

(932,238)

(2,399,664）

DISCONTINUED OPERATIONS

   

Loss on disposal of subsidiary

-

(8,027,234)

(8,027,234）

------------

------------

------------

NET LOSS

(1,467,426)

(8,959,472)

（10,426,898）

OTHER COMPREHENSIVE INCOME     

Foreign currency translation gain

1,064,912

1,170,670

2,235,582

------------

------------

------------

COMPREHENSIVE LOSS

$ (402,514)

$ (7,788,802)

(8,191,316）

============

============

============

Net loss per share-basic

$  (0.061)

$ -

$(0.434)

============

============

============

Net loss per share-diluted

$ (.0024)

$  (0.01)

$     -                                   

============

============

============

Weighted average number of shares outstanding   

during the year-basic

24,216,058

-

24,216,058          

============

============

============

Weighted average number of shares outstanding

during the year-diluted

609,000,000

609,000,000

609,000,000

============

============

============

   The accompanying notes are an integral part of these financial statements

                                                                              

43 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

AND SUBSIDIARIES (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

Treasury stock

Series C

Convertible

Preferred Stock

Common Stock                  

Shares

Amount

Shares

Amount

Shares

Amount                     

-------

-------

-------

------

----------

--------       

Balance at

January 1, 2007

-

$   -

500,000

$5,000

-

$  -

Imputed interest

expenses on due

to stockholders and

related companies

-

-

-

-

-

-

Stock issued in

Recapitalization

17,572,494

(489,258)

-

-

24,216,058

417,886                   

Foreign currency

translation gain

-

-

-

-

-

-                

Comprehensive income

----------

----------

----------

--------

-----------

---------

Balance at

December 31, 2007

17,572,494

(489,258)

500,000

5,000

24,216,058

417,886              

                            

Contribution by

Stockholders

-

-

-

-

-

-

Imputed interest

expenses on due

to stockholders and

related companies

-

-

-

-

-

-

Net loss for the year

-

-

-

-

-

-

Foreign currency

translation gain

-

-

-

-

-

-

----------

-------

----------

--------

-----------

---------

Balance at

December 31, 2008

17,572,494

$(489,258)

500,000

$5,000

24,216,058

$417,886        

=======

=======

=======

======

==========

========       

   The accompanying notes are an integral part of these financial statements

                                                                              

44 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

AND SUBSIDIARIES (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

(CONTINUED)

Accumulated

Additional

other

paid-in

Accumulated

comprehensive

capital

deficits

income

Total

-----------

------------

-------------

-----------

Balance at January 1, 2007

$23,633,613

$(2,835,330)

$1,300,316

$22,103,599

Contribution by stockholders

128,205

-

-

128,205

Stock issued in recapitalization

517,214

(998,691)

-

(552,849)

Recapitalization

(998,691)

998,691

-

-

Imputed interest expenses on

due to stockholders and

related companies

243,337

-

-

243,337

Foreign currency translation gain

-

-

1,170,670

1,170,670

Net loss for the year

-

(8,959,472)

-

(8,959,472)

-----------

------------

-------------

-----------

Balance at December 31, 2007

23,523,678

(11,794,802)

2,470,986

14,133,490

Contribution by stockholders

330,498

-

-

330,498  

Imputed interest expenses on

due to stockholders and

related companies

353,951

-

-

353,951

Net loss for the year

-

(1,467,426)

-

(1,467,426)

Foreign currency translation gain

-

-

1,064,912

1,064,912

-----------

------------

-------------

-----------

Balance at December 31, 2008

$24,208,127

$(13,262,228)

$  3,535,898

$14,415,425

===========

============

=============

===========

   The accompanying notes are an integral part of these financial statements

                                                                              

45 | Page

NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION

AND SUBSIDIARIES (An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

2008

2007

Accumulated

-----------

-----------

-----------

CASH FLOWS FROM OPERATING ACTIVITIES    

Net loss from continuing operations

$(1,467,426)

$(932,238)

(2,399,664）

Net loss from discontinued operations

-

(8,027,234)

(8,027,234）

-----------

-----------

-----------

Total net loss

(1,467,426)

(8,959,472)

(10,426,898）

Adjusted to reconcile net loss to cash used

in operating activities:

Loss on disposal of subsidiary

-

8,027,234

8,027,234

    

Depreciation

35,779

29,712

65,491

Amortization of land use rights

395,944

367,480

763,424   

Imputed interest expense

353,951

243,337

597,288

Minority interests

(58,773)

(56,435)

(115,208）

Changes in operating assets and liabilities

(Increase) decrease in:     

Other current assets and prepayments

303,024

(254,098)

48,926

Increase (decrease) in:                                                             

Other payables and accrued expenses

49,488

159,515

209,003

-----------

-----------

-----------

               Net cash used in operating activities

(388,013)

(442,727)

(830,740)                                                                                                      

 

-----------

-----------

-----------

CASH FLOWS FROM INVESTING ACTIVITIES

Issuance of note receivable

-

(133,000)

(133,000)

Purchases of furniture and equipment

(6,145)

(42,954)

(49,099）

Due from stockholder

-

25,584

25,584

Due from related parties

(883,124)

(537,126)

(1,420,250）

Payment for acquisition of long-term investment

(292,629)

(1,017,903)

(1,310,532）

Net cash outflow from disposal of discontinued

Operations

-

(1,406,430)

(1,406,430）

-----------

-----------

-----------

Net cash used in investing activities

(1,181,898)

(3,111,829)

