UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 5, 2008

Soyodo Group Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
000-32341
84-1482082
(State or Other Jurisdiction
(Commission File
(I.R.S. Employer
of Incorporation)
Number)
Identification Number)
 
Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1,
Luchu Taoyuan County
Taiwan
(Address of principal executive offices) (zip code)

011-8863-322-9658
(Registrant's telephone number, including area code)

1390 Monterey Pass Road,
Monterey Park, CA 91754
(Former name or former address, if changed since last report)

Copies to:
Marc J. Ross, Esq.
Louis A. Brilleman, Esq.
Sichenzia Ross Friedman Ference LLP
61 Broadway
New York, New York 10006
Phone: (212) 930-9700
Fax: (212) 930-9725

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

Item 1.01 Entry into a Material Definitive Agreement.

On February 5, 2008, Soyodo Group Holdings, Inc. (the “Soyodo”) entered into and completed the transactions contemplated under a Share Exchange Agreement (the “Exchange Agreement”) with each of the shareholders (the “Shareholders”) of Omphalos Corp., a British Virgin Islands corporation (”Omphalos,” the “Company,” or “we”), pursuant to which Soyodo purchased from the Shareholders all issued and outstanding shares of Omphalos’ common stock in consideration for the issuance of an aggregate of 81,996,275 shares of Soyodo common stock (the "Share Exchange").

The Share Exchange resulted in a change in control of Soyodo with the Shareholders owning 81,996,275 shares of common stock of the Company out of a total of 90,191,275 issued and outstanding shares after giving effect to the Share Exchange. Also, the Shareholders were elected directors of the Company, subject to Soyodo’s disclosure obligations under the Securities Exchange Act of 1934, as amended, and appointed as its executive officers. As a result of the Exchange Agreement, (i) Omphalos became a wholly-owned subsidiary of Soyodo and (ii) the Soyodo succeeded to the business of Omphalos as its sole business. Accordingly, Soyodo intends to change its name to Omphalos Corp.  
 
Item 2.01 Completion of Acquisition or Disposition of Assets

See Item 1.01 hereof.
 
NOTE: The discussion contained in this Item 2.01 relates primarily to Omphalos. Information relating to the business and results of operations of the Company and all other information relating to the Company has been previously reported in its Annual Report on Form 10-KSB for the year ended December 31, 2006 and other periodic filings with the SEC and is herein incorporated by reference to those reports.  
 
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DESCRIPTION OF OMPHALOS BUSINESS

Organizational History

Omphalos Corp. was incorporated on February 13, 1991 under the laws of Republic of China (TWN), initially serving as a sales agent for an equipment and used machine dealer. Omphalos Corp. (B.V.I.) was incorporated on October 30, 2001 under the laws of the British Virgin Islands. All Fine Technology Co., Ltd. was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British Virgin Islands.
 
On July 4, 2007, Omphalos Corp. (BVI) acquired Omphalos (TWN) and All Fine Technology Co., (TWN) through a share exchange with the shareholders of these two entities. On October 19, 2007, Omphalos (BVI) purchased All Fine Tech (BVI).
 
Overview of Business

Omphalos Corp., through its wholly-owned subsidiaries, supplies a wide range of equipment and parts including refurbished and modified reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan and China. Omphalos also provides after sale services to its customers and sells parts for the equipment.
 
A reflow oven is a machine used primarily for reflow soldering of surface mount electronic components to printed circuit boards . Reflow soldering represents the most common means to attach a component to a circuit board , and typically consists of applying solder paste, positioning the components, and reflowing the solder in a specialized oven . The goal of the reflow process is to melt the powder particles in the solder paste , with the surfaces being joined together, and solidify the solder to create a strong metallurgical bond.
 
From its in Shenzhen, Shanghai and Kunshan, Omphalos markets its products in both Taiwan and China. Omphalos’s clients are mainly big name Taiwanese electronics manufacturing giants, including Quanta Computer Inc., MiTAC International Corp., Universal Scientific Industrial Co., ASUS, Gigabyte, and Advantech in Taiwan, and Foxconn group, QSMC, in China.
 
Products
 
Omphalos offers a wide range of products, including the following:
 
Saki Optical Inspection Devices. The main purpose of using AOI is to inspect the process of the SMT production line which can also be considered as the tool for quality assurance and quality control.
 
Quality assurance is the assurance for the back-end process, i.e. the 100% assurance for zero-defect of production quality. All defects must be found and then repaired to achieve this requirement. AOI is normally used at the post-reflow process for this purpose. Therefore, the AOI plays an important role to detect all defects and also to support the reparability of all defects.found. Quality Control is aimed to keep the highest process quality in the factory. In order to achieve this purpose, AOI is usually used at the pre-reflow, pre-IC-mounting or post-printing processes which enable the monitoring the real situation of the production line by inspecting all of and the defects. Furthermore, the causes of defects are able to be analyzed in real time. During the years ended December 31, 2006 and 2007, approximately 53% and 77% of Omphalos’s revenues were generated by these devices, respectively.
 
Tamura N2 Reflow Ovens.   Omphalos offers the Tamura Reflow Oven as its preferred choice for reflow soldering. The ovens have multiple temperature controlled heat emitting infrared radiation compartments that create a phase change in flux (Small Soldier Particles) turning the solid into a liquid. When cooled in the final compartment, the flux undergoes another phase change turning from a liquid back into a solid forming a bond between the surface mount component and etched circuit board. The Tamura Line takes the additional step of being an oxygen-free environment, instead it utilizes nitrogen gas to minimize oxidation. During the years ended December 31, 2006 and 2007, approximately 47% and 23% of Omphalos’s revenues were generated by these machines, respectively.
 
Argus Management Information System. This system consists of Scanner Stations networked to a Datastore. These scanners can be placed at any point in the production line as they are intended to collect and analyze production data. As a laser barcoded pcb passes through the Argus Scanner Station, the circuit board is identified (scanned), the time is noted and stored. Data is then aggregated and analyzed to compute bottle necks in production (actual vs. desired). To date, the Company has not derived any significant revenues from this system.

Gryphon Laser Marking System. This system is placed at the beginning of the SMT production line where it Laser Etches a Uniquely Identifiable 2-Dimensional Barcode onto the surface of a printed circuit board. 2D barcodes allow for more data to be physically written to the circuit board, usually the threshold is when more than 20 characters need to be written, 2D
 
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barcoding is required. The 2D barcode helps to simplify MIS by making more information available offline, such as an identification number, time of fabrication, plant of fabrication, etc making it easier to track defects and finished products to their final destination. This barcode works best when combined with the Argus Management Information System throughout the fabrication process as its life will be tracked and analyzed. To date, the Company has not derived any significant revenues from this system.

Marketing

Most of the Omphalos’s business is generated through personal relationships with its major customers. In addition, it may participate in trade shows and occasionally run advertisements in trade journals and newspapers.

Markets and Customers

Omphalos’s customers include a number of major electronic manufacturing companies, including the following

Name
 
Location
 
Percentage Revenues for the Year ended December 31, 2006
         
Quanta Computer
 
Taiwan based publicly traded company; original design manufacturer of laptop computers
 
39%
         
Hon Hai
 
Taiwan based publicly traded company; manufacturing services provider to Computer, Communication and Consumer-electronics leaders
 
21%
         
Universal Scientific Industrial
 
US based publicly traded company; Information and communications products
 
10%
         
MiTac
 
Taiwan based publicly traded company; Computer products design and production
 
9%

Regulations

Omphalos is not subject to any significant government regulation that is particular to its business.

Competition

Omphalos’s industry is highly competitive. Omphalos believes that its principal direct competitors are the manufacturers of the equipment themselves. These include Japanese companies such as Sayaka, Tamura Furukawa and Ishikawa.

There are also a number of companies in Asia that resell refurbished equipment. They include Daichi International, Panasonic, Hitachi and Sony Corporation.

Some of these companies have significantly greater financial, technical and human resources than we do, as well as a wider range of products than we have. In addition, many of our competitors have much greater experience in marketing their products, as well as more established relationships with our target customers. Our competitors may also have greater name recognition and more extensive customer bases that they can use to their benefit. As a result, we may have difficulty maintaining our market share.

We believe that our competitive edge is our responsiveness to our customers’ needs, both in terms of speed as well as in our ability to modify the equipment in accordance with the customers’ instructions.
 

Intellectual Property

Omphalos has been granted the following patents:

Name
 
Patent No
 
Country
 
Patent Term
Automatically Labeling and Inspecting Apparatus and Method of Use
 
M277230
 
Taiwan
 
2005/10/1-20/15-1/30
Automatically Marking and Reading/Distinguishing Apparatus and Method of Use
 
M277229
 
Taiwan
 
2005/10/1-20/15-1/30

In addition it has the following patents pending:

Name
 
Number
 
Country
Automatically Labeling and Inspecting Apparatus and Method of Use
 
200510052694.4
 
China
Automatically Marking and Reading/Distinguishing Apparatus and Method of Use
 
200510052693.X
 
China
Servo Motor Conntrol Method and Apparatus Using the Same
 
2007-241297
 
Japan
Servo Motor Conntrol Method and Apparatus Using the Same
 
096114150
 
Taiwan
Servo Motor Conntrol Method and Apparatus Using the Same
 
200710107348.0
 
China
Automatically Labeling and Inspecting Apparatus and Method of Use
 
11/248,218
 
U.S.A
Automatically Marking and Reading/Distinguishing Apparatus and Method of Use
 
11/248,212
 
U.S.A


Employees

As of December 1, 2007, Omphalos had 20 full-time employees, as follows:

Management
3
Technical
10
Administrative
4
Sales
3

None of its employees is represented by a labor union, and Omphalos considers its employee relations to be excellent. Omphalos seeks to use contract workers and anticipates maintaining a small full-time employee base.
 
4
 
Description of Property

Omphalos does not own any real property. The company leases an office and a warehouse from a shareholder. The office maintains office administration and sales facilities and the warehouse maintains inventory, and research and design facilities. The location of the office and warehouse are Unit 2, 15 Fl., 83, Nankan Rd. Sec. 1, Luchu, Taoyuan County, Taiwan and No.1371-1, Sec. 3, Fuguo Rd., Lujhu Township, Taoyuan County 338, Taiwan. The office space is approximately 3,700 square feet and the warehouse space is approximately 4,034 square feet.

Generally, Omphalos maintains short-term leases for its office and warehouse, with options to renew, where possible. The terms of the lease for office and warehouse are both from January 1, 2007 to December 31, 2008  and the company pays a monthly rent of approximately $2,200 for the periods ended September 30, 2007 and 2006, respectively. Rent expenses under the office and warehouse lease agreements amounted to approximately $19,800 and $11,880 for the periods ended September 30, 2007 respectively.

Legal Proceedings
 
From time to time, Omphalos may be named in claims arising in the ordinary course of business. Currently, no legal proceedings or claims are pending against or involving Omphalos that could reasonably be expected to have a material adverse effect on its business and financial condition.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

Forward Looking Statements

Some of the statements contained in this Form 8-K that are not historical facts are "forward-looking statements" which can be identified by the use of terminology such as "estimates," "projects," "plans," "believes," "expects," "anticipates," "intends," or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements, which are contained in this Form 8-K, reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties, and other factors affecting our operations, market growth, services, products, and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include without limitation:
 
1.
Our ability to attract and retain management, and to integrate and maintain technical information and management information systems;
 
2.
Our ability to generate customer demand for our services;
 
3.
The intensity of competition; and
 
4.
General economic conditions.
 
All written and oral forward-looking statements made in connection with this Form 8-K that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

Company Overview

Omphalos Corp., through its wholly-owned subsidiaries supplies a wide range of equipment and parts including refurbished and modified reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan and China. Omphalos also provides after sale services to its customers and sells parts for the equipment.
 
Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our financial statements that have been prepared under accounting principle generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents, Investments, and Long-term Investments   — Cash equivalents are included at cost, which approximates market. At September 30, 2007, the Company’s cash equivalents were held primarily by three financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having original maturities in excess of three months are classified as investments or as long-term investments when maturities are in excess of one year. Investment and long-term investments consist of certificates of deposit (CDs) and marketable securities.

At the date of acquisition of an investment security, management designates the security as belonging to a trading portfolio, an available-for-sale portfolio, or a held-to-maturity portfolio. Currently, the Company holds no securities designated as held-to-maturity or available-for-sale. All investment securities are classified as trading according to management’s intent and carried at fair value. Unrealized holding gains and losses for trading securities are included in earnings.

