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<SEC-DOCUMENT>0001010549-08-000503.txt : 20080613
<SEC-HEADER>0001010549-08-000503.hdr.sgml : 20080613
<ACCEPTANCE-DATETIME>20080613114051
ACCESSION NUMBER:		0001010549-08-000503
CONFORMED SUBMISSION TYPE:	10KSB/A
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20061231
FILED AS OF DATE:		20080613
DATE AS OF CHANGE:		20080613

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CHINA RECYCLING ENERGY CORP
		CENTRAL INDEX KEY:			0000721693
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-BUSINESS SERVICES, NEC [7389]
		IRS NUMBER:				900093373
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB/A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-12536
		FILM NUMBER:		08897454

	BUSINESS ADDRESS:	
		STREET 1:		429 GUANGDONG ROAD
		CITY:			SHANGHAI
		STATE:			F4
		ZIP:			200001
		BUSINESS PHONE:		86-21 6336-8686

	MAIL ADDRESS:	
		STREET 1:		429 GUANGDONG ROAD
		CITY:			SHANGHAI
		STATE:			F4
		ZIP:			200001

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CHINA DIGITAL WIRELESS INC
		DATE OF NAME CHANGE:	20040810

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BOULDER ACQUISITIONS  INC
		DATE OF NAME CHANGE:	20020430

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	BOULDER BREWING CO
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB/A
<SEQUENCE>1
<FILENAME>creg10ksba4.htm
<DESCRIPTION>FORM 10KSB/A
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation: Form 10-KSB/A</title>
</head>

<body>

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  <hr color="#000000" size="5">
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<b>UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
</b><font size="2">Washington, D.C. 20549</font></p>
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<b>FORM 10-KSB/A-4</b></p>
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<b>ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</b></p>
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For the fiscal year ended December 31, 2006</p>
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<i>Commission file number: 333-120431</i></p>
<p dir="ltr" style="padding:0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; " align="center">
<b><font size="6">China Recycling Energy Corporation</font></b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<u>(Known as &quot;China Digital Wireless, Inc.&quot; prior to March 08, 2007)<br>
</u>(Name of Small Business Issuer in its Charter)</p>
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<b><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Nevada&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br>
</u></b>(State or other jurisdiction of incorporation or organization)</p>
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<u><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 90-0093373&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><br>
</u>(I.R.S. Employer Identification No.)</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>429 Guangdong Road<br>
</b><u><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Shanghai, China 200001&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><br>
</u>(Address of principal executive offices)</p>
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<u><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; N/A&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b><br>
</u>(Zip Code)</p>
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Issuer's telephone number: (011) 86-21-6336-8686</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>Securities registered pursuant to Section 12(b) of the Act: None</b></p>
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<b>Securities registered pursuant to Section 12(g) of the Act: None</b></p>
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Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. <font face="Wingdings 2" size="3">&#163;</font></p>
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Page 1</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
<font face="Wingdings 2" size="3">R</font>&nbsp;&nbsp;&nbsp; No
<font face="Wingdings 2" size="3">&#163;</font></p>
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB/A or any
amendment to this Form 10-KSB/A. <font face="Wingdings 2" size="3">&#163;</font></p>
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Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes <font face="Wingdings 2" size="3">&#163;</font>&nbsp;&nbsp;&nbsp;
No <font face="Wingdings 2" size="3">R</font></p>
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The issuer's revenues for its most recent fiscal year ended December 31, 2006
were US$ 2,889,436.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The aggregate market value of the voting common stock held by non-affiliates
computed by reference to the price at which the common stock was sold, or the
average bid and asked prices of such common stock, as of March 31, 2007, is
$3,429,453. The number of shares of common stock outstanding as of March 31,
2006 was 17,147,268.</p>
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Transitional Small Business Disclosure Format (check one): Yes
<font face="Wingdings 2" size="3">&#163;</font>&nbsp;&nbsp;&nbsp; No
<font face="Wingdings 2" size="3">R</font></p>
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<b>CHINA RECYCLING ENERGY CORPORATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