(4,293,727）

-----------

-----------

-----------

CASH FLOWS FROM FINANCING ACTIVITIES

Capital contribution by stockholders

-

128,205

128,205

Proceeds from notes payable

-

573,146

573,146

Proceeds from (repayments of) preferred stock debenture (12,700)

12,700

-      

Proceeds from (repayments of) preferred stock dividends

Payable

(15,003)

15,003

-

Payments for recapitalization

-

(71,372)

(71,372）

Additional paid-in capital

-

(481,477)

(481,477）

Advances from (payments to) stockholders

538,343

(249,189)

289,154

Advances from related parties

935,268

2,146,708

3,081,976

Investment from minority stockholders

-

(619,747)

(619,747）

-----------

-----------

-----------

Net cash provided by financing activities

1,445,908

1,453,977

2,899,885

-----------

-----------

-----------

EFFECT OF EXCHANGE RATES ON CASH

(331,277)

513,842

182,565

-----------

-----------

-----------

NET DECREASE IN CASH AND CASH EQUIVALENTS

(455,280)

(1,586,737)

（2,042,017）

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

479,241

2,065,978

2,065,978

-----------

-----------

-----------

CASH AND CASH EQUIVALENTS AT END OF YEAR

$  23,961

$  479,241

23,961                                                                ===========  ===========  ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:  

Interest expenses

$ 1,357

$ -

1,357

===========

===========

===========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

In February, 2008, the Company offset the $133,000 note receivable against the notes payable.

In 2008, the Company increased additional paid-in capital by $330,498 with amounts due from related parties.

   The accompanying notes are an integral part of these financial statements

                                                                         

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

        (A) Organization

       North American Gaming and Entertainment Corporation ("North American")

       was incorporated under the laws of the State of Delaware in 1969. North

       American has had no operations or significant assets since incorporation

       to the year ended December 31, 2006.

       Hongkong Wah Bon Enterprise Limited ("Wah Bon") was incorporated in Hong

       Kong on July 7, 2006 as an investment holding company.

       Shaanxi Tai Ping Yang Xin Neng Yuan Development Company Limited ("Tai

       Ping Yang") was incorporated as a limited liability company in the

       People's Republic of China ("PRC") on July 20, 2007 as an investment

       holding company.

       Chang Jiang Si You Neng Yuan Fa Zhang Gu Feng You Xiang Gong Si ("Chang

       Jiang") (formerly Weinan Industrial and Commercial Company Limited) was

       incorporated as a limited liability company in the PRC on March 19,

       1999. Chang Jiang became a joint stock company in January 2006 with its

       business activities in mining and new energy development in Shaanxi PRC.

       In July, 2008, Chang Jiang change its name to Shaanxi Chang Jiang Mining

& New Energy Stock Company Ltd.

       In August 2005, Chang Jiang contributed a piece of land valued at

       $7,928,532 in lieu of cash to the registered capital of Shaanxi Huanghe

       Wetland Park Company Limited ("Huanghe"), representing 92.93% of the

       equity of Huanghe.  Huanghe was incorporated as a limited liability

       company in the PRC on August 9, 2005 as Shaanxi Chang Jiang Mining

       and New Energy Co., Limited and is engaged in the development of

       a theme park in Xian, PRC.

       On February 5, 2007, Chang Jiang entered into an agreement with a third

       party to acquire 40% of the equity interest in Dongfang Mining Company

       Limited ("Dongfang Mining") at a consideration of $3,117,267 payable in

       cash. Dongfang Mining is engaged in the exploration of lead, zinc and

       gold for mining in Xian, PRC.

       On March 22, 2007, Chang Jiang entered into an agreement with the

       majority stockholder of Chang Jiang to exchange its 92.93% interest in

       Huanghe for 20% equity interest in Dongfang Mining, which is owned by this

 Related party.

       On August 15, 2007, 97.2% of the stockholders of Chang Jiang entered

       into a definitive agreement with Tai Ping Yang and the stockholders of

       Tai Ping Yang in which they disposed of their ownership in Chang Jiang to

       Tai Ping Yang for 98% of the ownership in Tai Ping Yang and cash of

       $1,328, 940, payable on or before December 31, 2007.

       On September 2, 2007, Wah Bon acquired 100% ownership of Tai Ping Yang

       for a cash consideration of $128,205.

       The acquisitions of Tai Ping Yang and Chang Jiang were accounted for as

       a reorganization of entities under common control.  Accordingly, the

       operations of Wah Bon, Tai Ping Yang and Chang Jiang for the year ended

       December 31, 2007 were included in

       the consolidated financial statements as if the transactions had

       occurred retroactively.

       On May 30, 2007, amended to July 5, 2007, North American entered into a

       Material Definitive Agreement, pursuant to which the shareholders of

       Chang Jiang exchanged all their shares in Chang Jiang for 500,000 shares

       of series C convertible preferred stock ("series C shares") in North

       American, which carries the right of 1,218 votes per share and is

       convertible to 609,000,000 (pre a one for ten reverse split) common

       shares. North American will affect a one for ten reverse stock splits

       after the closing of this transaction and upon obtaining regulatory

       approval and approval of the North American shareholders. The holders

       will not convert its series C convertible preferred stock until after

       the completion of the reverse stock split. In connection with the

       exchange, Chang Jiang will also deliver $370,000 to North American and

       certain non-affiliates of North American will transfer to North American

       or its designee a total of 3,800,000 shares of common stock with a par value

       of $0.01 per share, of North American which had been held for longer

       than 2 years by such non-affiliates, in exchange for the issuance by

       North American to each of such non-affiliates of 2,250,000 shares of

       common stock of North American. Issued and outstanding shares of series C

       preferred stock shall automatically be converted into that number of

       fully paid and non-assessable shares of common stock based upon the

       conversion rate upon the filing by the Company of an amendment to its

       Certificate of Incorporation, increasing the number of authorized shares

       of common stock to 800,000,000 shares, changing the Company's name to

       China Changjiang Mining and New Energy Company Limited and implementing

       a one for ten reverse stock split.  The transaction was closed on

       February 4, 2008 and Wah Bon became a wholly owned subsidiary of North

       American.