Inventory — Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods and is net of an allowance for slow-moving inventory of $156,871 and $203,704 at September 30, 2007 and December 31, 2006, respectively.  
 
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Intangible Assets   —Include cost of patent applications that are deferred and charged to operations over their useful lives. The accumulated amortization is $1,004 and $629 at September 30, 2007 and December 31, 2006, respectively. Annual amortization expense of such intangible assets is expected to be $495 per year for the next five years.

Foreign-currency Transactions   — Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

Translation Adjustment — The accounts of the Company was maintained, and its financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance SFAS No. 52, "Foreign Currency Translation", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income" as a component of shareholders’ equity.

As of September 30, 2007 and December 31, 2006 the exchange rates between the NTD and the USD ($) were NTD1=$0.03063 and NTD1=$0.03069, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.03031 and NTD1=$0.03086 for the nine months ended September 30, 2007 and September 30, 2006, respectively. Total translation adjustment recognized as of September 30, 2007 and December 31, 2006 is $289,094 and $213,824, respectively.

Recently Issued Accounting Pronouncements   — In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, " Accounting for the Impairment or Disposal of Long-Lived Assets ", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.

In March 2006, the FASB issued Statement No. 156, "Accounting for Servicing of Financial Assets”(“SFAS 156”), an amendment of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurement, which provides guidance for applying the definition of fair value to various accounting pronouncements” (“SFAS 157”). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the provisions of SFAS 157.  
 
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In September 2006, the FASB also issued Statement No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 amends SFAS 87, 88, 106, and 132R, and requires employers to recognize the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in its statement of financial position. SFAS No. 158 is effective as of the end of fiscal years ending after December 15, 2006. SFAS 158 is not applicable to the Company, as it does not have a defined benefit pension plan. In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin 108 ("SAB 108"), considering the Effect of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, that addresses how uncorrected errors in previous years should be considered when quantifying errors in the current year financial statements. SAB 108 is effective for fiscal years ending November 15, 2006 and, upon adoption, companies are allowed to record the effects as a cumulative-effect adjustment to retained earnings. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.

In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

Results of Operations

Three Months Ended September 30, 2007 and September 30, 2006

Net Sales.   Net sales for the three months ended September 30, 2007 were $2,907,249 compared to $3,148,646 for the three months ended September 30, 2006. The decrease in net sales was due to a general decrease in business to existing customers, as compared to sales volume in the 2006 period, which was affected by the increased competition.

Cost of Sales.   Cost of sales for the three months ended September 30, 2007 was $1,897,694 or 65.3% of net sales, as compared to $1,954,056 or 62.1% of net sales, for the three months ended September 30, 2006. The increase in cost of sales as a percentage of net sales was due to an increase in purchase cost, which was affected by the increase in vendors’ manufacturing costs, especially the cost increase in materials, such as stainless steel.

Selling, General and Administrative Expenses . Selling, general and administrative expenses for the three months ended September 30, 2007 were $468,093 or 16.1% of net sales, as compared to $310,603 or 9.9% of net sales, for the three months ended September 30, 2006. The increase in selling, general and administrative expenses as a percentage of net sales was due to the decrease in sales, increases in traveling expenses, payroll expenses, and professional service fees.

Income from Operations . Income from operations for the three months ended September 30, 2007 was $ 541,462 as compared to $883,987 for the three months ended September 30, 2006. The decrease in income from operations for the three months ended September 30, 2007 compared with income from operations for the three months ended September 30, 2007 resulted primarily from a decrease in net sales and an increase in selling, general and administrative expenses as described above.

Other Income . Other income for the three months ended September 30, 2007 was $288,762 as compared to $111,030 for the three months ended September 30, 2006. This change was primarily attributable to the additional income recognized on a lawsuit settlement.

Net Income . Net income for the three months ended September 30, 2007 was $830,224 as compared to $995,017 for the three months ended September 30, 2006. The decrease in net income was due to the reasons described above.

Nine Months Ended September 30, 2007 and September 30, 2006

Net Sales . Net sales for the nine months ended September 30, 2007 were $7,820,401 compared to $12,837,880 for the nine months ended September 30, 2006. The decrease in net sales was due to a general decrease in business to existing customers, as compared to sales volume in the 2006 period, which was affected by the increased competition.
 
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Cost of Sales . Cost of sales for the nine months ended September 30, 2007 was $5,161,989 or 66.0% of net sales, as compared to $9,226,621 or 71.9% of net sales, for the nine months ended September 30, 2006. The decrease in cost of sales as a percentage of net sales was due to that the Company had a fixed price purchase contract with one of its major vendor for Automated Optical Inspection (AOI) machines for the 2007 period. Therefore, the purchase cost remained relatively constant as compared to the increase in sales prices. The decrease in purchase cost as a percentage of sales for AOI machines was partially offset by an increase in purchase cost of other products, which was affected by the increase in vendors’ manufacturing costs, especially the cost increase in materials, such as stainless steel.

Selling, General and Administrative Expenses . Selling, general and administrative expenses for the nine months ended September 30, 2007 were $1,330,919 or 17.0% of net sales, as compared to $1,026,940 or 8.0% of net sales, for the nine months ended September 30, 2006. The increase in selling, general and administrative expenses as a percentage of net sales was due to the decrease in sales, increases in traveling expenses, payroll expenses, and professional service fees.

Income from Operations . Income from operations for the nine months ended September 30, 2007 was $ 1,327,493 as compared to $2,584,319, for the nine months ended September 30, 2006. The decrease in income from operations for the nine months ended September 30, 2007 compared with income from operations for the nine months ended September 30, 2007 resulted primarily from a decrease in net sales and an increase in selling, general and administrative expenses as described above.

Other Income . Other income for the nine months ended September 30, 2007 was $463,895 as compared to $386,345 for the nine months ended September 30, 2006. This change was primarily attributable to the additional income recognized on a lawsuit settlement.

Net Income . Net income for the nine months ended September 30, 2007 was 1,791,388 as compared to $2,970,664 for the nine months ended September 30, 2006. The decrease in net income was due to the reasons described above.

Years Ended December 31, 2006 and December 31, 2005

Net Sales . Net sales for the year ended December 31, 2006 were $13,782,980 compared to $17,309,701 for the year ended December 31, 2005. The decrease in net sales was due to a general decrease in business to existing customers, as compared to sales volume in the 2005 period.

Cost of Sales . Cost of sales for the year ended December 31, 2006 was $10,085,907 or 73.2% of net sales, as compared to $14,367,572 or 83.0% of net sales, for the year ended December 31, 2005. Cost of sales decreased by 9.8% as a percentage of net sales. The Company replaced a vendor of reflow soldering ovens with another in 2005. Since it was the first year business relationship with the new vendor, the purchase term was not as favorable. The Company was able to negotiate for better purchase prices with the vendor in 2006.

Selling, General and Administrative Expenses . Selling, general and administrative expenses for the year ended December 31, 2006 were $2,378,892 or 17.3% of net sales, as compared to $1,848,955 or 10.7% of net sales, for the year ended December 31, 2005. The increase in selling, general and administrative expenses was mainly due to the increase in employee bonus and professional service fees.

Income from Operations . Income from operations for the year ended December 31, 2006 was $ 1,318,181 as compared to $1,093,174, for the year ended December 31, 2005. The increase in income from operations for the year ended December 31, 2006 compared with income from operations for the year ended December 31, 2005 resulted primarily from a increase in sales margin, which was partially offset by an increase in selling, general and administrative expenses as described above.

Other Income . Other income for the year ended December 31, 2006 was $317,736 as compared to $377,310 for the year ended December 31, 2005. This change was primarily attributable to decrease in commission income and gain on currency exchange, which is partially offset by the increase in interest income and decease in loss on inventory value decline.

Net Income . Net income for the year ended December 31, 2006 was $1,635,916 as compared to $1,470,485 for the year ended December 31, 2005. The increase in net income was due to the reasons described above.

Liquidity and Capital Resources

Cash and cash equivalents were $5,673,891 at September 30, 2007 and $9,124,178 at December 31, 2006. Our total current assets were $14,294,402 at September 30, 2007 as compared to $12,035,540 at December 31, 2006. Our total current liabilities were $4,544,425 at September 30, 2007 as compared to $4,357,378 at December 31, 2006.  
 
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We had working capital at September 30, 2007 of $9,749,977 compared with working capital of $7,678,162 at December 31, 2006. This increase in working capital was due to increases in accounts receivable and in due from shareholders. During the nine months ended September 30, 2007, net cash used in operating activities was $991,877. Net cash used in investing activities was $272,031, and net cash provided by financing activities was $(4,609,566). Net change in cash and cash equivalents was $(3,450,287).

Capital Expenditure

Total capital expenditures during the nine months ended September 30, 2007 was $(10,883).

Current Exchange Fluctuations

As of September 30, 2007, the accounts of Omphalos, Inc. were maintained, and their financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance with Statement of Financial Accounts Standards (SFAS) No. 52, "Foreign Currency Translation", with the NTD as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholder's equity is translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income" as a component of shareholders’ equity.

As of September 30, 2007 and December 31, 2006 the exchange rates between the NTD and the USD ($) were NTD1=$0.03063 and NTD1=$0.03069, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.03031 and NTD1=$0.03086 for the nine months ended September 30, 2007 and September 30, 2006, respectively. Total translation adjustment recognized as of September 30, 2007 and December 31, 2006 is $289,094 and $213,824, respectively.  
 
10

  RISK FACTORS

An investment in our securities involves a high degree of risk. In determining whether to purchase our securities, you should carefully consider all of the material risks described below, together with the other information contained in this Current Report on Form 8-K before making a decision to purchase our securities. You should only purchase our securities if you can afford to suffer the loss of your entire investment.

RISKS RELATED TO OUR BUSINESS

The success of our business depends on our ability to successfully obtain a supply of merchandise for our buyers and to attract and retain active professional buyers to create sufficient demand for our sellers.

Our ability to increase our revenue and maintain profitability depends on whether we can successfully expand the supply of merchandise available for sale on our online marketplaces and attract and retain active professional buyers to purchase the merchandise. Our ability to attract sufficient quantities of suitable merchandise and new buyers will depend on various factors, some of which are out of our control. These factors include our ability to:

 
·
offer buyers a sufficient supply of merchandise;
     
 
·
develop and implement effective sales and marketing strategies;
     
 
·
comply with regulatory or corporate seller requirements affecting marketing and disposition of certain categories of merchandise;
     
 
·
efficiently catalogue, handle, store, ship and track merchandise; and
     
 
·
achieve high levels of seller and buyer satisfaction with the trading experience.
 
Omphalos is exposed to risks as a result of ongoing changes in the semiconductor and semiconductor-related industries.  
 
 
The global industries in which we operate are characterized by ongoing changes, including: (1) higher capital requirements for building and operating new semiconductor and LCD fabrication plants and the resulting effect on customers’ ability to raise the necessary capital; (2) differing rates of market growth for, and capital investments by, various semiconductor device makers, such as memory (including NAND Flash and DRAM), logic and foundry, as well as LCD and solar manufacturers; (3) industry growth rates; (4) the increasing cost and decreasing affordability of research and development due to many factors, including decreasing linewidths, the increasing number of materials, applications and process steps, and the greater complexity of process development and chip design; (5) the increasing difficulty for customers to move from product design to volume manufacturing; (6) the importance of reducing the cost of system ownership, due in part to the increasing significance of consumer electronics as a driver for semiconductor and LCD demand and the related focus on lower prices; (7) varying levels of business information technology spending; (8) the heightened importance to customers of system reliability and productivity, and the effect on demand for systems as a result of their increasing productivity, device yield and reliability; (9) the growing types and varieties of semiconductors and expanding number of applications across multiple substrate sizes, resulting in customers’ divergent technical demands; (10) demand for shorter cycle times for the development, manufacture and installation of manufacturing equipment; (11) the challenge to semiconductor manufacturers of moving volume manufacturing from one technology node to the next smaller technology node, and the resulting impact on the technology transition rate and the rate of investment in capital equipment; (12) price trends for certain semiconductor devices and LCDs; (13) difficulties associated with transitioning to larger substrate sizes; and (14) the increasing importance of the availability of spare parts to assure maximum system uptime. If we do not successfully manage the risks resulting from the ongoing changes occurring in the semiconductor and semiconductor-related industries, its business, financial condition and results of operations could be materially and adversely affected.
 
The industries that Omphalos serves are volatile and unpredictable.  
 