(KNOWN AS &quot;CHINA DIGITAL WIRELESS, INC.&quot; PRIOR TO MARCH 08, 2007)</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>FORM 10-KSB/A</b></p>
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<b>TABLE OF CONTENTS</b></p>
<div align="center">
  <center>
  <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td vAlign="bottom" width="1%"><b><font face="Times New Roman" size="2">
      PART I</font></b></td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">&nbsp;</td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 1.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Description of Business</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      2.</font></td>
      <td vAlign="bottom" width="79%"><font face="Times New Roman" size="2">
      Description of Property</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 3.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Legal Proceedings</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      4.</font></td>
      <td vAlign="bottom" width="79%"><font face="Times New Roman" size="2">
      Submission of Matters to a Vote of Security Holders</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">&nbsp;</td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><b><font face="Times New Roman" size="2">
      PART II</font></b></td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">&nbsp;</td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 5.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Market For Common Equity and Related
      Stockholder Matters</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      6.</font></td>
      <td vAlign="bottom" width="79%"><font face="Times New Roman" size="2">
      Management's Discussion and Analysis or Plan of Operation</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 7.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Financial Statements</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      8.</font></td>
      <td vAlign="bottom" width="79%"><font face="Times New Roman" size="2">
      Changes In and Disagreements With Accountants on Accounting and Financial
      Disclosure</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 8A.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Controls and Procedures.</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      8B.</font></td>
      <td vAlign="bottom" width="79%"><font face="Times New Roman" size="2">
      Other Information</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">&nbsp;</td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><b><font face="Times New Roman" size="2">
      PART III</font></b></td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">
      <p style="MARGIN-LEFT: 60pt">&nbsp;</td>
      <td vAlign="bottom" width="79%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Item 9.</font></td>
      <td vAlign="bottom" width="79%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Directors, Executive Officers,
      Promoters and Control Persons; Compliance With Section 16(a) of the
      Exchange Act</font></td>
    </tr>
  </table>
  </center>
</div>
<div align="center">
  <center>
  <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      10.</font></td>
      <td vAlign="bottom" width="78%"><font face="Times New Roman" size="2">
      Executive Compensation.</font></td>
      <td vAlign="bottom" align="right" width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">Item 11.</font></td>
      <td vAlign="bottom" width="78%" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">Security Ownership of Certain
      Beneficial Owners and Management and Related Shareholder Matters</font></td>
      <td vAlign="bottom" align="right" width="1%" bgcolor="#E9F1F8">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      12.</font></td>
      <td vAlign="bottom" width="78%"><font face="Times New Roman" size="2">
      Certain Relationships and Related Transactions</font></td>
      <td vAlign="bottom" align="right" width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">Item 13.</font></td>
      <td vAlign="bottom" width="78%" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">Exhibits</font></td>
      <td vAlign="bottom" align="right" width="1%" bgcolor="#E9F1F8">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%"><font face="Times New Roman" size="2">Item
      14.</font></td>
      <td vAlign="bottom" width="78%"><font face="Times New Roman" size="2">
      Principal Accountant Fees and Services</font></td>
      <td vAlign="bottom" align="right" width="1%">
      <p style="MARGIN-LEFT: 20pt">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="1%">
      <p style="MARGIN-LEFT: 60pt">&nbsp;</td>
      <td vAlign="bottom" width="78%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="78%" colSpan="2" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">Consolidated Financial Statements</font></td>
      <td vAlign="bottom" align="right" width="1%" bgcolor="#E9F1F8">
      <font face="Times New Roman" size="2">F-1</font></td>
    </tr>
  </table>
  </center>
</div>
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<font face="Times New Roman" size="2">Page 2</font></p>
<hr color="#000000" SIZE="5"><p style="PAGE-BREAK-BEFORE: always">

<font FACE="Times New Roman" SIZE="2"><b>
<p align="center">EXPLANATORY NOTE </p>
</b>
<p align="justify">On March 06, 2008, March 06, 2008 and March 17, 2008, China
Recycling Energy Corporation (formerly known as China Digital Wireless, Inc.)