      The members have limited liability for the obligations or debts of the entity.

       The merger of North American and Wah Bon was treated for accounting

       purposes as a capital transaction and recapitalization by Wah Bon ("the

       accounting acquirer") and re-organization by North American ("the

       accounting acquiree"). The consolidated financial statements

 have been prepared as if the reorganization had occurred retroactively.

       Accordingly, the consolidated financial statements include the following:

       (1) The balance sheets consisting of the net assets of the acquirer at

            historical cost and the net assets of the acquiree at historical

            cost.

       (2)  The statements of operations including the operations of the

            acquirer for the periods presented and the operations of the

            acquiree from the date of the merger.

       North American, Wah Bon, Tai Ping Yang, Chang Jiang and Dongfang Mining

       are hereafter referred to as (the "Company").

       

The Company is considered to be an exploration stage company.  This requires

that information is presented to show the cumulative results of the Company since

its inception as an exploration stage company.  Even though members of the Company

have been in existence prior to 2007, the Company considers itself to have become

an exploration stage company when it acquired Dongfang Mining on March 22, 2007.

The accumulated columns shown on the consolidated statements of operations and comprehensive

loss and the consolidated statements cash flows have been provided to show cumulative

balances from March 22, 2007 through December 31, 2008.

      

   (B)Use of estimates

       The preparation of the consolidated financial statements in

Conformity with generally accepted accounting principles requires management

to make estimates and assumptions that affects the reported amount of assets

       and liabilities and disclosure of contingent assets and liabilities at

       the dates of the consolidated financial statements and the reported amounts

       of revenues and expenses during the reporting periods.  Actual results could

       differ from those estimates.

   (C)Principles of consolidation

       The accompanying consolidated financial statements as of December 31,

       2008 and 2007 consolidate the financial statements of North American and

       its 100% owned subsidiary Wah Bon, 100% owned subsidiary Tai Ping Yang,

       97.2% owned subsidiary Chang Jiang and 60% owned subsidiary Dongfang

       Mining. The minority interests represent the minority shareholders' 2.8%

       and 40% shares of the results of Chang Jiang and Dongfang Mining,

       respectively.

     

       All significant inter-company balances and transactions have been

       eliminated in consolidation.

   (D) Business combinations between entities under common control

       On August 15, 2007, 97.2% of the stockholders of Chang Jiang entered

       into a definitive agreement with Tai Ping Yang and the stockholders of

       Tai Ping Yang in which they disposed their ownership in Chang Jiang to

       Tai  Ping  Yang  for  98%  of  ownership in Tai Ping Yang  and  a  cash

       consideration of $1,328,940, payable on or before December 31, 2007. On

       September 2, 2007, Wah Bon acquired 100% ownership of Tai Ping Yang at a

       consideration of $128,205, payable entirely in cash. All the entities were

       either under common ownership or shared common management.

       These transactions were accounted for as a reorganization of entities

       under common control. Accordingly, the operations of Tai Ping Yang for

       the period from inception to December 31, 2008 and the operations of

       Chang Jiang for the years ended December 31, 2008 and 2007 were included

       in the consolidated financial statements as if the transactions had

       occurred at the beginning of the first period presented, with each account

       stated at its historical cost.  In this regard, the prior year's

       consolidated financial statements and financial information have been

 adjusted retroactively to combine the previously separate entities to

furnish comparative financial information.

46 | Page

   (E)Cash and cash equivalents

       For purpose of the consolidated statements of cash flows, cash and cash equivalents

       include cash on hand and demand deposits with a bank with a maturity of

       less than three months.

   (F)Furniture and equipment

       Furniture   and   equipment   are   stated at cost, less accumulated

       depreciation.  Expenditures for additions, major renewals and betterments

       are capitalized and expenditures for maintenance and repairs are charged

       to expense as incurred.

       Depreciation is provided on a straight-line basis,  less  estimated

       residual value, over the assets' estimated  useful  lives.  The estimated

       useful lives are as follows:

       Buildings

10 Years

       Motor vehicles

10 Years

       Furniture and office equipment

5 Years

       Land use rights are stated at cost less accumulated  amortization and

       are amortized  over the term of the relevant land-use rights.

   (G)Long-lived assets

       The Company accounts  for  long-lived  assets  under  the  Statements of

       Financial Accounting Standards Nos. 142 and 144 "Accounting for Goodwill

       and Other Intangible Assets" and "Accounting for Impairment  or Disposal

       of Long-Lived Assets" ("SFAS No. 142 and 144").  In accordance with SFAS

       No.  142  and  144, long-lived assets, goodwill and certain identifiable

       intangible assets  held  and  used  by  the  Company  are  reviewed  for

       impairment  annually  or  whenever  events  or  changes in circumstances

       indicate that the carrying amount of an asset may  not  be  recoverable.

       For purposes of evaluating the recoverability of long-lived assets, when

       undiscounted  future  cash  flows  will not be sufficient to recover  an

       asset's carrying amount, the asset is  written  down  to its fair value.