As a supplier to the global semiconductor, computer and related industries, we are subject to business cycles, the timing, length and volatility of which can be difficult to predict and which may vary by reportable segment. The industries have historically been cyclical due to sudden changes in customers’ manufacturing capacity requirements and spending, which depend in part on capacity utilization, demand for customers’ products, and inventory levels relative to demand. The effects on Omphalos of these changes in demand, including end-customer demand, are occurring more rapidly. These changes have affected the timing and amounts of customers’ purchases and investments in technology, and continue to affect our orders, net sales, gross margin, contributed profit and results of operations.
 
We must effectively manage our resources and production capacity to meet rapidly changing demand. During periods of decreasing demand for our products, we must be able to appropriately align its cost structure with prevailing market conditions, motivate and retain key employees, and effectively manage its supply chain. During periods of increasing demand, we must have sufficient manufacturing capacity and inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage its supply chain. If we are not able to timely and appropriately adapt to changes in industry cycles, our business, financial condition or results of operations may be materially and adversely affected.
 
11
 
Omphalos is exposed to risks associated with a highly concentrated customer base in the semiconductor and flat panel display industries.
 
Our semiconductor and other customer base historically has been, and is becoming even more, highly concentrated. For the year ended December 31, 2006, three customers, each of whom accounted for more than 10% of Omphalos’s total revenues, represented approximately 74% of the its total revenues.   Orders from a relatively limited number of manufacturers have accounted for, and are expected to continue to account for, a substantial portion of our net sales. In addition, the mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year. If customers do not place orders, or they delay or cancel orders, we may not be able to replace the business. As our products are configured to customer specifications, changing, rescheduling or canceling orders may result in significant, non-recoverable costs. Major customers may also seek, and on occasion receive, pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us. In addition, certain customers have undergone significant ownership changes, have outsourced manufacturing activities, and/or have entered into strategic alliances or industry consortia that have increased the influence of key semiconductor manufacturers in technology decisions made by their partners, which may result in additional complexities in managing customer relationships and transactions. These factors could have a material, adverse effect on our business, financial condition and results of operations.
 
Omphalos is highly dependent on two suppliers.
 
For the year ended December 31, 2006, Omphalos obtained 98% of the equipment that it sells to its customers from only two vendors. If either one of these two vendors or both were to cease supplying us with products for any reason, this would force us to find alternative sources for our products. A change in suppliers could cause a delay in availability of products and a possible loss of sales, which could adversely affect operating results.
 
Manufacturing interruptions or delays could affect our ability to meet customer demand, while the failure to estimate customer demand accurately could result in excess or obsolete inventory.  
 
Our business depends on its ability to supply equipment, services and related products that meet the rapidly changing technical and volume requirements of its customers, which depends in part on the timely delivery of parts, components and subassemblies (collectively, parts) from suppliers. Some key parts may be subject to long lead-times and/or obtainable only from a single supplier or limited group of suppliers, and some sourcing or subassembly is provided by suppliers in developing regions, including China. Significant interruptions of manufacturing operations or the delivery of services as a result of: (1) the failure or inability of suppliers to timely deliver quality parts; (2) volatility in the availability and cost of materials; (3) difficulties or delays in obtaining required export approvals; (4) information technology or infrastructure failures; (5) natural disasters (such as earthquakes, floods or storms); or (6) other causes (such as regional economic downturns, pandemics, political instability, terrorism, or acts of war), could result in delayed deliveries, manufacturing inefficiencies, increased costs or order cancellations. Moreover, if actual demand for our products is different than expected, we may purchase more/fewer parts than necessary or incur costs for canceling, postponing or expediting delivery of parts. Any or all of these factors could materially and adversely affect our business, financial condition and results of operations.
 
We may not be able to effectively manage our growth, which may harm our profitability.
 
Our strategy envisions expanding our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Growth may place a strain on our management systems and resources. We must continue to refine and expand our business development capabilities, our systems and processes and our access to financing sources. As we grow, we must continue to hire, train, supervise and manage new employees. We cannot assure you that we will be able to:

 
·
meet our capital needs;
     
 
·
expand our systems effectively or efficiently or in a timely manner;
     
 
·
allocate our human resources optimally; \
     
 
·
identify and hire qualified employees or retain valued employees; or
     
 
·
incorporate effectively the components of any business that we may acquire in our effort to achieve growth.
 
If we are unable to manage our growth, our operations and our financial results could be adversely affected by inefficiency, which could diminish our profitability.
 
12

Loss of Sheng-Peir Yang, our Chief Executive Officer, could impair our ability to operate.

If we lose our key employee, Sheng-Peir Yang, our Chief Executive Officer, our business could suffer. Our success is highly dependent on our ability to attract and retain qualified technical and management personnel. We are highly dependent on our management. Mr. Yang has an employment agreement with the Company. However, the loss of Mr. Yang’s services could have a material adverse effect on our operations. If we were to lose this individual, we may experience difficulties in competing effectively, developing our technology and implementing our business strategies. We do not have key-man life insurance in place for any person working for us.

Our management team does not have extensive experience in public company matters, w hich could impair our ability to comply with legal and regulatory requirements .

Our management team has had limited public company management experience or responsibilities. This could impair our ability to comply with legal and regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable federal securities laws including filing required reports and other information required on a timely basis. There can be no assurance that our management will be able to implement and affect programs and policies in an effective and timely manner that adequately respond to increased legal, regulatory compliance and reporting requirements imposed by such laws and regulations. Our failure to comply with such laws and regulations could lead to the imposition of fines and penalties and further result in the deterioration of our business.

Our insurance may be inadequate to cover liabilities we may incur.

Our involvement in the exploration for and development of oil and gas properties may result in our becoming subject to liability for pollution, blow-outs, property damage, personal injury or other hazards. Although we will obtain insurance in accordance with industry standards to address such risks, such insurance has limitations on liability that may not be sufficient to cover the full extent of such liabilities. In addition, such risks may not, in all circumstances, be insurable or, in certain circumstances, we may choose not to obtain insurance to protect against specific risks due to the high premiums associated with such insurance or for other reasons. The payment of such uninsured liabilities would reduce the funds available to us. If we suffer a significant event or occurrence that is not fully insured, or if the insurer of such event is not solvent, we could be required to divert funds from capital investment or other uses towards covering our liability for such events.

RISKS RELATED TO OUR COMMON STOCK

There has been a limited trading market for our common stock and no market.

It is anticipated that there will be a limited trading market for the Company's common stock on the National Association of Securities Dealers' ("NASD") Over-the-Counter Bulletin Board. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration.
 
You may have difficulty trading and obtaining quotations for our common stock.

The common stock may not be actively traded, and the bid and asked prices for our common stock on the NASD's Over-the-Counter Bulletin Board may fluctuate widely. As a result, investors may find it difficult to dispose of, or to obtain accurate quotations of the price of, our securities. This severely limits the liquidity of the common stock, and would likely reduce the market price of our common stock and hamper our ability to raise additional capital.

The market price of our common stock may, and is likely to continue to be, highly volatile and subject to wide fluctuations.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including:

 
·
dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in the Offering and in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies;
     
 
·
announcements of new acquisitions, reserve discoveries or other business initiatives by our competitors;
     
 
·
our ability to take advantage of new acquisitions, reserve discoveries or other business initiatives;
     
 
·
fluctuations in revenue from our oil and gas business as new reserves come to market;
     
 
·
changes in the market for oil and natural gas commodities and/or in the capital markets generally;  

13

 
·
changes in the demand for oil and natural gas, including changes resulting from the introduction or expansion of alternative fuels;
     
 
·
quarterly variations in our revenues and operating expenses;
     
 
·
changes in the valuation of similarly situated companies, both in our industry and in other industries;
     
 
·
changes in analysts’ estimates affecting our Company, our competitors and/or our industry;
     
 
·
changes in the accounting methods used in or otherwise affecting our industry;
     
 
·
additions and departures of key personnel;
     
 
·
announcements of technological innovations or new products available to the oil and gas industry;
     
 
·
announcements by relevant governments pertaining to incentives for alternative energy development programs;
     
 
·
fluctuations in interest rates and the availability of capital in the capital markets; and
     
 
·
significant sales of our common stock, including sales by the investors following registration of the shares of common stock issued in this Offering and/or future investors in future offerings we expect to make to raise additional capital.

These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and/or our results of operations and financial condition.

Our operating results may fluctuate significantly, and these fluctuations may cause our stock price to decline.
 
Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, including the coming to market of oil and natural gas reserves that we are able to develop, expenses that we incur, the prices of oil and natural gas in the commodities markets and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline.
 
We do not expect to pay dividends in the foreseeable future.

We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in the common stock.

Applicable SEC rules governing the trading of “penny stocks” limit the trading and liquidity of our common stock, which may affect the trading price of our common stock.

Shares of common stock may be considered a “penny stock” and be subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and regulate broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASD's automated quotation system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities.
 
 
 
  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of February 5, 2008 with respect to the beneficial ownership of the Company’s outstanding common stock by (i) any holder of more than five (5%) percent; (ii) each of the named executive officers, directors and director nominees; and (iii) our directors, director nominees and named executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.  
 
Name of Beneficial Owner
   
Common Stock Beneficially Owned
   
Percentage of
Common Stock Beneficially Owned (1)
 
Sheng-Peir Yang
   
55,347,485
   
61.3
%
 
           
Chi Pi Yun
   
2,049,907
   
2.3
%
 
           
Li Shen-Ren
   
4,099,814
   
4.5
%
 
           
All officers and directors as a group (5 persons)
   
61,497,206
   
68.2
%
 
* Denotes less than 1%

Beneficial ownership percentages gives effect to the completion of the Share Exchange, and are calculated based on shares of common stock issued and outstanding and is based on a total of 90,195,000 shares of common stock that were issued and outstanding as of February 5, 2008. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. The number of shares beneficially owned by a person includes shares of common stock underlying options or warrants held by that person that are currently exercisable or exercisable within 60 days of January 5, 2008. The shares issuable pursuant to the exercise of those options or warrants are deemed outstanding for computing the percentage ownership of the person holding those options and warrants but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. The persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite that person’s name, subject to community property laws, where applicable, unless otherwise noted in the applicable footnote.
 
15

DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Executive Officers and Directors

Below are the names and certain information regarding the Company's executive officers, directors and director nominees. Officers are elected annually by the Board of Directors. Each of the following officers and directors were elected on November 22, 2006.


Name
 
Age
 
Position
Sheng-Peir Yang
 
50
 
President and Director
Chi Pi Yun
 
36
 
Chief Financial Officer
Li Shen-Ren
 
44
 
Chief Operating Officer
 
Shen-Peir Yang, Chief Executive Officer

Mr. Yang has been President of Omphalos since 1991. He holds a degree in Mechanical Engineering from National Taipei University of Technology.
 
Chu Pi Yun, Chief Financial Officer
 
Mr. Yun has been with Omphalos since 2000. During that time he functioned in various accounting related positions. He was appointed our Chief Financial Officer in October 2007. Mr. Yun has done extensive accounting coursework.

Li Shen-Ren, Chief Operating Officer
 
Mr. Shen-Ren has been with Omphalos since 1997. He has worked primarily in sales and was appointed our Chief Operating Officer in 2007. He holds a degree from the Department of Mechanics at Taiwan Technical University.

Our directors and officers hold office until the earlier of their resignation, or removal or until their successors have been duly elected and qualified.
 
16
 
Item 3.02 Unregistered Sales of Equity Securities

See Item 2.01 above.
 
Item 5.01 Changes in Control of Registrant.

See Items 1.01 and 2.01 above.  
 
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

See Item 2.01above.
 
17
 
Item 9.01 Financial Statements and Exhibits.

(a) Financial statements of business acquired.
 
 
OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)

COMBINED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2006 AND 2005 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONDENSED COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 2007
 
 

CONTENTS
     
   
Page
 
       
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   
F-1
 
         
FINANCIAL STATEMENTS
       
         
Combined Balance Sheets
   
F-2 - F-3
 
         
Combined Statements of Income
   
F-4
 
         
Combined Statements of Changes in Shareholders' Equity and Comprehensive Income
   
F-5
 
         
Combined Statements of Cash Flows
   
F-6
 
         
Notes to Combined Financial Statements
   
F-7 - F-17
 
 
i


CONTENTS
     
   
Page
 
Condensed Combined Balance Sheets
   
F-18 -F-19
 
         
Condensed Combined Statements of Income
   
F-20
 
         
Condensed Combined Statements of Cash Flows
   
F-21
 
         
Notes to Combined Financial Statements
   
F-22- F-26
 
 
ii

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Omphalos Corp., Omphalos Corp.(B.V.I.),
All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.)