(either the &quot;Company,&quot; &quot;we&quot; or &quot;our&quot;) filed the Amendment No.1, Amendment No.2
and Amendment No.3, respectively, to restate the financial statements contained
on the previously filed Form 10KSB for the year ended December 31, 2006 to
reflect the correction of error on the impairment on deposit for business
acquisition and property and equipment of approximately $7.1 million to the
consolidated statement of operations. </p>
<p align="justify">This Amendment No. 4 on Form 10-KSB/A (&quot;Amendment No.4 &quot;) is
being filed to amend the above-described Amendment No.1, Amendment No.2 and
Amendment No.3 to revise and correct the following items and disclosures: </p>
<blockquote>
<p align="justify">To revise our disclosures in Item 8A to describe the effect
of the restatement made in Amendment No.1, Amendment No.2 and Amendment No.3 on
our officers' conclusions regarding the effectiveness of the Company's
disclosure controls and procedures. </p>
</blockquote>
<p align="justify">In addition, in accordance with Rule 12b-15 promulgated under
the Securities and Exchange Act of 1934, as amended, this Amendment also
includes updated certifications from our President, Chief Financial Officer, and
Chief Executive Officer as Exhibits 31.1, 31.2, 31.3and 32.1, 32.2 and 32.3. The
remaining Items contained within this Amendment No. 4 consist of all other Items
originally contained in our Amendment No.3 to Form 10-KSB for the year ended
December 31, 2006 filed on March 17, 2008. This Amendment No. 4 does not reflect
events occurring after the filing of the Original Form 10-KSB for Year 2006
which is filed on April 17, 2007 or modify or update those disclosures in any
way other than as required to reflect the effects of the restatements. </font>
<font FACE="Times New Roman" SIZE="1"><b></p>
</b></font>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>PART I</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
When we use the terms &quot;we,&quot; &quot;us,&quot; &quot;our&quot; and &quot;the Company,&quot; we mean China Digital
Wireless, Inc., a Nevada corporation, and its wholly-owned subsidiary, Sifang
Holdings Co., Ltd., and Sifang Holdings Co., Ltd.'s wholly-owned subsidiary,
Shanghai TCH Data Technology Co., Ltd. Since March 08, 2007, China Digital
Wireless, Inc. has changed its name to &quot;China Recycling Energy Corporation&quot;.
However, since this Form 10KSB/A is for fiscal year ended December 31, 2006 when
the name change has not occurred, we still use China Digital Wireless, Inc. as
the full name of the reporting issuer on this Form 10KSB/A.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The information set forth in this Report on Form 10-KSB/A including, without
limitation, that contained in Item 6, Management's Discussion and Analysis or
Plan of Operation, contains &quot;forward looking statements&quot; within the meaning of<br>
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements relate to future
events or our future financial performance, and involve risks and uncertainties.
In some cases, you can identify forward-looking statements by terminology such
as &quot;may,&quot; &quot;will,&quot; &quot;could,&quot; &quot;expect,&quot; &quot;plan,&quot; &quot;intend,&quot; &quot;anticipate,&quot; &quot;believe,&quot;
&quot;estimate,&quot; &quot;predict,&quot; &quot;potential,&quot; or &quot;continue,&quot; or the negative of such terms
or other comparable terminology. These statements are only predictions. Actual
results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this
report. Although management believes that the assumptions made and expectations
reflected in the forward-looking statements are reasonable, there is no
assurance that the underlying assumptions will, in fact, prove to be correct or
that actual future results will not be different from the expectations expressed
in this report. In evaluating these statements, you should specifically consider
various factors, including the risks outlined in the &quot;Risk Factors&quot; section
below.</p>
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<b>ITEM 1. DESCRIPTION OF BUSINESS</b></p>
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<b>General</b></p>
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Our current operations include providing value added information services,
cellular phone distribution and advertising services through our Chinese
operating subsidiaries. In 2006 and first quarter of 2007, we also began to
engage in recycling energy business, providing energy saving and recycling
products and services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Overview</b></p>
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Business History. We originally began operations as a Colorado corporation known
as Boulder Brewing Company, or Boulder Brewing. We were incorporated in Colorado
on May 8, 1980 and operated as a microbrewery of various beers. Boulder Brewing
was unable to become profitable within any segment of its core business, became
illiquid, and was forced to divest itself of all of its assets. Boulder Brewing
became dormant without any operations or assets in the second quarter of 1990.</p>
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Page 3</p>
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In September 2001, Boulder Brewing changed its state of incorporation from
Colorado to Nevada and changed its name to Boulder Acquisitions, Inc., or
Boulder Acquisitions. From the date of reincorporation until June 23, 2004
Boulder Acquisitions had no material operations or assets.</p>
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On June 23, 2004, we completed a stock exchange transaction with the