       The Company believes that no impairment of furniture and equipment or land

       use rights existed at December 31, 2008 and 2007.

   (H)Fair value of financial instruments

       Statement  of Financial Accounting Standards No. 107, "Disclosure  About

       Fair Value of  Financial  Instruments," requires certain disclosures

       regarding the fair  value  of  financial  instruments.   Fair  value  of

       financial  instruments  is  made  at  a specific point in time, based on

       relevant  information  about financial markets  and  specific  financial

       instruments. As these estimates  are  subjective  in  nature,  involving

       uncertainties  and  matters  of  significant  judgment,  they  cannot be

       determined  with  precision.  Changes  in  assumptions can significantly

       affect estimated fair values.

       The carrying value of other current assets and  prepaid  expenses, other

       payables and accrued liabilities approximate their fair value because of

       the short-term nature of these instruments.

       The  Company's  major  operation is in the PRC, which may give  rise  to

       significant foreign currency  risks  from fluctuations and the degree of

       volatility of foreign exchange rates between  the  United States dollars

       ("US$") and the Chinese Renminbi ("RMB"). At December 31, 2008, the new RMB

       rate against the US$ was approximately 6.8346. Historically, the PRC government

       has  benchmarked the  RMB  exchange  ratio  against  the  US$,  thereby

mitigating  the associated foreign  currency exchange rate fluctuation

risk. The Company does not believe that  its  foreign  currency  exchange

rate fluctuation risk is  significant,  especially  if the PRC government

continues  to benchmark the RMB against the US$.

   (I)Income taxes

       The Company accounts for income taxes  under  the Statement of Financial

       Accounting Standards No. 109, "Accounting for Income  Taxes" ("Statement

       109").   Under  Statement  109, deferred tax assets and liabilities  are

       recognized for the future tax  consequences attributable to differences

       between the financial statement carrying  amounts of existing assets and

       liabilities and their respective tax bases.   Deferred  tax  assets  and

       liabilities  are  measured  using enacted tax rates expected to apply to

       taxable income in the years in  which  those  temporary  differences are

       expected to be recovered or settled.  Under Statement 109, the effect on

       deferred  tax  assets  and  liabilities  of  a  change  in tax rates  is

       recognized in income in the period that included the enactment date.

In addition, we account for uncertain tax positions in accordance with FASB

Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an

Interpretation of FASB Statement No. 109, FIN 48 which was issued in July

2006. FIN 48 prescribes a recognition threshold and measurement attribute for

financial statement recognition and measurement of a tax position taken or

expected to be taken in a tax return and also provides guidance on various related

matters such as de-recognition, interest, penalties and disclosures required. We

recognize interest and penalties, if any, related to unrecognized tax benefits

in income tax expense.

   (J)Foreign currency translation

       North American, Wah Bon, Tai Ping Yang, Chang Jiang and Dongfang  Mining

       maintain their accounting records in their functional currencies of US$

       and RMB respectively.     

       Foreign  currency  transactions  during  the year are translated to the

       functional currency at the approximate rates of exchange on the dates of

       transactions.  Monetary assets and liabilities  denominated  in  foreign

       currencies  at  the balance sheet date are translated at the approximate

       rates of exchange at that date.  Non-monetary assets and liabilities are

       translated at the  rates of exchange prevailing at the time the asset or

       liability was acquired.  Exchange  gains  or  losses are recorded in the

       statement operations.

       The consolidated financial statements of Wah Bon (whose functional  currency

 is RMB),

       Tai  Ping  Yang,  Chang  Jiang  and  Dongfang  mining  (whose functional

       currency is RMB) are translated into US$ using the closing  rate method.

       The balance sheet items are translated into US$ using the exchange rates

       at the respective balance sheet dates.  The capital and various reserves

       are  translated at historical exchange rates prevailing at the  time  of

       the transactions  while  income and expenses items are translated at the

       average  exchange rate for  the  year.   All  exchange  differences  are

       recorded within equity.

       The translation  gain recorded for the years ended December 31, 2008 and

       2007 was $1,064,912 and $1,170,670 respectively.

   (K)Comprehensive loss

       The foreign currency translation gain or loss resulting from translation

       of the consolidated financial statements expressed in RMB to US$ is reported

 as other comprehensive income in  the consolidated statements of operations

       and comprehensive loss and stockholders’ equity.  The foreign currency

translation

       gain  for  the  years ended December 31, 2008 and 2007 was $1,064,912 and $1,170,670

       respectively.

   (L)Loss per share

       Basic loss  per  share  is computed by dividing loss available to common

       stockholders by the weighted average number of common shares outstanding

       during the period.  Diluted  loss per share is computed similar to basic

       loss per share except that the  denominator  is increased to include the

       number of additional common shares that would  have  been outstanding if

       the potential common shares had been issued and if the additional common

       shares were dilutive.

   (M)Segments

       As of December 31, 2008, the Company operates in only one reportable segment, mining

       for mineral ores, which is still at an exploration stage.  As of December 31, 2007, the

Company operated in two reportable segments, theme parks and mining for mineral ores.

Currently, and in the near future, the Company is and will be engaged in the mining.

But the Company also tried to develop other business, for example, the new energy business.

The Company invested in the Changjiang Electric in September,2008.

All of the assets and business is located in China, and all of the operating losses have come

from the foreign operations（outside United States）.

   (N)Reclassifications

       Certain reclassifications have been made to the 2007 comparative totals to conform to the 2008 presentation.