We have audited the accompanying combined balance sheets of Omphalos Corp., Omphalos Corp. (B.V.I.),
All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.) as of December 31, 2006 and 2005, and the related combined statements of income, shareholders’ equity and comprehensive income (loss), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the combined financial position of Omphalos Corp., Omphalos Corp. (B.V.I.), All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.) as of December 31, 2006 and 2005, and the combined results of their operations and their combined cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.


Simon & Edward, LLP

City of Industry, California
March 15, 2007
 
F-1

OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
COMBINED BALANCE SHEETS
December 31, 2006 and 2005

 
2006
 
2005
 
Assets
         
Current Assets
         
Cash and cash equivalents
 
$
9,124,178
 
$
8,102,156
 
Accounts receivable, net
   
1,795,676
   
5,733,419
 
Inventory, net
   
941,986
   
1,381,460
 
Prepaid and other current assets
   
93,213
   
141,079
 
Advances to shareholders
   
-
   
62,798
 
Short-term investments
   
80,487
   
77,735
 
Total current assets
   
12,035,540
   
15,498,647
 
               
Leasehold Improvements and Equipment, net
   
196,061
   
209,217
 
               
Intangible assets, net
   
20,375
   
20,708
 
Deposits
   
11,601
   
11,506
 
Long-term investments
   
1,902,166
   
1,344,465
 
               
Total Assets
 
$
14,165,743
 
$
17,084,543
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-2

OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
COMBINED BALANCE SHEETS
December 31, 2006 and 2005

 
2006
 
2005
 
Liabilities and Shareholders' Equity
         
Current Liabilities
         
Accounts payable
 
$
3,194,389
 
$
8,389,573
 
Accrued salaries and bonus
   
1,057,659
   
527,188
 
Accured expenses
   
58,332
   
47,761
 
Customer deposits
   
-
   
733
 
Advances from shareholders
   
46,998
   
-
 
Total current liabilities
   
4,357,378
   
8,965,255
 
               
Lont-term notes payable
   
-
   
10,246
 
               
Commitments and contingencies
             
               
Shareholders' Equity
             
Capital contribution
   
434,215
   
434,215
 
Subscription receivable
   
(100,000
)
 
(100,000
)
Other comprehensive income
   
213,824
   
150,417
 
Retained Earnings
   
9,260,326
   
7,624,410
 
Total shareholders' equity
   
9,808,365
   
8,109,042
 
               
Total Liabilities and Shareholders' Equity
 
$
14,165,743
 
$
17,084,543
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-3

OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
COMBINED STATEMENTS OF INCOME
For the Years Ended December 31, 2006 and 2005

   
2006
 
2005
 
Net sales
 
$
13,782,980
 
$
17,309,701
 
Cost of sales
   
10,085,907
   
14,367,572
 
Gross profit
   
3,697,073
   
2,942,129
 
               
Selling, general and administrative expenses
   
2,378,892
   
1,848,955
 
               
Income from operations
   
1,318,181
   
1,093,174
 
               
Other income (expenses)
             
Commission income
   
24,175
   
181,025
 
Rental income
   
332
   
337
 
Interest expense
   
-
   
(3,512
)
Interest income
   
266,076
   
175,289
 
Loss due to inventory value decline
   
(53,105
)
 
(194,463
)
Gain on foreign currency exchange
   
76,257
   
228,833
 
Gain on investment
   
2,118
   
3,627
 
Miscellaneous income (expenses)
   
1,881
   
(13,825
)
Total other income
   
317,736
   
377,310
 
               
Income before provision for income taxes
   
1,635,916
   
1,470,485
 
               
Provision for income taxes
   
-
   
-
 
               
Net Income
 
$
1,635,916
 
$
1,470,485
 
 
The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-4

OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
COMBINED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
For the Years Ended December 31, 2006 and 2005



   
Capital
 
Retained
 
Subscription
 
Comprehensive
 
 
 
 
 
Contribution
 
Earning
 
Receivable
 
Income (Loss)
 
Total
 
Balance at January 1, 2005
 
$
384,215
 
$
6,153,925
 
$
(50,000
)
$
368,910
 
$
6,857,050
 
Capital contribution
   
50,000
         
(50,000
)
       
-
 
Translation adjustment
                     
(218,493
)
 
(218,493
)
Net income
   
-
   
1,470,485
         
-
   
1,470,485
 
Balance at December 31, 2005
   
434,215
   
7,624,410
   
(100,000
)
 
150,417
   
8,109,042
 
Translation adjustment
                     
63,407
   
63,407
 
Net income
   
-
   
1,635,916
         
-
   
1,635,916
 
Balance at December 31, 2006
 
$
434,215
 
$
9,260,326
 
$
(100,000
)
$
213,824
 
$
9,808,365
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-5
 

OMPHALOS CORP., OMPHALOS CORP. (B.V.I.),
ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2006 and 2005

   
2006
 
2005
 
Cash flows from operating activities
         
Net income
 
$
1,635,916
 
$
1,470,485
 
Adjustments to reconcile net income to net cash provided by
             
operating activities:
             
Amortization and depreciation
   
15,407
   
31,245
 
Loss due to inventory value decline
   
13,936
   
194,463
 
Foreign currency exchange (gains)
   
(76,257
)
 
(228,833
)
Changes in assets and liabilities:
             
(Increase) Decrease in accounts receivable
   
3,992,622
   
(3,173,008
)
(Increase) Decrease in inventory
   
437,765
   
(310,293
)
Decrease in prepaid and other assets
   
49,121
   
130,726
 
Increase (Decrease) in accounts payable
   
(5,274,379
)
 
4,972,462
 
Increase (Decrease) in accrued expenses
   
536,628
   
(436,829
)
Increase (Decrease) in other long-term liabilities
   
(10,350
)
 
10,492
 
Net cash provided by operating activities
   
1,320,409
   
2,660,910
 
               
Cash flows from investing activities
             
Acquisition of equipment
   
-
   
(7,391
)
Acquisition of intangible assets
   
-
   
(21,332
)
Purchases of investments
   
(549,846
)
 
(41,271
)
Net cash (used in) investing activities
   
(549,846
)
 
(69,994
)
               
Cash flows from financing activities
             
Loans from (repayment to) related parties
   
110,528
   
(64,304
)
Net cash provided by (used in) financing activities
   
110,528
   
(64,304
)
               
Effect of exchange rate changes on cash and cash equivalents
   
140,931
   
15,066
 
               
Net increase in cash and cash equivalents
   
1,022,022
   
2,541,677
 
               
Cash and cash equivalents
             
Beginning
   
8,102,156
   
5,560,479
 
Ending
 
$
9,124,178
 
$
8,102,156
 
               
Supplemental disclosure of cash flows
             
Cash paid during the year for:
             
Interest expense
 
$
-
 
$
3,512
 
Income tax
 
$
-
 
$
-
 
               
Supplemental disclosure of noncash financing activity
             
Subscription receivable from issuance of stocks
 
$
-
 
$
50,000
 
 
The Accompanying Notes Are an Integral Part of the Financial Statements.

 
F-6
 
OMPHALOS CORP., OMPHALOS CORP. (B.V.I.), ALL FINE TECHNOLOGY CO., LTD.,
AND ALL FINE TECHNOLOGY CO., LTD. (B.V.I.)
NOTES TO COMBINED FINANCIAL STATEMENTS
 
YEARS ENDED DECEMBER 31, 2006 AND 2005
 

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization — Omphalos Corp. was incorporated on February 13, 1991 under the laws of Republic of China. Omphalos Corp. (B.V.I.) was incorporated on October 30, 2001 under the laws of the British Virgin Islands. All Fine Technology Co., Ltd. was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British Virgin Islands. Omphalos Corp., Omphalos Corp. (B.V.I.), All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.) (collectively the “Company”) supply a wide range of equipments and parts including reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan and China.
 
Basis of Combination — The combined financial statements include the accounts of Omphalos Corp., Omphalos Corp. (B.V.I.), All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.). These companies are under common control and ownership. All significant intercompany accounts and transactions are eliminated.

  Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
Contingencies — Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
 
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.
 
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
 
F-7
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash Equivalents, Investments, and Long-term Investments — Cash equivalents are included at cost, which approximates market. At December 31, 2006, the Company’s cash equivalents were held primarily by three financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having original maturities in excess of three months are classified as investments or as long-term investments when maturities are in excess of one year. Investment and long-term investments consist of certificates of deposit (CDs) and marketable securities.

At the date of acquisition of an investment security, management designates the security as belonging to a trading portfolio, an available-for-sale portfolio, or a held-to-maturity portfolio. Currently, the Company holds no securities designated as held-to-maturity or available-for-sale. All investment securities are classified as trading   according to management’s intent and carried at fair value. Unrealized holding gains and losses for trading securities are included in earnings.

Accounts Receivable — Accounts receivable are carried at original invoice amount less an estimate for doubtful receivables based on a review of all outstanding amounts at year end. Management determines the allowance for doubtful accounts by using historical experience applied to an aging of accounts. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.
 
Inventory — Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods and is net of an allowance for slow-moving inventory of $203,704 and $189,909 at December 31, 2006 and 2005, respectively.
 
Property and Equipment — Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the related assets as follows:

Automobile
5 years
Furniture and fixtures
3 years
Machinery and equipment
3 to 5 years
Leasehold improvements
55 years

Expenditures for major renewals and betterment that extend the useful lives of property and equipment are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in the statement of income for the period.
 
F-8
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Other Intangible Assets — Other intangible assets consist of patents and are accounted for at historical costs. The Company amortizes other intangible assets over their useful lives, as applicable.

Effective July 2002, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." The adoption of SFAS No. 142 requires an initial impairment assessment involving a comparison of the fair value of trademarks, patents and other intangible assets to current carrying value. No impairment loss was recognized for the year ended December 31, 2006. Patents, trademarks, and other intangible assets determined to have indefinite useful lives are not amortized. The Company tests such intangible assets with indefinite useful lives for impairment annually, or more frequently if events or circumstances indicate that an asset might be impaired. Trademarks, patents, and other intangible assets determined to have definite lives are amortized over their useful lives or the life of the trademark and other intangible asset, whichever is less.
 
Revenue Recognition — The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which superceded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and services performed and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or service has not been performed or is subject to refund until such time that the Company and the customer jointly determine that the product or service has been delivered or performed or no refund will be required.
 
The Company derives revenues from the sale of equipments and parts to customers. The Company recognizes this revenue when title passes to and the risks and rewards of ownership have transferred to the customer based on the terms of the sales, and is recorded net of returns, discounts and allowances. Shipping and handling charges to customers are included in net sales. Shipping and handling charges incurred by the Company are included in cost of good sold.
 
SAB 104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"), Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF 00-21 on the Company's financial position and results of operations was not significant.
 
Research and Development Expenses — Research and development costs are generally expensed as incurred.
 
F-9
 

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Warranty Costs — Substantially all of the Company’s equpiments are sold with a one- to two-year warranty. The Company periodically assesses the adequacy of its recorded warranty accrual and adjusts the amounts as necessary. The Company estimates its warranty costs based on historical warranty claim experience and applies this estimate to the revenue stream for products under warranty. Future costs for warranties applicable to revenue recognized in the current period are charged to cost of revenue. The warranty accrual is reviewed quarterly to verify that it properly reflects the remaining obligation based on anticipated expenditures over the balance of the obligation period. Adjustments are made when accrual warranty claim experience differs from estimate.
 
To date, warranty costs incurred have been minimal in relation to the volume of revenues and have been within management’s expectation.
 
Income Taxes — Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements.

Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled as prescribed in SFAS No. 109. A valuation allowance is established against deferred tax assets if it is more likely than not that all, or some portion, of such assets will not be realized.
 
Stock Based Compensation —The Company adopted Statement of Financial Accounting Standards No 123(R), “Share-Based Payments” (“SFAS No. 123R”) effective January 1, 2006. SFAS No. 123R amends existing accounting pronouncements for share-based payment transactions in which an enterprise receives employee and certain non-employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R generally requires such transactions be accounted for using a fair-value-based method. The Company does not have any awards of stock-based compensation issued and outstanding at December 31, 2006 and 2005.