shareholders of Sifang Holdings Co., Ltd. (&quot;Sifang Holdings&quot;). The exchange was
consummated under Nevada and Cayman Islands law pursuant to the terms of a
Securities Exchange Agreement dated as of June 23, 2004 by and among Boulder
Acquisitions, Sifang Holdings and the shareholders of Sifang Holdings. Pursuant
to the Securities Exchange Agreement, we issued 13,782,636 shares of our common
stock to the shareholders of Sifang Holdings, representing approximately 89.7%
of our post-exchange issued and outstanding common stock, in exchange for 100%
of the outstanding capital stock of Sifang Holdings. We presently carry on the
business of Sifang Holdings' wholly-owned subsidiary, Shanghai TCH Data
Technology Co., Ltd., a corporation organized under the laws of the PRC, or TCH.</p>
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Effective August 6, 2004, we changed our name from Boulder Acquisitions, Inc. to
China Digital Wireless, Inc.</p>
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On January 24, 2007, a group of individuals purchasers entered a share purchase
agreement with a group of shareholders of the Company to purchase 12,911,835
shares of Company's common stocks owned by Sellers, $ 0.001 par value, for an
aggregate purchase price of $ 490, 000.00. Purchasers are Guohua Ku, Hanqiao
Zheng, Ping Sun, Qianping Huang, Xiaohong Zhang and Lixia Zhang. Sellers are
Caihua Tai, Ming Mao, Ying Shi, Sixing Fu, Xiaodong Zhang, Tianqi Huang, Wei
Huang, Jing Song, Ruijie Yu, and Weiping Jing, all of whom are shareholders of
Company.</p>
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On March 8, 2007, we changed our name from China Digital Wireless, Inc. to China
Recycling Energy Corporation.</p>
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Our business is primarily conducted through our wholly-owned subsidiary, Sifang
Holdings and its wholly-owned subsidiary, TCH. TCH was established as a foreign
investment enterprise in Shanghai under the laws of the PRC on May 25, 2004,
with registered capital of $7.2 million.</p>
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Our current operations were originally a business division of Sifang
Information. Sifang Information is a Shanghai-based privately owned enterprise
established under the laws of the PRC on August 14, 1998. Sifang Information is
engaged in the business of pager and mobile phone distribution and provides
value added information services to the customers in the Shanghai metropolitan
area. In March 2004, Sifang Information spun off its mobile phone distribution
business and the majority of its value added information services business to
TCH. As the acquiring entity under common control, TCH initially recognized all
the assets and liabilities transferred at their carrying amounts in the accounts
of Sifang Information at the date of transfer under the guidance of the
Statement of Financial Accounting Standard (&quot;SFAS&quot;) No. 141, Appendix D.</p>
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On May 26, 2004, Sifang Information exchanged 100% of the equity interest in TCH
for 100% of the equity interest in Sifang Holdings. Since the ultimate owners of
the three entities were the same owners and the three entities remained under
common control, the ownership exchange transaction was accounted for at
historical costs under the guidance of SFAS No. 141, Appendix D. Prior to May
26, 2004, there were no activities in Sifang Holdings. As a result of the
exchange of ownership between TCH and Sifang Holdings, TCH's historical
financial statements became the historical financial statements of Sifang
Holdings.</p>
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Page 4</p>
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As a result of the spin-off, TCH engages in the business of mobile phone
distribution and provides pager and mobile phone users with access to certain
value-added information reformatted by TCH. TCH purchases mobile phones from
first tier distributors and sells them to retailers with a mark-up. In the
process of providing value-added information services through monthly
subscription agreements with various users, TCH purchases trading activity
information from stock exchanges, comments and analysis on PRC stock markets
provided by certain reputable security and investment companies, lottery
information, weather forecast, and other value-added products and reformats the
aforementioned information through decoding and recoding and then has the
reformatted information transmitted by Sifang Information, via service
contracts, to pager users. The value-added information is constantly saved on
TCH's server in order for mobile phone users to dial in via China Mobile or
China Unicom. By signing a monthly subscription agreement, wireless receiver
users agree to make advance payments for our services for either three or
six-month subscription periods.</p>
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In the spin-off process, the cost of sales included in the Company's financial
statements is directly related to the product revenue and the cost of services
is directly related to different types of service. The business taxes (similar
to sales taxes in the U.S.) are related only to service revenue at a tax rate of
approximately 3.3%. The selling expenses are allocated based on the relationship
between expense and revenue (such as commission) and payroll records. The
general and administrative expenses are allocated based on management hours
spent and payroll records. The income tax provision has been calculated on a
separate company basis and is in line with the historical actual income tax