   (O) Recent Accounting Pronouncements

In May 2008, the FASB released SFAS No. 162, “The Hierarchy of Generally Accepted Accounting

Principles”. This statement identifies the sources of accounting principles and the framework

for selecting the accounting principles used in the preparation of financial statements of

nongovernmental entities that are presented in conformity with generally accepted accounting

principles in the United States. SFAS No. 162 is effective 60 days after the SEC’s approval

of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning

of Present Fairly in Conformity with Generally Accepted Accounting Principles”.  The Company

does not expect the implementation of this guidance to have a material impact on the consolidated

financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133”. SFAS No. 161 gives financial statement users better information about the reporting entity's hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 and interim periods within those years. The Company does not expect the adoption of SFAS No. 161 to have a material effect on the consolidated financial statements.

In September 2006, FASB issued Statement 157, "Fair Value Measurements”. This  statement

defines  fair  value  and  establishes  a framework for measuring   fair  value  in  generally

accepted  accounting  principles ("GAAP").  More   precisely,   this  statement  sets

forth  a  standard definition of fair value as it applies  to  assets  or  liabilities, the

      principal  market  (or  most  advantageous market) for determining  fair value (price), the market

participants,  inputs  and  the application of the  derived fair value to those assets and

liabilities.  The  effective date of  this  pronouncement is for all full fiscal and interim

periods beginning after November 15, 2007.  The  Company  does  not  expect  the adoption  of  

SFAS  No. 157  to  have  an impact on the Company's results of operations or financial condition.

      

In February 2007, the FASB released SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. The standard is effective for fiscal years beginning after November 15, 2007. The standard provides entities the ability, on an elective basis, to report most financial assets and financial liabilities at fair value, with corresponding gains and losses recognized in current earnings. The Company did not elect the fair value option under SFAS 159 as of January 1, 2008 for any of our financial assets and liabilities that were not already fair valued. The Company will consider applying the fair value option to future transactions as provided by the standard. The Company does not expect SFAS 159 to have a material impact on the consolidated financial statements.

In December 2007, the FASB released SFAS No. 141(R), “Business Combinations”. This standard revises and enhances the guidance set forth in SFAS No. 141(R) by establishing a definition for the “acquirer,” providing additional guidance on the recognition of acquired contingencies and non-controlling interests, and broadening the scope of the standard to include all transactions involving a transfer in control, irrespective of the consideration involved in the transfer. SFAS No. 141(R) is effective for business combinations for which the acquisition date occurs in a fiscal year beginning on or after December 15, 2008. Although the standard will not have any impact on the current consolidated financial statements, application of the new guidance could be significant to the Company in the context of future merger and acquisition activity.

       

In December 2007, the FASB released SFAS No. 160, “Non-Controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect the standard to have a material impact on the consolidated financial statements.

2.  BUSINESS COMBINATION

    On  February 5, 2007, Chang Jiang entered into an agreement  with  a  third

    party  to  acquire  40%  of  the  equity  interest  in Dongfang Mining at a

    consideration of $3,117,267 payable in cash. On March 22, 2007, Chang Jiang

    entered into an agreement with a related party of the  Company  to exchange

    Chang Jiang's 92.93% interest in Huanghe for 20% equity interest in Dongfang

    Mining, which is owned by the related party.

    Dongfang  Mining  is  principally  engaged in the exploration, development,

    mining and processing of lead, zinc  and gold in Xian, PRC. Dongfang Mining

    was granted rights to explore for lead,  zinc  and gold at mines located at

    Gan  Gou  and  Guan  Zi Gou, Xunyang County, Shaanxi  Province,  PRC,  from

    December 31, 2006 to October  31,  2008,  subject  to  further  renewal upon

    expiration.   The  Company  engaged  the Geology and Mineral Bureau of Shaanxi to

    conduct a preliminary survey from which it  was  reported  that  there  are

    gold, lead and zinc deposits in the mines.

    The following is a detail of the acquisition of Dongfang Mining by Chang Jiang made during the year ended December      31, 2007:

Cash and cash equivalents

$

27,233

Other receivables and prepaid expenses

46,309

-----------

Total current assets

273,542

 

Fixed assets, net

7,432

-----------

Total assets

280,974

Less: Accounts payable and accrued liabilities

(3,223)

Due to a stockholder

(273,444)

         

-----------

Net assets acquired

4,307

Minority interests

(1,723)

Additional paid in capital

(861)

 

Less: Consideration for acquisition

(3,117,267)

          

-----------

 

Goodwill

$(3,115,544)

          

===========

    Analysis of the net outflow of cash and cash equivalents with respect to the

    business combination is as follows:

    Total cash consideration

$ 3,117,267

    Less: cash consideration payable

(1,872,131)

    

-----------

    Cash consideration paid

1,245,136

    Less: cash and cash equivalents acquired

(227,233)

    

-----------

    Net cash outflow

$ 1,017,903

    

===========

    The acquisition of 40% of Dongfang Mining  was  accounted for as a purchase

under  SFAS  No.  141,  Business  Combinations.  Accordingly,  the  40%  of

    operating results of Dongfang Mining have been included in the consolidated

    statements of operations and comprehensive loss after  the effective date

    of the acquisition of February 5, 2007.

    In accordance with SFAS No. 142 "Goodwill  and  other  intangible  assets",

goodwill  is  not  amortized  but  is  tested  for  impairment. The  Company is

going to perform an assessment on goodwill arising from  the  acquisition  of

Dongfang Mining as the price of non-ferrous metals are going down and the

whole industry is stagnant. We cannot concluded that there was no impairment

to the carrying value of the goodwill in this reporting period.