Impairment of Long-Lived Assets —The Company adopted SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets", effective December 15, 2001. The Company periodically evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset were less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

The assumptions used by management in determining the future cash flows are critical. In the event these expected cash flows are not realized, future impairment losses may be recorded. Management has determined that no impairments of long-lived assets currently exist.
 
F-10
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Concentrations —

Credit Risk : Financial instruments that subject the Company to credit risk consist primarily of trade accounts receivable and investments. The Company performs ongoing credit evaluations of its customers and maintains an allowance for potential credit losses. The Company regularly evaluates securities to determine whether there has been any diminution in value that is deemed to be other than temporary.

Customers: The Company sells equipments and parts to printed circuit board (PCB) manufacturers in Taiwan and China. The Company performs ongoing credit evaluations of its customers’ financial condition and generally, requires no collateral. For the year ended December 31, 2006, three customers, each of who accounted for more than 10% of the Company’s total revenues, represented approximately 74% of the its total revenues, and 72% of accounts receivable in aggregate at December 31, 2006. For the year ended December 31, 2005, four customers, each of who accounted for more than 10% of the Company’s total revenues, represented approximately 85% of the its total revenues, and 89% of accounts receivable in aggregate at December 31, 2005.  

Suppliers:   For the year ended December 31, 2006, 98% of the Company’s inventory is purchased from two vendors. Management believes other vendors could supply similar products, but their terms may not be as favorable as currently being offered by these vendors. A change in suppliers, however, could cause a delay in availability of products and a possible loss of sales, which could adversely affect operating results.

Foreign-currency Transactions — Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currency denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

Translation Adjustment — The accounts of the Company was maintained, and its financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance SFAS No. 52, "Foreign Currency Translation", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income" as a component of shareholders’ equity.

As of December 31, 2006 and December 31, 2005 the exchange rates between the NTD and the USD ($) were NTD1=$0.03069 and NTD1=$0.03044, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.03075 and NTD1=$0.03117 for the years ended December 31, 2006 and December 31, 2005, respectively. Total translation adjustment recognized as of December 31, 2006 and December 31, 2005 is $213,824 and $150,417, respectively.
 
F-11

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Statement of Cash Flows — In accordance with SFAS No. 95, "Statement of Cash Flows", cash flows from the Company's operations are based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.
 
Comprehensive Income — Comprehensive income includes accumulated foreign currency translation gains and losses. The Company has reported the components of comprehensive income on its statements of stockholders’ equity and comprehensive income (loss).
 
Fair Value of Financial Instruments — The carrying amounts of cash and cash equivalents, accounts receivable, deposits and accounts payable approximate their fair value because of the short maturity of those instruments.
 
The carrying amounts of the Company's long-term debt approximate their fair value because of the short maturity and/or interest rates which are comparable to those currently available to the Company on obligations with similar terms.
 
Recently Issued Accounting Pronouncements — In May 2005, the FASB issued Statement No. 154, "Accounting Changes and Error Corrections" ("SFAS 154"), a replacement of Accounting Principles Board Opinion No. 20, "Accounting Changes", and Statement No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods' financial statements, unless it is impracticable to determine either the period of specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. The Company does not believe adoption of SFAS 154 will have a material effect on its financial position, cash flows or results of operations.
 
In February 2006, the FASB issued Statement No. 155, "Accounting for Certain Hybrid Financial Instruments" ("SFAS 155"), which amends Statement No. 133, "Accounting for Derivatives Instruments and Hedging Activities" ("SFAS 133") and Statement No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 140"). SFAS 155 amends SFAS 133 to narrow the scope exception for interest-only and principal-only strips on debt instruments to include only such strips representing rights to receive a specified portion of the contractual interest or principle cash flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to hold a passive derivative financial instrument pertaining to beneficial interests that itself is a derivative instruments. The Company is currently evaluating the impact this new Standard, but believes that it will not have a material impact on the Company's financial position.
 
F-12
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements (Continued) —
 
In March 2006, the FASB issued Statement No. 156, "Accounting for Servicing of Financial Assets” (“SFAS 156”), an amendment of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The company is currently evaluating the provisions of FIN 48.

In September 2006, the FASB issued Statement No. 157, “Fair Value Measurement, which provides guidance for applying the definition of fair value to various accounting pronouncements” (“SFAS 157”). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the provisions of SFAS 157.
 
In September 2006, the FASB also issued Statement No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 amends SFAS 87, 88, 106, and 132R, and requires employers to recognize the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in its statement of financial position. SFAS No. 158 is effective as of the end of fiscal years ending after December 15, 2006. SFAS 158 is not applicable to the Company, as it does not have a defined benefit pension plan.
 
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin 108 ("SAB 108"), considering the Effect of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, that addresses how uncorrected errors in previous years should be considered when quantifying errors in the current year financial statements. SAB 108 is effective for fiscal years ending November 15, 2006 and, upon adoption, companies are allowed to record the effects as a cumulative-effect adjustment to retained earnings. The Company will adopt SAB 108 for its fiscal year ending December 31, 2006 and is assessing what impact, if any, the adoption of SAB 108 will have on its financial position and results of operations.
 
F-13
 
2.
PROPERTY AND EQUIPMENT
 
The following is a summary of the Company’s property and equipment for the years ended December 31:

   
2006
 
2005
 
Automobiles
 
$
29,156
 
$
28,918
 
Building and fixtures
   
147,890
   
146,685
 
Machinery and equipment
   
49,709
   
49,304
 
Leashold improvements
   
3,560
   
3,530
 
Land
   
78,506
   
77,867
 
     
308,821
   
306,304
 
Less: accumulated depreciation
   
(112,760
)
 
(97,088
)
               
Property and equipment, net
 
$
196,061
 
$
209,217
 
 
3.
OTHER INTANGIBLE ASSETS
 
The following reconciliation of other intangible assets is as follows:

   
Gross Carrying Value
 
Accumulated Amortization
 
Patents
 
$
21,004
  $ 629  
 
Amortization of intangible assets was $504 and $125 for the year ended December 31, 2006 and 2005, respectively.
 
Estimated amortization expense for the years ending December 31 is as follows:
 
2007
 
$
504
 
2008
 
$
504
 
2009
 
$
504
 
2010
 
$
504
 
2011
 
$
504
 

 
F-14
 
4.
INCOME TAXES
 
Income before income taxes for the years ended December 31, 2006 and 2005 includes the results of operations of Taiwan and BVI. Omphalos Corp. (B.V.I.) and All Fine Technology Co., Ltd. (B.V.I.) are incorporated in British Virgin Islands and are not required to pay income tax. Omphalos Corp. and All Fine Technology Co., Ltd. are incorporated in Taiwan and are subject to Taiwan tax law. The provision for income taxes calculated at the statutory rates in the combined statements of income is as follows for the years ended December 31:
 
 
 
2006
 
 
2005
 
Current provision:
 
 
 
 
 
 
Computed (provision for) income taxes
 
 
 
 
 
 
     at statutory rates in BVI
$
-
 
$
-
 
Computed (provision for) income taxes
 
 
 
 
 
 
     at statutory rates in Taiwan
 
-
 
 
-
 
Total current provision
 
-
 
 
-
 
             
Deferred provision:
 
-
 
 
-
 
BVI
 
-
 
 
-
 
Taiwan
 
-
 
     
Valuation allowance
 
-
 
 
-
 
Total deferred provision
 
-
 
 
-
 
Provision for income taxes
$
-
 
$
-
 
 
Deferred tax assets and liabilities are measured based on the difference between the financial statement and tax bases of assets and liabilities at the applicable tax rates. There were no significant components of the deferred tax for the years ended December 31, 2006 and 2005.
 
5.
RELATED-PARTY TRANSACTIONS
 
Operating Leases--- The Company leases its facility from a shareholder under an operating lease agreement which expires on December 31, 2007. The monthly base rent is approximately $2,200. Rent expense under this lease agreement amounted to approximately $26,000 and $26,000 for the years ended December 31, 2006 and 2005, respectively.
 
Approximately future minimum annual obligations under the above operating lease at December 31, 2006 are as follows:

2007
 
$
26,000
 
Total
 
$
26,000
 
 
Advances to / from Shareholders - The advances to or from shareholders are non-interest bearing and without fixed terms of repayment. 
 
F-15
 
6.
COMPENSATED ABSENCES
 
Employees earn annual vacation leave at the rate of seven days per year for the first year. Upon completion of the first year of employment, employees earn one additional day for each additional year. At termination, employees are paid for any accumulated annual vacation leave. As of December 31, 2006, vacation liability existed in the amount of $3,371.
 
7.
OTHER COMPREHENSIVE INCOME
 
Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders' equity, at December 31, 2006 and 2005 are as follows:

   
Foreign Currency
 
Accumulated Other
 
 
 
Translation Adjustment
 
Comprehensive Income
 
Balance at January 1, 2005
 
$
368,910
 
$
368,910
 
Change for 2005
   
(218,493
)
$
(218,493
)
Balance at December 31, 2005
   
150,417
   
150,417
 
Change for 2006
   
63,407
   
63,407
 
Balance at December 31, 2006
 
$
213,824
 
$
213,824
 

 
8.
PENSION PLAN
 
 
Omphalos Corp. (Taiwan) and All Fine Technology Co., Ltd. (Taiwan) were required to make monthly contributions, equal to 2% of salaries and wages, to a pension fund that is administered by a pension fund monitoring committee and deposited in the Central Trust of China in the Republic of China (Taiwan).
 
Taiwan has a new pension scheme law effective July 1, 2005. The new pension scheme is a defined contribution scheme. All new employees who joined Omphalos Corp. (Taiwan) and All Fine Technology Co., Ltd. (Taiwan) after July 1, 2005 must participate in the new scheme. Existing employees can choose to stay with the old scheme or to join the new scheme. Under the new scheme, Omphalos Corp. (Taiwan) and All Fine Technology Co. (Taiwan) are required to contribute 6% of the employees’ salary into employees’ own pension fund accounts managed by the government.
 
Contributions to the pension plan totaled $20,073 and $9,218 for the years ended December 31, 2006 and 2005, respectively.
 
F-16
 
 
9.
COMMITMENTS
 
Letter of Credit -Inventory - At December 31, 2006, the Company has an outstanding irrevocable letter of credit in the amount of JPY ¥ 7,600,000 or $63,840. This letter of credit, which has term of three months, collateralizes the Company’s obligation to a third party for the purchase of inventory. The fair value of this letter of credit approximates contract values based on the nature of the fee arrangements with the issuing bank.
 
Operating Leases - The Company leases office facilities (Note 5), warehouses, and certain equipments under operating leases that expire through 2008. Rental expense for these leases was $64,704 and $86,481 for the years ended December 31, 2006 and 2005, respectively. Future minimum lease commitments on non-cancelable operating leases are as follows:
 

For the year ended
     
December 31,
 
Amount
 
2007
 
$
54,394
 
2008
   
1,440
 
         
Total
 
$
55,834
 
******
 
F-17

ALL FINE TECHNOLOGY CO., LTD. (B.V.I.),
OMPHALOS CORP. (B.V.I.) AND ITS SUBSIDIARIES
CONDENSED COMBINED BALANCE SHEETS
(Unaudited)

   
September 30,
 
December 31,
 
Assets
 
  2007
 
  2006
 
Current Assets
             
Cash and cash equivalents
 
$
5,673,891
 
$
9,124,178
 
Accounts receivable, net
   
3,234,455
   
1,795,676
 
Inventory, net
   
644,055
   
941,986
 
Prepaid and other current assets
   
130,676
   
93,213
 
Due from shareholders
   
4,611,325
   
-
 
Short-term investments
   
-
   
80,487
 
Total current assets
   
14,294,402
   
12,035,540
 
               
Leasehold Improvements and Equipment, net
   
13,543
   
196,061
 
               
Intangible assets, net
   
23,177
   
20,375
 
Deposits
   
3,676
   
11,601
 
Long-term investments
   
1,600,435
   
1,902,166
 
               
Total Assets
 
$
15,935,233
 
$
14,165,743
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-18

ALL FINE TECHNOLOGY CO., LTD. (B.V.I.),
OMPHALOS CORP. (B.V.I.) AND ITS SUBSIDIARIES
CONDENSED COMBINED BALANCE SHEETS
(Unaudited)