provision at the Sifang Information level assuming that all income taxes had
been paid by Sifang Information and no income tax liability was in existence in
the periods reported in the accompanying financial statements. Management
believes that the costs, operating expenses, interest expense, and income tax
provision included in the Company's financial statements are a reasonable
representation of the costs and expenses that would have been incurred if the
Company had performed these functions as a stand-alone company.</p>
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We launched a new digital media project to move into the media market in China
in 2005. In conjunction with charitable organizations, we have installed
donation boxes with digital TV incorporated on top of them in the main lobbies
of commercial banks, hotels, malls and other public locations to call the
public's attention to the charity and broadcast commercial advertisements.</p>
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Value-Added Information Services for Mobile Phone and Pager Users. We render
value-added information services in China by purchasing content from third-party
providers and reformatting that content. Our value-added information services
enable wireless receiver (mobile phone and pager) users in China to access
financial information and various entertainment-related services. We contract
with our affiliated wireless service providers to transmit the reformatted
content to customers of China's various network operators.</p>
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The primary focus of our value-added information services is to provide wireless
receiver users in China with access to financial information. We derive the vast
majority of our value-added information services revenue from our financial
information business. Our financial information software, Sifang Gutong, allows
our customers to access stock and currency exchange information and execute
stock trades. We are one of the largest stock information and trading
value-added information service providers in China.</p>
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We began providing our entertainment-related services, including icons, screen
savers, multiplayer games, Western horoscopes, jokes, and sports and
entertainment news during the latter part of 2003. These services are ancillary
to our financial information services and they represent only a small portion of
our value-added information services revenue at the present time.</p>
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Page 5</p>
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Leveraging our experience and understanding of the wireless value-added services
market in China, we have consistently purchased and reformatted content,
applications and technologies that are popular in the Chinese wireless market.
To further enhance and differentiate our services, we have entered into, and
will continue to actively pursue, collaborative relationships with third parties
to customize, market and provide access to their content through various
wireless technologies to Chinese consumers. In addition, all of our services are
promoted by our sales force and supported by our customer service team, each of
which is strategically based in Shanghai.</p>
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In order to meet ownership requirements under Chinese law that restrict us, as a
foreign company, from operating in certain industries such as value-added
telecommunication and Internet services, we have entered into information
service and cooperation agreements with two of our affiliates that are
incorporated in the People's Republic of China (&quot;PRC&quot; or &quot;China&quot;): Shanghai
Sifang Information Technology Co. (&quot;Sifang Information&quot;) and Tianci. We hold no
ownership interest in Sifang Information or Tianci. Sifang Information and
Tianci contract with China Mobile Communications Corporation, or China Mobile,
and China United Telecommunications Corporation, or China Unicom, respectively,
to provide wireless value-added information services to wireless receiver
customers in China via China Mobile and China Unicom. Sifang Information
transmits those services to customers of China Mobile and China Unicom on behalf
of itself and Tianci pursuant to a signed agreement between Sifang Information
and Tianci.</p>
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Mobile Phone Distribution. We distribute various mobile phone brands in the
Shanghai, China region. We distribute mobile phones manufactured primarily by
SAMSUNG Electronics Co., Ltd. (&quot;Samsung&quot;) and NOKIA Corporation (&quot;Nokia&quot;), and
to a lesser extent, by Motorola, Inc. (&quot;Motorola&quot;). We began distributing
Motorola mobile phones in early 2002, Samsung mobile phones in November 2002 and
Nokia mobile phones in March 2005. We began discontinuing our Motorola mobile
phone distribution business on June 30, 2004. We are a distributor, for the
Shanghai region, of over ten different mobile phone models manufactured by
Samsung and plan to increase our sales of Samsung mobile phones.</p>
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Most of the Samsung models we distribute are compatible with the GSM network and
only a few Samsung models we distribute are compatible with the Code Division
Multiple Access, or CDMA, network.</p>
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There are three main first-tier wholesalers of Samsung phones in China:<br>
Shanghai Taili Communication Equipment Co., Ltd., Shenzhen Tianyin Communication
Development Co., Ltd., and Guangzhou Yingtai Data Power Technology Co., Ltd.