There was no change for the goodwill at the year end of 2008, comparing with

that at the year end of 2007, whose balance was RMB 22,787,401.  The $218,579

increase is due to the exchange gain when translating the financial report

    from RMB to USD.

3.  DISCONTINUED OPERATIONS

    On March 22, 2007, the Company disposed a subsidiary Huanghe in exchange of

    20%  interest  in  Dongfang  Mining. The operations of  Huanghe  were

    reclassified as discontinued operations  in  the  consolidated

    statements  of  operations for the year ended December  31,  2006  and  were

    summarized as follows:

    

Operating expenses

$(282,728)

    

Loss from operations

$(291,885)

    

Net loss

$(291,885)

                                                                        

4.  DISPOSAL OF SUBSIDIARY

On March 22, 2007,  Chang  Jiang  entered  into an agreement with a related

    party of the Company to exchange Chang Jiang's  90.3%  interest  in Huanghe

    for 20% equity interest in Dongfang Mining owned by the related party.

    The detailed information on the loss on disposal of Huanghe is as follows:

Cash and cash equivalents

$

1,406,430

Other current assets

31,687

Fixed assets, net

349,024

Land use rights

8,987,826

----------

Total assets

10,774,967

  

Less: Accounts payable and accrued liabilities

(205,800)

  

Due to related parties

(1,618,037)

  

Due to a stockholder

(4,726)

Minority interests

(918,343)

-----------

Book value of net assets disposed

8,028,061

20% of book value of net assets of

Dongfang Mining exchanged

(827)

-----------

Loss on disposal of Huanghe

$

8,027,234

===========

Net cash outflow on disposal of subsidiary

Proceed from disposal

$

-

Cash and cash equivalent disposed

(1,406,430)

-----------

Net cash outflow

$(1,406,430)

===========

   

5.  NOTE RECEIVABLE

     The Company had a note receivable at December 31, 2007 of $133,000.  This note

bore interest at 9% per annum and was secured by membership interests.  

6.  OTHER CURRENT ASSETS AND PREPAID EXPENSES

    Other current assets and prepaid expenses consisted of

    the following:

December 31,

2008

2007

Rental and other deposits

$

11,756

$

8,231

Short-term advances to third parties

82,697

276,179

Prepaid consulting fee for reverse merger

-

115,591

Interest receivable from note receivable

-

45,560

Prepaid expense

115,800

80,694

Advances to staff

19,307

6,329

--------

--------

$229,560

$532,584

========

========

7.  FURNITURE AND EQUIPMENT

    The following is a summary of furniture and equipment:

December 31,

  

2008

2007

Motor vehicles

$277,988

$259,764

Furniture and office equipment

55,066

50,717          

Building

5,244

-

Construction in progress

-

3,913

--------

--------  

338,298

314,394

Less: accumulated depreciation

(102,498)

(61,453)

--------

--------

Furniture and equipment, net

$235,800

252,941

========

========

    Depreciation expense for the years ended December 31, 2008 and 2007 was

    $35,779  and  $29,712,  respectively .

8. LONG TERM INVESTMENT

In September 2008, the Company, along with Shaanxi Changfa Industry Stock Co.,Ltd.

("Changfa"),established a new company named  Shaanxi  Changjiang  Mining & New Energy

 Co., Ltd.(“Shaanxi”).  The Company  owns  a 20% share of the registered capital of

Shaanxi while Changfa owns the remaining 80% share.  The  Company  has

significant  influence  on  Shaanxi as it has assigned finance and other

directors in Shaanxi.  The Company has recorded this investment under the equity

method. Shaanxi had no income for  the year ended December 31,2008 and

since the expense was not material, no adjustment has been made.  As of December

31, 2008, the balance of this investment was $292,628.

9.  LAND USE RIGHTS

    The following is a summary  of land use rights:

December 31,

 

2008

2007

Cost

$19,146,841

$17,891,607

Less: accumulated amortization

(1,638,232)

(1,148,125)

-----------

-----------

Land use rights, net

$17,508,609

$16,743,482

===========

===========

    The land use rights are being amortized over the lease term of fifty years.

    Amortization expense for the years ended December 31,  2008 and 2007 was

    $395,943 and $367,480, respectively.  

    Amortization expense for the next five years ending December 31 is as follows:

2009

$1,638,232

2010

 1,638,232

2011

 1,638,232

2012

 1,638,232

2013

 1,638,232

 

                                                               

10. OTHER PAYABLES AND ACCRUED EXPENSES

    Other payables and accrued liabilities consist of the

    following:

December 31,

2008

 2007

Other payables

$

247,228

$65,432

Consideration payable to a former owner of Dongfang Mining

1,827,898

1,872,131

Accrued wages

1,990

-

Statutory staff welfare

1,876

5,884

Other tax payable

57

Accrued interest payable

-

75,434

Other accrued expenses

45,000

55,680

 

-------------

---------------

$

2,124,049

$2,074,561

==============

===============

       

11.  NOTES PAYABLE

The balance of notes payable consisted of the following:

December 31,

2008

 2007

Note payable to a third party, interest rate of

12% per annum, guaranteed by a stockholder, due

February 2008

-

$114,634

Note payable to a related party, interest rate of

8% per annum, collateralized by note receivable

from a third party.