   
September 30,
 
December 31,
 
Liabilities and Shareholders' Equity
 
2007
 
2006
 
Current Liabilities
             
Accounts payable
 
$
4,428,871
 
$
3,194,389
 
Accrued salaries and bonus
   
39,490
   
1,057,659
 
Accured expenses
   
76,064
   
58,332
 
Advances from shareholders
   
-
   
46,998
 
Total current liabilities
   
4,544,425
   
4,357,378
 
               
Shareholders' Equity
             
Capital contribution
   
100,000
   
434,215
 
Subscription receivable
   
-
   
(100,000
)
Other comprehensive income
   
239,094
   
213,824
 
Retained earnings
   
11,051,714
   
9,260,326
 
Total shareholders' equity
   
11,390,808
   
9,808,365
 
               
Total Liabilities and Shareholders' Equity
 
$
15,935,233
 
$
14,165,743
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-19

ALL FINE TECHNOLOGY CO., LTD. (B.V.I.),
OMPHALOS CORP. (B.V.I.) AND ITS SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2007 and 2006
(Unaudited)

   
Nine Months Ended
 
Three Months Ended  
 
   
September 30, 2007
 
September 30, 2006
 
September 30, 2007
 
 September 30, 2006
 
Net sales
 
$
7,820,401
   
12,837,880
 
$
2,907,249
 
$
3,148,646
 
Cost of sales
   
5,161,989
   
9,226,621
   
1,897,694
   
1,954,056
 
Gross Profit
   
2,658,412
   
3,611,259
   
1,009,555
   
1,194,590
 
                           
Selling, general and
                         
administrative expenses
   
1,330,919
   
1,026,940
   
468,093
   
310,603
 
                           
Income from operations
   
1,327,493
   
2,584,319
   
541,462
   
883,987
 
                           
Other income
                         
Interest income
   
139,044
   
150,786
   
23,476
   
48,274
 
Gain (loss) on foreign
                         
currency exchange
   
(111,706
)
 
191,183
   
(132,520
)
 
39,713
 
Gain on investment
   
57,179
   
33,384
   
18,756
   
14,811
 
Loss on sale of property
   
-
   
-
   
2,527
   
-
 
Income from lawsuit settlement
   
376,398
   
-
   
376,398
   
-
 
Miscellaneous income
   
2,980
   
10,992
   
125
   
8,232
 
Total other income
   
463,895
   
386,345
   
288,762
   
111,030
 
                           
Income before provision
                         
for income taxes
   
1,791,388
   
2,970,664
   
830,224
   
995,017
 
                           
Provision for income taxes
   
-
   
-
   
-
   
-
 
                           
Net Income
 
$
1,791,388
 
$
2,970,664
 
$
830,224
 
$
995,017
 

The Accompanying Notes Are an Integral Part of the Financial Statements.
 
F-20

ALL FINE TECHNOLOGY CO., LTD. (B.V.I.),
OMPHALOS CORP. (B.V.I.) AND ITS SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2007 and 2006
(Unaudited)

   
September 30, 2007
 
September 30, 2006
 
Cash flows from operating activities
             
Net income
 
$
1,791,388
 
$
2,970,664
 
Adjustments to reconcile net income to net cash provided by
             
operating activities:
             
Amortization and depreciation
   
9,974
   
11,806
 
Loss on sale of property
   
2,527
   
-
 
Foreign currency exchange loss (gains)
   
111,706
   
(191,183
)
Changes in assets and liabilities:
             
(Increase) Decrease in accounts receivable
   
(1,427,222
)
 
284,538
 
Decrease in inventory
   
292,997
   
409,177
 
(Increase) Decrease in prepaid and other assets
   
(29,432
)
 
50,565
 
Increase (Decrease) in accounts payable
   
1,227,765
   
(1,998,125
)
(Decrease) in accrued expenses
   
(987,826
)
 
(531,221
)
Increase in other long-term liabilities
   
-
   
3,722
 
Net cash provided by operating activities
   
991,877
   
1,009,943
 
               
Cash flows from investing activities
             
Capital contribution
   
96,598
   
(65,167
)
Redemption (purchase) of investments
   
374,390
   
-
 
Purchase of equipment
   
(10,883
)
 
-
 
Proceeds received from disposition of equipment
   
115,026
   
-
 
Investments in subsidiaries
   
(303,100
)
 
-
 
Purchases of investments
   
-
   
-
 
Net cash provided by (used in) investing activities
   
272,031
   
(65,167
)
               
Cash flows from financing activities
             
Loans from (repayment to) related parties
   
(4,609,566
)
 
178,571
 
Net cash provided by (used in) financing activities
   
(4,609,566
)
 
178,571
 
               
Effect of exchange rate changes on cash and cash equivalents
   
(104,629
)
 
108,451
 
               
Net increase (decrease) in cash and cash equivalents
   
(3,450,287
)
 
1,231,798
 
               
Cash and cash equivalents
             
Beginning
   
9,124,178
   
8,102,156
 
Ending
 
$
5,673,891
 
$
9,333,954
 
               
Supplemental disclosure of cash flows
             
Cash paid during the period for:
             
Interest expense
 
$
-
 
$
-
 
Income tax
 
$
-
 
$
-
 

The Accompanying Notes Are an Integral Part of the Financial Statements.

F-21

ALL FINE TECHNOLOGY CO., LTD. (B.V.I.),
OMPHALOS CORP. (B.V.I.) AND ITS SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
September 30, 2007

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation — The accompanying unaudited condensed combined financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) Item 310 of Regulation S-B and generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the nine-month period ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ended December 31, 2007.
 
Organization — Omphalos Corp. was incorporated on February 13, 1991 under the laws of Republic of China. Omphalos Corp. (B.V.I.) was incorporated on October 30, 2001 under the laws of the British Virgin Islands. All Fine Technology Co., Ltd. was incorporated on March 23, 2004 under the laws of Republic of China. All Fine Technology Co., Ltd. (B.V.I.) was incorporated on February 2, 2005 under the laws of the British Virgin Islands. These companies are under common control and ownership.

On July 4, 2007, Omphalos Corp. (B.V.I,) acquired both All Fine Technology Co., Ltd. and Omphals Corp as wholly owned subsidiaries.

Omphalos Corp., Omphalos Corp. (B.V.I.), All Fine Technology Co., Ltd., and All Fine Technology Co., Ltd.(B.V.I.) (collectively the “Company”) supply a wide range of equipments and parts including reflow soldering ovens and automated optical inspection machines for printed circuit board (PCB) manufacturers in Taiwan and China.

Basis of Consolidation / Combination — The combined financial statements include the accounts of All Fine Technology Co., Ltd. (B.V.I.) and Omphalos Corp. (B.V.I.) and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 
F-22

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash Equivalents, Investments, and Long-term Investments — Cash equivalents are included at cost, which approximates market. At September 30, 2007, the Company’s cash equivalents were held primarily by three financial institutions. The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents, while those having original maturities in excess of three months are classified as investments or as long-term investments when maturities are in excess of one year. Investment and long-term investments consist of certificates of deposit (CDs) and marketable securities.

At the date of acquisition of an investment security, management designates the security as belonging to a trading portfolio, an available-for-sale portfolio, or a held-to-maturity portfolio. Currently, the Company holds no securities designated as held-to-maturity or available-for-sale. All investment securities are classified as trading according to management’s intent and carried at fair value. Unrealized holding gains and losses for trading securities are included in earnings.

Inventory — Inventory is carried at the lower of cost or market. Cost is determined by using the specific identification method. The Company periodically reviews the age and turnover of its inventory to determine whether any inventory has become obsolete or has declined in value, and charges to operations for known and anticipated inventory obsolescence. Inventory consists substantially of finished goods and is net of an allowance for slow-moving inventory of $156,871 and $203,704 at September 30, 2007 and December 31, 2006, respectively.
 
Intangible Assets —Include cost of patent applications that are deferred and charged to operations over their useful lives. The accumulated amortization is $1,004 and $629 at September 30, 2007 and December 31, 2006, respectively. Annual amortization expense of such intangible assets is expected to be $495 per year for the next five years.

Foreign-currency Transactions — Foreign-currency transactions are recorded in New Taiwan dollars (“NTD”) at the rates of exchange in effect when the transactions occur. Gains or losses resulting from the application of different foreign exchange rates when cash in foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or payables are settled, are credited or charged to income in the year of conversion or settlement. On the balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the prevailing exchange rates and the resulting differences are charged to current income except for those foreign currencies denominated investments in shares of stock where such differences are accounted for as translation adjustments under stockholders’ equity.

Translation Adjustment — The accounts of the Company was maintained, and its financial statements were expressed, in New Taiwan Dollar (“NTD”). Such financial statements were translated into U.S. Dollars (“$” or “USD”) in accordance SFAS No. 52, "Foreign Currency Translation", with the NTD as the functional currency. According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder's equity are translated at the historical rates and income statement items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, "Reporting Comprehensive Income" as a component of shareholders’ equity.

F-23

1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Translation Adjustment (Continued) — As of September 30, 2007 and December 31, 2006 the exchange rates between the NTD and the USD ($) were NTD1=$0.03063 and NTD1=$0.03069, respectively. The weighted-average rates of exchange between NTD and USD were NTD1=$0.03031 and NTD1=$0.03086 for the nine months ended September 30, 2007 and September 30, 2006, respectively. Total translation adjustment recognized as of September 30, 2007 and December 31, 2006 is $289,094 and $213,824, respectively.

Recently Issued Accounting Pronouncements — In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, " Accounting for the Impairment or Disposal of Long-Lived Assets ", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.
 
In March 2006, the FASB issued Statement No. 156, "Accounting for Servicing of Financial Assets” (“SFAS 156”), an amendment of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.
 
In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006, with earlier adoption permitted. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.
 
F-24
 
1.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
Recently Issued Accounting Pronouncements (Continued) —
 
In September 2006, the FASB issued Statement No. 157, “Fair Value Measurement, which provides guidance for applying the definition of fair value to various accounting pronouncements” (“SFAS 157”). SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the provisions of SFAS 157.
 
In September 2006, the FASB also issued Statement No. 158, “Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). SFAS 158 amends SFAS 87, 88, 106, and 132R, and requires employers to recognize the overfunded or underfunded status of defined benefit postretirement plans as an asset or liability in its statement of financial position. SFAS No. 158 is effective as of the end of fiscal years ending after December 15, 2006. SFAS 158 is not applicable to the Company, as it does not have a defined benefit pension plan.
 
In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin 108 ("SAB 108"), considering the Effect of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements, that addresses how uncorrected errors in previous years should be considered when quantifying errors in the current year financial statements. SAB 108 is effective for fiscal years ending November 15, 2006 and, upon adoption, companies are allowed to record the effects as a cumulative-effect adjustment to retained earnings. The adoption of this statement did not have a material effect on the Company's financial position or results of operations.
 
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “ The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115 ”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “ Accounting for Certain Investments in Debt and Equity Securities ” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “ Fair Value Measurements”. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

F-25
 
2.
RELATED-PARTY TRANSACTIONS
 
Operating Leases--- The Company leases its facility from a shareholder under an operating lease agreement which expires on December 31, 2007. The monthly base rent is approximately $2,200. Rent expense under this lease agreement amounted to approximately $19,800 and $19,800 for the periods ended September 30, 2007 and 2006, respectively.
 
Approximately future minimum annual obligations under the above operating lease at September 30, 2007 are as follows:
 
For the twelve months ended
     
September 30, 2008
 
$
6,600
 
Total
 
$
6,600
 
 
Advances to / from Shareholders - The advances to or from shareholders are non-interest bearing and without fixed terms of repayment. 
 
3.
OTHER COMPREHENSIVE INCOME
 
Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders' equity, at September 30, 2007 and December 31, 2006 are as follows:
 
   
Foreign Currency
 
Accumulated Other
 
   
Translation Adjustment
 
Comprehensive Income
 
Balance at January 1, 2006
 
$
150,417
 
$
150,417
 
Change for 2006
   
63,407
 
$
63,407
 
Balance at December 31, 2006
   
213,824
   
213,824
 
Change for 2007
   
75,270
   
75,270
 
Balance at September 30, 2007
 
$
289,094
 
$
289,094
 
 
4.
SUBSEQUENT EVENT
 
On October 19, 2007, Omphalos Corp. (B.V.I.) completed its acquisition of All Fine Technology Co., Ltd. (B.V.I.). The purchase price was $2,095,230, representing the book value of assets, less liabilities, of All Fine Technology Co., Ltd. (B.V.I.) at June 30, 2007.
 
******
 
F-26
 
(b) Pro forma financial information.

Not applicable.

(c) Exhibits
 
Exhibit
Number
 
Description
2.1
 
Share Exchange Agreement dated February 5, 2008, between the Company and the parties set forth on the signature page thereof.

