China’s market for jewelry and other luxury goods is expanding rapidly, due in part to the country’s rapid economic growth. According to the EIU, China’s real gross domestic product, or GDP, grew by 10.1%, 10.4% and 10.7% in 2004, 2005 and 2006, respectively. Economic growth in China has led to greater levels of personal disposable income and increased spending among China’s expanding middle-class consumer base. According to EIU, private consumption has grown at a 9% compound annual growth rate, or CAGR, over the last decade.

Notwithstanding China’s rapid economic growth, with a population of 1.3 billion people, China’s economic output and consumption rates are still small on a per capita basis compared to developed countries. In 2006, China’s GDP per capita was $7,530, as compared to GDP per capita of $44,244 in the United States. Per capita disposable income in China has grown at a CAGR of 9.8% over the last decade, rising to $728 in 2006, as compared to $9,522.8 in the United States.

China’s government has demonstrated on multiple occasions its commitment to continued economic growth. An underlying driver of economic policy in China is the need to achieve strong rates of growth in order to create jobs and reduce economic imbalances, particularly between urban and rural areas. The government has set a target of building a more equal society by 2020, largely by promoting development in rural areas and continuing its program of economic reforms. Income expanded for both urban and rural populations in 2006. According to the EIU, in 2006 disposable income per capita for urban residents averaged $1,475, an increase of 12% from 2005, while those of rural residents reached $449, an increase of 10% from 2005.

The Company has historically sold its products directly to distributors, retailers and other wholesalers, who then sell its products to consumers through both retail counters located in department stores and in traditional stand-alone jewelry stores.

The Company sells its products to its customers at price points that reflect the market price of the base material, plus a mark-up reflecting its design fees and processing fees. Typically this markup ranges from 10-12%.

The Company’s customers then further mark up the products to the consumers up to an additional 30%. The Company’s target price points are primarily designed to appeal to China’s growing middle class.

The Company intends to open new retail locations by leasing unoccupied space, acquiring existing leases from third parties and/or acquiring the existing jewelry operations of third parties that occupy retail space.

During 2007, the Company intends to open 20 retail counters and 2 retail stores in municipalities and provincial capitals throughout China. In 2008, the Company plans to open 60 to 80 retail counters and 8 to 10 retail stores.

Since the commencement of its jewelry operations in 2001, the Company has expanded its line of products from basic gold jewelry to a range of products that include rings, bracelets, necklaces, earrings and pendants made from precious metals such as platinum, gold, palladium and Karat gold (K-gold). The Company also manufactures jewelry with diamond and other precious stone inlays, in addition to gold coins and gold bars.

Cost of sales for the six months ended June 30, 2007 increased to $48.0 million, an increase of $3.9 million, or 8.8%, from $44.1 million for the same period in 2006.

Gross profit for the six months ended June 30, 2007 increased to $6.2 million, an increase of $1.8 million, or 40.9%, from $4.4 million for the same period in 2006.

Interest expenses were approximately $530,000 for the six months ended June 30, 2007, an increase of $130,000, or 32.5%, from $400,000 for same period in 2006.

Net income increased to $3.4 million for the six months ended June 30, 2007 from $2.8 million for the six months ended June 30, 2006, an increase of $0.6 million, or 21.43%.