434,137

458,512

--------

--------

Current maturities at year end

434,137

$573,146

=======

========

    

12.   INCOME TAXES

    a. North American  was  incorporated  in the United States and has incurred

       net operating losses as for income tax purposes for the years ended December

       31, 2008 and 2007. Wah Bon was incorporated in  Hong Kong  and subject to

       Hong Kong profits tax. No provision for income tax expense was made for the

       years ended December 31, 2008 and 2007 as Wah Bon incurred net operating losses.

       Tai Ping Yang , Chang Jiang  and Dongfang Mining  were  incorporated  in

       the PRC and subject to PRC income tax, which is computed according to the

       relevant  laws  and  regulations in the PRC. No provision for income tax

       expense for the years ended December 31, 2008 and  2007  was  made as Tai Ping Yang,

       Chang Jiang and Dongfang Mining incurred net operating losses during those years.

    b. The Company's deferred tax asset at December  31, 2008 consisted of net

       operating loss carry forwards calculated using statutory effective tax

       rates.   Due to its  history of losses,  the Company determined that

       realization of its deferred tax asset is currently  judged to  be

       unlikely. Consequently, the Company recorded a valuation allowance for the entire balance of the deferred tax asset

at December 31, 2008 and 2007.

At December 31, 2008, the Company has available net operating loss carryforwards of approximately $13,000,000.  According to the China Tax Regulations, the operating loss carryforwards can

       be deducted in the taxable profit within 5 years.

    c. The reconciliation  of income taxes computed at the statutory income tax

       rates to total income  taxes for the years ended December 31 is as

       follows:

North American

2008

2007

Income tax computed at the federal statutory rate

34%

34%

State income taxes, net of federal tax benefit

0%

0%

----

Valuation allowance

(34%)

(34%)

====

Wah Bon                                 

Profits tax computed at the applicable tax rate

17%

17%

----

Valuation allowance

(17%)

(17%)

====

Tai Ping Yang, Chang Jiang and Dongfang Mining

Income tax computed at the applicable tax rate

25%

33%

----

Valuation allowance

(25%)

(33%)

====

Total deferred tax asset

0%

0%

----

13. NET LOSS PER SHARE

    The following is net loss per share information at December 31:

2008

 2007

-------------

------------

Net loss - basic and diluted

$ (1,467,426)

$  (8,959,472)

-------------

------------

Basic weighted-average common stock outstanding

24,216,058

-

Effect of dilutive securities                                   

Series C convertible preferred stock

609,000,000

609,000,000

-------------

------------

Diluted weighted-average common stock outstanding

609,000,000

609,000,000

-------------

------------

Net loss per share – basic

$   (0.061)

$     -

-------------

------------

Net loss per share – diluted

$   (.0024)

$ (0.01)    

--------------

------------

14. COMMITMENTS AND CONTINGENCIES

    (A)Capital commitments

      The Company’s cash balances with financial institutions in the U.S are insured up to

      FDIC limits.

As of December 31, 2007,the Company had capital commitments of $2,190,630 with two

suppliers for contracts in respect to the exploration of lead, zinc and gold for mining

in Xian, PRC. As the permit of mining for gold, lead and zinc has not yet been obtained as of December 31, 2008,

the contract was not implemented in 2008, but will still be effective in 2009.

In August 2008, The Company signed the Contract of Specific Survey of Gold with The First

Geological Team, Bureau of Geology and Minerals Exploration & Exploitation of Shaanxi Province.

The total amount of the project at December 31, 2008 is $323,018, which is to be paid in full

during the year ended December 31, 2009.     

    

(B)Operating lease commitments

The prior headquarters, formerly located in the 5^th floor of High-Tech Mansion, Gaoxin Road,High-Tech

      Zone,Xi’An, had a rental lease of approximately $3,500 (RMB25,000) per month, from June, 2006 to January, 2009.  

      The new headquarters office is removed to the Xinhui Mansion, Gaoxin Road, High-Tech Zone, Xi’An,PRC

      with the rental lease from February, 2009 to January, 2011 at a rental rate $11,029 per year.

     

The rental expense of headquarters for the years ended December 31,2008 and 2007 was $42,568 and $48,481, respectively.  

For the years ended December  31, 2009 and 2010, the Company has outstanding commitments of approximately

$13,717 and $10,974, respectively, with regards to the operating leases of its facilities.

15.  STOCKHOLDERS' EQUITY

    Stock issuances

    On May 30, 2007, amended to July  5,  2007,  North  American entered into a

    Material  Definitive  Agreement  to  acquire  97.2% of Chang  Jiang  equity

    through the acquisition of Wah Bon. The Company  issued  500,000  shares of

    series  C  convertible  preferred stock which was convertible to 609,000,000

    (prior to a one for ten reverse  stock split) common  shares, in exchange for 100% of

    Wah Bon's outstanding shares.

    In order to complete the merger, the Company has authorized up to 10,000,000

    shares of preferred stock with a par value of $0.01 per share.  The

    preferred stock can be issued from time to time in one or more series. As

    of  December  31, 2008, there are 500,000 shares of preferred stock issued and outstanding.

    On February 4, 2008, the  Company  issued  500,000  shares  of  series  C

convertible preferred stock to Wah Bon's shareholder.

    Each  of  the  preferred  shares  is  entitled  to  receive

    preferential   treatment   in   connection   with  the  payment  of  dividends,

    distributions upon liquidation and voting rights.  Each preferred share carries

    the  right  to  vote  the  equivalent  of  1,218 votes of common  shares.  Each

    preferred share will be automatically converted  into  1,218 common shares upon

    approval and an amendment to the Certificate of Incorporation  to  increase the

number  of authorized shares.  