These wholesalers contract, through local branches, with sub-wholesalers to
distribute each model in a defined area. We have contracts with Shanghai branch
offices of the three main first-tier wholesalers, making us a sub-wholesaler
distributor of nine Samsung mobile phone models in the Shanghai region.</p>
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We have rebate programs with Shanghai Taili Communication Equipment Co., Ltd.
and Shenzhen Tianyin Communication Development Co., Ltd. whereby we are credited
a certain portion of the sales price we paid to the first-tier wholesaler if we
are able to fulfill certain sales volume prescribed by that first-tier
wholesaler. As a result, we are entitled to receive certain rebates and credits
for the inventory held and sold by us within a specified period of time as set
by the first-tier wholesaler offering the rebate program.</p>
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Digital Advertising. We launched a new digital media project to move into the
media market in China in 2005. In conjunction with charitable organizations, we
have installed donation boxes with digital TV incorporated on top of them in the
main lobbies of commercial banks, hotels, malls and other public locations to
call the public's attention to the charity and broadcast commercial
advertisements.</p>
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Page 6</p>
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We have an agreement with China Charity Foundation (&quot;CCF&quot;), a national
non-profit charitable organization, which enables us to install donation boxes
for CCF in banks and other commercial locations throughout China that will also
have the Company's out-of-home digital television advertising media platform
attached. The completion of this agreement enables us to accelerate the
placement of out-of-home digital television platforms, particularly in banks
across China. We negotiate placement of the donation boxes and digital
television media platform with banks and other commercial entities that wish to
support the national charity. The China Banking Regulatory Commission (&quot;CBRC&quot;)
has previously agreed, pending completion of the agreement with CCF, to support
and coordinate this effort with respect to approvals of donation box placements
in banks throughout China. This agreement facilitates the continued placement of
platforms with little or no direct costs. We believe that such costs may
constitute as much as 30% of the direct costs of competitors based upon an
analysis of publicly available information.</p>
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We have placed more than 850 multimedia donation boxes in the inbound area of
Shanghai and other arranged spots will be rolled out in the public places with
high traffic flow. Based on Shanghai, our strategy is to expand our network to
penetrate other large and mid-sized developed cities throughout China. We
believe the earnings potential from the advertising service will be a new source
of profit in view of the upcoming Special Olympic World Summer Games in 2007 and
World Exposition in 2010 to be held in Shanghai.</p>
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During the year ended December 31, 2005, TCH rendered advertisement designing
and producing services to Shanghai Tianci Real Estate Co. Ltd. (&quot;Tianci Real
Estate&quot;) for publicity and promoting its apartment. Net advertising service
revenue of $1,738,878 was derived from this service. TCH performed such services
via an agent, Shanghai Sifang Media Co., Ltd. (&quot;Sifang Media&quot;), which is a
related company that granted the license to provide advertising in China.</p>
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In January 2005, Sifang Media and TCH entered into the &quot;Bank Digital TV's
Cooperation Agreement&quot;, where TCH will assist in the promotion of TV ads for
various customers, including Tianci Real Estate. TCH received a net fee of
$2,620,044 for providing the service from January 2005 to December 2005. There
was an &quot;Advertisement Agency Contract&quot; between Tianci Real Estate and Sifang
Media, which expired in November 2005. In June and September 2005, Sifang Media,
TCH and two unrelated customers, entered into certain agreements, where TCH will
assist in the promotion of TV ads for these customers.</p>
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In the third quarter of 2006, the Ministry of Information Industry of the
People's Republic of China initiated a nation-wide management specific plan as
well as introduced a series of policies and measures to regulate the SP market.