18
 
SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: February 11, 2008

     
 
Soyodo Group Holdings, Inc.
 
  		 
  		 
 
By:   / s/ Sheng-Peir Yang
 
Chief Executive Officer


SHARE EXCHANGE AGREEMENT

This Agreement dated as of the ____ day of January 2008, by and among Soyodo Group Holdings, Inc., a Delaware corporation having its offices at 1390 Monterey Pass Road, Monterey Park, California 91754 (the “Company”), Omphalos Corp., a corporation organized under the laws of the British Virgin Islands (“Omphalos”), and the shareholders of Omphalos named on the signature page of this Agreement (collectively, the “Shareholders” and each, individually, a “Shareholder”).

WITNESSETH:

WHEREAS, the Shareholders are the holders of all of the issued and outstanding capital stock (the “Omphalos Shares”) of Omphalos;
 
WHEREAS, the Shareholders are acquiring a controlling interest in the Company; and
 
WHEREAS, the Company is willing to issue shares of its common stock, par value $0.0001 per share (the “Common Stock”), to the Shareholders in consideration for all of the issued and outstanding capital stock of Omphalos.
 
NOW, THEREFORE, for the mutual consideration set out herein, the parties agree as follows:
 
1.    Exchange of Shares .
 
(a)    Issuance of Shares by the Company . On and subject to the conditions set forth in this Agreement, the Company will issue to the Shareholders, in exchange for 100,000 Omphalos Shares, which represents all of the issued and outstanding capital stock of Omphalos, an aggregate of 82,000,000 shares of Common Stock (the “Shares”). The Common Stock will be issued to the Shareholders in the amounts set forth after their respective names in Schedule 3(a)IV to this Agreement.

(b)    Transfer of Omphalos Shares by the Shareholders . On and subject to the conditions set forth in this Agreement, the Shareholders will transfer to the Company all of the Omphalos Shares in exchange for the Shares. Each Shareholder holds the number of Omphalos Shares set forth after his or her name in Schedule 3(a)IV to this Agreement.

(c)    Closing . The issuance of the Shares to the Shareholders and the transfer of the Omphalos Shares to the Company will take place at a closing (the “Closing”) to be held at the office of Sichenzia Ross Friedman Ference, LLP, 61 Broadway, 32 nd Floor, New York, New York 10006 as soon as possible after or contemporaneously with the satisfaction or waiver of all of the conditions to closing set forth in Section 6 of this Agreement (the “Closing Date”).
 
 
2.    Representations and Warranties of the Company . The Company hereby represents, warrants, covenants and agrees as follows:
 
(a)    Organization and Authority .
 
 
(i)
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company does not have any equity investment or other interest, direct or indirect, in, or any outstanding loans, advances or guarantees to or on behalf of, any domestic or foreign corporation, limited liability company, association, partnership, joint venture or other entity.  

 
(ii)
Complete and correct copies of the Company’s certificate of incorporation and by-laws are available for review on the EDGAR system maintained by the U.S. Securities and Exchange Commission (the “Commission”).

 
(iii)
The Company has full power and authority to carry out the transactions provided for in this Agreement, and this Agreement constitutes the legal, valid and binding obligations of the Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditor’s rights and except that any remedies in the nature of equitable relief are in the discretion of the court. All necessary action required to be taken by the Company for the consummation of the transactions contemplated by this Agreement has been taken.

 
(iv)
The execution and performance of this Agreement will not constitute a breach of any agreement, indenture, mortgage, license or other instrument or document to which the Company is a party or by which its assets and properties are bound, and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to the Company or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the certificate of incorporation or by-laws of the Company.

 
(v)
The Shares, when issued pursuant to this Agreement, will be duly and validly authorized and issued, fully paid and non-assessable. The issuance of the Shares to Shareholders is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an exemption provided by Section 4(2) and Rule 506 promulgated thereunder or under Regulation S.

 
(vi)
The authorized capital stock of the Company consists of 120,000,000 shares of Common Stock, of which 8,195,000 shares are presently outstanding. Except as provided in, contemplated by, or set forth in this Agreement or the Company SEC Documents (as defined below), the Company has no outstanding or authorized warrants, options, other rights to purchase or otherwise acquire capital stock or any other securities of the Company, preemptive rights, rights of first refusal, registration rights or related commitments of any nature. All issued and outstanding shares were either (i) registered under the Securities Act, or (ii) issued pursuant to valid exemptions from registration thereunder.
 

 
 
(vii)
No consent, approval or agreement of any person, party, court, governmental authority, or entity is required to be obtained by the Company in connection with the execution and performance by the Company of this Agreement or the execution and performance by the Company of any agreements, instruments or other obligations entered into in connection with this Agreement.
 
(b)    SEC Documents .

 
(i)
The Company is registered pursuant to Section 12 of the Exchange Act and it is current with its reporting obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). None of the Company’s filings made pursuant to the Exchange Act (collectively, the “Company SEC Documents”) contains any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company SEC Documents, as of their respective dates, complied in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder, and are available on the Commission’s EDGAR system.

 
(ii)
The Company SEC Documents include the Company’s audited consolidated financial statements for the fiscal years ended December 31, 2006 and 2005 (collectively, the “Audited Financial Statements”) and unaudited financial statements for the nine months ended September 30, 2007 and 2006 (collectively, the “Interim Financial Statements,” and, together with the Audited Financial Statements, the “Financial Statements”), including, in each case, a balance sheet and the related statements of income, stockholders’ equity and cash flows for the period then ended, together with the related notes. The Audited Financial Statements have been certified by Tom Jaspers, CPA (“Tom Jaspers”), and the Interim Financial Statements have been reviewed by Jaspers+Hall, PC (“Jaspers”). The Financial Statements are in accordance with all books, records and accounts of the Company, are true, correct and complete and have been prepared in accordance with GAAP, consistently applied. Jaspers is independent as to the Company under the rules of the Commission pursuant to the Securities Act and is registered with the PCAOB. The Financial Statements present fairly the financial position of the Company at the respective balance sheet dates, and fairly present the results of the Company’s operations, changes in stockholders’ equity and cash flows for the periods covered.
 
 
 
(iii)
At the close of business on September 30, 2007, the Company did not have any material liabilities, absolute or contingent, of the type required to be reflected on balance sheets prepared in accordance with GAAP which are not fully reflected, reserved against or disclosed on the September 30, 2007 balance sheet. The Company has not guaranteed or assumed or incurred any obligation with respect to any debt or obligations of any Person, except endorsements made in the ordinary course of business in connection with the deposit of items for collection. The Company does not have any debts, contracts, guaranty, standby, indemnity or hold harmless commitments, liabilities or obligations of any kind, character or description, whether accrued, absolute, contingent or otherwise, or due or to become due except to the extent set forth or noted in the Financial Statements, and not heretofore paid or discharged.
.
(c)   Absence of Changes . Since September 30, 2007, except as set forth in the Company SEC Documents, to the best of Company’s knowledge, there have not been:

 
(i)
any change in the consolidated assets, liabilities, or financial condition of the Company, except changes in the ordinary course of business which do not and will not have a material adverse effect on the Company;

 
(ii)
any damage, destruction, or loss, whether or not covered by insurance, materially and adversely affecting the assets or financial condition of the Company (as conducted and as proposed to be conducted);

 
(iii)
any change or amendment to a material contract, charter document or arrangement not in the ordinary course of business to which the Company is a party other than contracts which are to be terminated at or prior to the Closing;

 
(iv)
any loans made by the Company to any of affiliate of the Company or any of the Company’s employees, officers, directors, shareholders or any of its affiliates;

 
(v)
any declaration or payment of any dividend or other distribution or any redemption of any capital stock of the Company;

 
(vi)
any sale, transfer, or lease of any of the Company’s assets other than in the ordinary course of business;

 
(vii)
any other event or condition of any character which might have a material adverse effect on the Company;
 
 
 
(viii)
any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by Company except in the ordinary course of business and that is not material to the assets or financial condition of the Company; or

 
(ix)
any agreement or commitment by the Company to do any of the things described in this Section 2(c).

(d) Property . Except as set forth in the Company SEC Documents, the Company does not own any real estate and is not a party to any lease agreement.

(e) Taxes . The Company has filed all federal, state, county and local income, excise, franchise, property and other tax, governmental and/or related returns, forms, or reports, which are due or required to be filed by it prior to the date hereof, except where the failure to do so would have no material adverse impact on the Company, and has paid or made adequate provision in the financial statement included in the Company SEC Documents for the payment of all taxes, fees, or assessments which have or may become due pursuant to such returns or pursuant to any assessments received. The Company is not delinquent or obligated for any tax, penalty, interest, delinquency or charge.

(f) Contracts and Commitments . Except as contemplated under this Agreement or set forth in the Company SEC Documents, the Company is not a party to any contract or agreement.

(g) No Adverse Change . Since December 31, 2007, there has not been any Material Adverse Change in the financial condition of the Company, although Shareholders recognize that the Company has continued not to generate any revenue and has continued to operate at a loss as a result of ongoing expenses, including expenses relating to this Agreement and the consummation of the transactions contemplated hereby. A Material Adverse Change shall mean a material adverse change in the business, financial condition, operations or prospects of a person.

(h) No Defaults . The Company is not in violation of its certificate of incorporation or by-laws or any judgment, decree or order, applicable to it.

(i) Litigation . There are no material (i.e., claims which, if adversely determined based on the amounts claimed, would exceed ten thousand dollars ($10,000)) claims, actions, suits, proceedings, inquiries, labor disputes or investigations (whether or not purportedly on behalf of the Company) pending or, to Company’s knowledge, threatened against the Company or any of its assets, at law or in equity or by or before any governmental entity or in arbitration or mediation.

(j) Compliance with Laws . The Company, to its knowledge, is in full compliance with all laws applicable to it (including, without limitation, with respect to zoning, building, wages, hours, hiring, firing, promotion, equal opportunity, pension and other benefit, immigration, nondiscrimination, warranties, advertising or sale of products, trade regulations, anti-trust or control and foreign exchange or, to the Company’s knowledge, environmental, health and safety requirements).
 

(k) Contracts and Commitments . The Company is not a party to any contract of agreement other than agreements that will be terminated at or prior to the Closing.

(l) Intellectual Property . The Company has no intellectual property rights.

(m) No Broker . Except as set forth on Schedule 2(m), neither the Company nor any of its agents or employees has employed or engaged any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement. The Company shall indemnify and hold the Shareholders harmless against any loss, damage, liability or expense, including reasonable fees and expenses of counsel, as a result of any brokerage fees, commissions or finders’ fees which are due as a result of the consummation of the transaction contemplated by this Agreement.

(m) Reliance by Shareholders . The representations and warranties set forth in this Section 2 taken together, do not contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein and therein, when taken together, not misleading, and there is no fact which materially and adversely affects the business, operations or financial condition of the Company. Shareholders may rely on the representations set forth in this Section 2 notwithstanding any investigation it may have made.

3.    Representations and Warranties of Omphalos . Omphalos hereby represents, warrants, covenants and agrees as follows:
 
(a)    Organization and Authority .
 
 
(i)
Omphalos is a corporation duly organized, validly existing and in good standing under the laws of the British Virgin Islands.

 
(ii)
Omphalos has full power and authority to carry out the transactions provided for in this Agreement, and this Agreement constitutes the legal, valid and binding obligations of Omphalos, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws of general application affecting the enforcement of creditor’s rights and except that any remedies in the nature of equitable relief are in the discretion of the court. All necessary action required to be taken by Omphalos for the consummation of the transactions contemplated by this Agreement has been taken.

 
(iii)
The execution and performance of this Agreement will not constitute a breach of any agreement, indenture, mortgage, license or other instrument or document to which Omphalos is a party or by which its assets and properties are bound, and will not violate any judgment, decree, order, writ, rule, statute, or regulation applicable to Omphalos or its properties. The execution and performance of this Agreement will not violate or conflict with any provision of the certificate of incorporation or by-laws of Omphalos.
 

 
 
(iv)
The authorized and issued and outstanding capital stock of Omphalos are as set forth on Schedule 3(a)(iv) under the column "Omphalos Number of Shares." Except as provided in, contemplated by, or set forth in this Agreement, Omphalos has no outstanding or authorized warrants, options, other rights to purchase or otherwise acquire capital stock or any other Ompahalos securities, preemptive rights, rights of first refusal, registration rights or related commitments of any nature.