There are no preferred dividends in arrears at the year end of 2008.

No called or redeemed conditions prescribed for the preferred stock.

16. RELATED PARTY TRANSACTIONS

    

    The related  parties  owed  the Company $1,754,586 as  of  December  31,  2008,

    which consisted of nine related companies  and  four  related  persons, each owing  the Company

    amounts  totaling  $1,355,694 and $398,892, respectively, for advances made  on  an

    unsecured basis, repayable on demand and interest free.

The Company owed $2,396,560 to  two former stockholders of Chang Jiang as of

December 31, 2008, for advances made on an unsecured  basis, repayable on demand

and interest free.  Interest was imputed at a rate of 7% per  annum  on the amounts

due.

The  Company  owed a total of $3,446,160 to six related parties as of December  31,  

2008.  This consisted of five related companies and one related person, each

    of whom owed the Company amounts totaling $2,086,486 and $1,359,674, respectively,

    for the advances that  were made on an unsecured  basis,  repayable  on  demand and

    interest free.   Interest was imputed at a rate of 7% per annum on the amount due.

Seven  related  parties  owed  the Company $540,964 as of December 31, 2007,

    which consisted of five related companies  and  two related persons, each owing the Company

    amounts totaling $417,914 and $123,050, respectively, for advances made on an

    unsecured basis, repayable on demand and interest free.

    The Company owed $1,858,217 to two former stockholders of Chang Jiang as of

    December 31, 2007 for advances made on an  unsecured  basis,  repayable  on

    demand  and  interest  free.  Imputed interest is charged at 6% per annum on

    the amounts due.

    The Company owed $2,510,892 to five related parties as of December 31, 2007,which consisted of

four related companies  and  one  related person, each owing the Company

    amounts totaling $1,640,134 and $870,758, respectively , for advances made on

    an unsecured basis, repayable on demand and interest free. Imputed interest

    is charged at 6% per annum on the amount due.

Total  imputed interest recorded as  additional  paid-in  capital  amounted  to

$353,951 and $243,337 for the years ended December 31, 2008 and 2007, respectively.

17. SEGMENTS REPORTING

  

The  Company operates in two reportable segments, theme park and mining, before

March 22,2007, the date exchanging 92.93%  interest  in  Huanghe  for  20%  equity

interest in Dongfang Mining The accounting policies of the segments are the same

as described in the summary of  significant   accounting   policies.   The   Company

evaluates  segment performance based on income from operations. As a  result, the

components of operating income for one segment may not be comparable  to  another

segment.

For the whole year of 2008, only one reportable segment, the mining, operated, whose

Financial information can be showed as follows, comparative to 2007:

Theme park

Mining

Total

-----------

----------

-----------

2008                                                    

Loss from continuing operations before income

  tax expense and minority interests

$0

$1,526,199

$1,526,199

Depreciation of fixed assets

0

35,779

35,779

Amortization of intangible assets

0

395,944

395,944

Imputed interest expense

0

353,951

353,951

Interest income

0

(2,229)

(2,229)

Loss on disposal of discontinued operations

0

0

0

Additions to long-lived assets

0

6,145

6,145

Land use rights

0

17,508,609

17,508,609

Total identifiable assets

$0

$23,379,269

$23,379,269

2007                                                    

Loss from continuing operations before income

  tax expense and minority interests

$945,055

$43,618

$988,673

Depreciation of fixed assets

28,825

887

29,712

Amortization of intangible assets

367,480

-

367,480

Imputed interest expense

243,337

-

243,337

Interest income

(1,514)

(1,178)

(2,692)

Loss on disposal of discontinued operations

8,027,234

-

8,027,234

Additions to long-lived assets

36,415

6,539

42,954

Land use rights

16,743,482

-

16,743,482

Total identifiable assets

$21,556,605

$241,151

$21,797,756

All  of the Company's long-lived assets are located in the PRC. Accordingly,

    no geographic information is presented.

18. CONCENTRATIONS AND RISKS

As of December 31, 2008 and 2007,  99% and 1% of the Company's assets were located in

China and United States, respectively.

19. GOING CONCERN

As reflected in  the  accompanying  consolidated  financial statements,

the Company  has  an  accumulated  deficit  during  the  exploration  stage  of

    $13,262,228 at December 31, 2008, which included a net  loss  of  $1,467,426

    for  the  year  ended  December 31, 2008. The Company's current liabilities

    exceeded its current assets  by  $8,147,385  and  the  Company  used  cash in

    operations  of  $388,013.  These  factors raise substantial doubt about its

    ability to continue as a going concern.   In  view of the matters described

    above,  recoverability  of a major portion of the  recorded  asset  amounts

    shown in the accompanying  consolidated  balance  sheets  is  dependent upon

    continued  operations of the Company, which in turn is dependent  upon  the

    Company's ability to raise additional capital, obtain financing and succeed

in its future  operations.   The  consolidated financial  statements  do not

include any adjustments relating to the recoverability and classification  of

recorded asset  amounts  or amounts and classification of liabilities that might

be necessary should the Company be unable to continue as a going concern.

    Management  has  taken   steps   to  revise  its  operating  and  financial

    requirements, which it believes are  sufficient to provide the Company with

    the ability to continue as a going concern.   The  Company is also actively

    pursuing additional funding and potential merger or  acquisition candidates

    and  strategic  partners,  which  would  enhance stockholders'  investments.

    Management  believes  that the above actions  will  allow  the  Company  to

    continue operations through the next fiscal year.

                                                                           

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