 
(v)
No consent, approval or agreement of any person, party, court, governmental authority, or entity is required to be obtained by Omphalos in connection with the execution and performance by Omphalos of this Agreement or the execution and performance by Omphalos of any agreements, instruments or other obligations entered into in connection with this Agreement.
 
(b)   Absence of Changes . Since September 30, 2007, to the best of Omphalos’s knowledge, there have not been:

 
(i)
any change in the consolidated assets, liabilities, or financial condition of Omphalos, except changes in the ordinary course of business which do not and will not have a material adverse effect on Omphalos;

 
(ii)
any damage, destruction, or loss, whether or not covered by insurance, materially and adversely affecting the assets or financial condition of Omphalos (as conducted and as proposed to be conducted);

 
(iii)
any change or amendment to a material contract, charter document or arrangement not in the ordinary course of business to which Omphalos is a party other than contracts which are to be terminated at or prior to the Closing;

 
(iv)
any loans made by Omphalos to any of affiliate of Omphalos or any of Omphalos’s employees, officers, directors, shareholders or any of its affiliates;

 
(v)
any declaration or payment of any dividend or other distribution or any redemption of any capital stock of Omphalos;
 
 
 
(vi)
any sale, transfer, or lease of any of Omphalos’s assets other than in the ordinary course of business;

 
(vii)
any other event or condition of any character which might have a material adverse effect on Omphalos;

 
(viii)
any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by Omphalos except in the ordinary course of business and that is not material to the assets or financial condition of Omphalos; or

 
(ix)
any agreement or commitment by Omphalos to do any of the things described in this Section 3(b)).

(c) Property . Omphalos does not own any real estate and is not a party to any lease agreement.

(d) Taxes . Omphalos has filed all applicable income, excise, franchise, property and other tax, governmental and/or related returns, forms, or reports, which are due or required to be filed by it prior to the date hereof, except where the failure to do so would have no material adverse impact on Omphalos, and has paid or made adequate provision in its financial statements for the payment of all taxes, fees, or assessments which have or may become due pursuant to such returns or pursuant to any assessments received. Omphalos is not delinquent or obligated for any tax, penalty, interest, delinquency or charge.

(e) No Adverse Change . Since December 31, 2006, except for the restructuring of Omphalos and its subsidiaries, there has not been any Material Adverse Change in the financial condition of Omphalos.

(f) No Defaults . Omphalos is not in violation of its certificate of incorporation or by-laws or any judgment, decree or order, applicable to it.

(g) Litigation . There are no material (i.e., claims which, if adversely determined based on the amounts claimed, would exceed ten thousand dollars ($10,000)) claims, actions, suits, proceedings, inquiries, labor disputes or investigations (whether or not purportedly on behalf of Omphalos) pending or, to Omphalos’s knowledge, threatened against Omphalos or any of its assets, at law or in equity or by or before any governmental entity or in arbitration or mediation.

(h) Compliance with Laws . Omphalos, to its knowledge, is in full compliance with all laws applicable to it (including, without limitation, with respect to zoning, building, wages, hours, hiring, firing, promotion, equal opportunity, pension and other benefit, immigration, nondiscrimination, warranties, advertising or sale of products, trade regulations, anti-trust or control and foreign exchange or, to Omphalos’s knowledge, environmental, health and safety requirements).
 

4.    Representations and Warranties of Shareholders . Each Shareholder hereby severally and not jointly warrants, covenants and agrees as follows:

(a)    Such Shareholder understands that the offer and sale of the Shares is being made only by means of this Agreement and understands that the Company has not authorized the use of, and the Shareholder confirms that he or she is not relying upon, any other information, written or oral, other than material contained in this Agreement. Such Shareholder is aware that the purchase of the Shares involves a high degree of risk and that such Shareholder may sustain, and has the financial ability to sustain, the loss of his or her entire investment, understands that no assurance can be given that the Company will be profitable in the future, that there is no public market for the Common Stock, and the Company can give no assurance that there will ever be a public market for the Common Stock. Furthermore, in subscribing for the Shares, such Shareholder acknowledges it is not relying upon any projections or any statements of any kind relating to future revenue, earnings, operations or cash flow in making an investment in the Shares.

(b)    Such Shareholder severally represents to the Company that he or she

(A)   is an accredited investor within the meaning of Rule 501 of the Commission under the Securities Act of 1933, as amended (the “Securities Act”) and it understands the meaning of the term “accredited investor.” The requirements for an accredited investor are as set forth in Exhibit A. Such Shareholder further represents that he or she has such knowledge and experience in financial and business matters as to enable the Shareholder to understand the nature and extent of the risks involved in purchasing the Shares. Such Shareholder is fully aware that such investments can and sometimes do result in the loss of the entire investment. Such Shareholder has engaged his or her own counsel and accountants to the extent that the Shareholder deems it necessary; or

(B)   is not acquiring the Shares for the account or benefit of, directly or indirectly, any U.S. Person. The Shareholder is not a U.S. Person. The Shareholder is acquiring the Shares for investment only and not with a view to resale or distribution and, in particular, it has no intention to distribute either directly or indirectly any of the Shares in the United States or to U.S. Persons. The Shareholder acknowledges that the Shareholder has not acquired the Shares as a result of, and will not itself engage in, any "directed selling efforts" (as defined in Regulation S under the 1933 Act) in the United States in respect of the Shares which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of the Shares; provided, however, that the Shareholder may sell or otherwise dispose of the Shares pursuant to registration of the Shares pursuant to the 1933 Act and any applicable state and provincial securities laws or under an exemption from such registration requirements and as otherwise provided.
 

(c)    All of the information provided by such Shareholder in his or her Confidential Questionnaire is true and correct in all material respects.

(d)    Such Shareholder is acquiring the Shares pursuant to this Agreement for his or her own account, for investment and not with a view to the sale or distribution thereof, for the Shareholder’s own account and not on behalf of others; has not granted any other person any interest or participation in or right or option to purchase all or any portion of the Shares; is aware that the Shares are restricted securities within the meaning of Rule 144 of the Commission under the Securities Act, and may not be sold or otherwise transferred other than pursuant to an effective registration statement or an exemption from registration; and understands and agrees that the certificates for the Shares shall bear the Company’s standard investment legend. The Shareholder understands the meaning of these restrictions.

(e)    The Shareholder will not transfer any Shares except in compliance with all applicable federal and state securities laws and regulations, and, in such connection, the Company may request an opinion of counsel reasonably acceptable to the Company as to the availability of any exemption.

(f)    Such Shareholder represents and warrants that no broker or finder was involved directly or indirectly in connection with his or her purchase of the Shares pursuant to this Agreement. Such Shareholder shall indemnify the Company and hold it harmless from and against any manner of loss, liability, damage or expense, including fees and expenses of counsel, resulting from a breach of the Shareholder’s warranty contained in this Paragraph 3(f).

(g)    Such Shareholder understands that he or she has no registration rights with respect to the Shares.

(h)    Such Shareholder represents and warrants that the address set forth on Schedule I to this Agreement is its true and correct address, and understands that the Company will rely on this representation in making filings under state securities or blue sky laws.

(i) Such Shareholder is the record and beneficial owner of the Omphalos Shares, free and clear of any and all Liens. Such Shareholder has the power and authority to sell, transfer, assign and deliver the Omphalos Shares as provided in this Agreement, and such delivery will convey to the Company good and marketable title to such Omphalos Shares, free and clear of any and all liens

5. Closing Deliveries .
 
(a) On the Closing Date, the Company shall deliver or cause to be delivered to each Shareholder:
 
(i) a certificate registered in the name of each Shareholder representing the number of shares of Common Stock set forth on Schedule I;
 

(ii) a legal opinion of counsel to the Company acceptable to the Shareholders;

(iii) undated letters of resignation from each of the directors and officers of the Company;

(b) On the Closing Date, each Shareholder shall deliver or cause to be delivered to the Company:

(i) the certificate representing such Shareholder’s shares of Omphalos capital stock.

6. Conditions to the Obligation of the Shareholders and the Company to Close . The obligations of Shareholders under this Agreement are subject to the satisfaction of the following conditions unless waived by Shareholders:
 
(a)   Representations and Warranties . On the Closing Date, the representations and warranties of the Company shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on such date, and the Company shall have performed all of their respective obligations required to be performed by them pursuant to this Agreement at or prior to the Closing Date, and Shareholders shall have received a certificate of the Company to such effect and as to any other matters set forth in this Agreement.
 
(b)   No Material Adverse Change . No Material Adverse Change in the business or financial condition of the Company shall have occurred or be threatened since the date of this Agreement, and no action, suit or proceedings shall be threatened or pending before any court of governmental agency or authority or regulatory body seeking to restraint, prohibition or the obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement or that, if adversely decided, has or may have a Material Adverse Effect.
 
(c)   Liabilities . On the Closing Date, the Company’s total liabilities shall not exceed $5,000.
 
(d)   Legal Opinion . The Shareholders shall have received a legal opinion from the Company’s legal counsel, acceptable to the Shareholders
 
(e)   Resignations . All officers shall have tendered resignations. Sole director of the Company shall have tendered his resignation, effective upon compliance with Section 14f: Notice to Shareholders under the Securities Exchange Act of 1934.
 
(f)   Appointments . Existing Board of Directors shall have appointed a new director, Danny Chen effective at closing.
 
 
7. Conditions to the Obligation of the Company to Close . The obligations of the Company under this Agreement are subject to the satisfaction of the following conditions unless waived by the Company:
 
(a) Representations and Warranties . On the Closing Date, the representations and warranties of Omphalos and the Shareholders shall be true and correct in all material respects on and as of the Closing Date with the same force and effect as if made on such date, and Omphalos shall have performed all of their respective obligations required to be performed by them pursuant to this Agreement at or prior to the Closing Date, and the Company shall have received a certificate of the Company to such effect.
 
(b) No Material Adverse Change . No Material Adverse Change in the business or financial condition of Omphalos shall have occurred or be threatened since the date of this Agreement, and no action, suit or proceedings shall be threatened or pending before any court of governmental agency or authority or regulatory body seeking to restraint, prohibition or the obtain damages or other relief in connection with this Agreement or the consummation of the transactions contemplated by this Agreement or that, if adversely decided, has or may have a Material Adverse Effect.
 
8.    Miscellaneous .
 
(a)    This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof, superseding any and all prior or contemporaneous oral and prior written agreements, understandings and letters of intent. This Agreement may not be modified or amended nor may any right be waived except by a writing which expressly refers to this Agreement, states that it is a modification, amendment or waiver and is signed by all parties with respect to a modification or amendment or the party granting the waiver with respect to a waiver. No course of conduct or dealing and no trade custom or usage shall modify any provisions of this Agreement.
 
(b)    This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.
 
(c)    This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.
 
(d)    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same document.
 
(e)    The various representations, warranties, and covenants set forth in this Agreement or in any other writing delivered in connection therewith shall survive the issuance of the Shares.
 
 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have executed this Share Exchange Agreement the day and year first above written.

 
SOYODO GROUP HOLDINGS, INC.

By: ________________________________________
 
OMPHALOS CORP.

By: _________________________________________

 


Exhibit A

Accredited investors

A Shareholder who meets any one of the following tests is an accredited investor:

(a)   The Shareholder is an individual who has a net worth, or joint net worth with the Shareholder’s spouse, of at least $1,000,000.

(b)   The Shareholder is an individual who had individual income of more than $200,000 (or $300,000 jointly with the Shareholder’s spouse) for the past two years, and the Shareholder has a reasonable expectation of having income of at least $200,000 (or $300,000 jointly with the Shareholder’s spouse) for the current year.

(c)   The Shareholder is an officer or director of the Company.

(d)   The Shareholder is a bank as defined in section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity.

(e)   The Shareholder is a broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934.

(f)   The Shareholder is an insurance company as defined in section 2(13) of the Securities Act.                   

(g)   The Shareholder is an investment company registered under the Investment Company Act of 1940 or a business development company as defined in section 2(a)(48) of that Act.

(h)   The Shareholder is a small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958.

(i)   The Shareholder is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors.

(j)   The Shareholder is a private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940.

(k)   The Shareholder is an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
 

(l)   The Shareholder is a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Commission under the Securities Act.

(m)   The Shareholder is an entity in which all of the equity owners are accredited investors (i.e., all of the equity owners meet one of the tests for an accredited investor).

If an individual Shareholder qualifies as an accredited investor, such individual may purchase the Shares in the name of his or her individual retirement account (“IRA”).