With the introduction of these policies and measures that set very strict rules
on the provisions of information services provided by value-added service
providers, our advertising service business was seriously affected. We generated
only $ 334,844 revenue from the above-mentioned advertising services in 2006.</p>
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<b>Energy Saving Products.</b></p>
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In December 2005, TCH entered into a series of agreements to purchase (i) 95% of
the equity interests of Shanghai Kena Energy Saving Electric Co Ltd (&quot;Kena&quot;) for
an aggregate purchase price of RMB 28,500,000 (approximately $3,532,000); (ii) a
related patent from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000); and (iii) related rights to make a patent
application from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000). The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February 10, 2006, these agreements were amended to impose an additional
condition on Mr. Zhang Naiyao, the transferor of the patent and holder of the
right to make the patent application, that if he fails to provide the necessary
technical assistance services to enable TCH to use the patented technology in
producing products on a large scale that meet the standards set by the Company
within one year, TCH shall have the right to demand the return of the relevant
payment received by him in full and to terminate the agreement for the
assignment of the patent and the right to apply for registration of the patent.
The amendments also set forth the arrangement for payment of the purchase price
between TCH and Sifang Information. The purchase price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for registration of the patent shall be paid by Sifang Information on
behalf of TCH. According to the amended agreements, the amount of the purchase
consideration paid by Sifang Information on behalf of TCH will be applied to
offset the trade and other receivables owed to TCH by Sifang Information.</p>
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Page 7</p>
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Kena was established on April 26, 2005 and it specializes in the research,
development and manufacture of energy-saving products, as well as illumination
projects in China. The patent and patent application mentioned above relate to a
&quot;three phase transformer&quot; which is used in connection with a power supply system
and utilizes technology that allows manufacturers to produce transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.</p>
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Mr. Zhang Naiyao failed to meet the condition mentioned-above within the period
prescribed. In 2006, we decided not to pursue the above-mentioned acquisition of
Kena. All the agreements in connection with the Kena acquisition were terminated
by TCH and Kena. We also reviewed the future economic value of the deposit for
the anticipated business acquisition of Kena and determined that future
undiscounted cash flows associated with this deposit were uncertain and may not
be sufficient to recover their carrying values and so was fully written down as
of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Other Energy Recycling and Saving Products.</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In December 2006, TCH began to engage in other activities in the energy saving
and recycling industry, including purchasing certain equipments, devices,
hardware and software for the construction and installation of top gas recovery
turbine system (&quot;TRT&quot;) and other renewable energy products. TRT is an
electricity generating system that utilizes the exhaust pressure and heat
produced in the blast furnace of steel mill to generate electricity. It has
significant commercial value for the steel mills. TCH plans to use the purchased
properties as investment in several TRT projects that TCH expects to pursue with
several large Chinese steel companies in year 2007.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On April 08, 2007, our Board of Directors approves and makes effective a TRT
Project Joint-Operation Agreement (&quot;Joint-Operation Agreement&quot;) which is
conditionally entered on February 01, 2007 between Shanghai TCH Data Technology
Co., Ltd. (&quot;TCH&quot;) and Xi'an Yingfeng Science and Technology Co., Ltd.(&quot;Yingfeng&quot;).
Yingfeng is a Chinese company that is located in Xi'an, Shaanxi Province, China,
and is engaging in the business of designing, selling, installing, and operating
TRT systems and other renewable energy products.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Under the Joint-Operation Agreement, TCH and Yingfeng will jointly pursue a top
gas recovery turbine project (&quot;Project&quot;) which is to design, construct, install
and operate a TRT system in Xingtai Iron and Steel Company, Ltd. (&quot;Xingtai&quot;).
This project was originally initiated by a Contract to Design and Construct TRT
System (&quot;Project Contract&quot;) entered by Yingfeng and Xingtai on September 26,
2006. Due to Yingfeng's lack of capital in pursuing this Project alone, Yingfeng
sought TCH's cooperation. After intensive and substantial inquiry and
assessment, TCH agreed to pursue this project with Yingfeng in the
joint-operation mode. Under the terms of the Joint-Operation Agreement, TCH
provides various forms of investments and properties into the Project including
cash, hardware, software, equipments, major components and devices. In return,
TCH becomes entitled to all the rights, titles, benefits and interests that
Yingfeng originally had under the Project Contract, including but not limited to
the cash payment made by Xingtai on regular basis and other property rights and
interests.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 8</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Yingfeng remains liable for providing all the manpower, expertise and skills to
design, construct, install, maintain and operate the TRT system under the terms
of the Project Contract and also takes responsibility to manage the properties
that TCH possesses in this Project. As for consideration, TCH will make monthly
payment of 30,000 RMB Yuan (approximately US $ 3,900) to Yingfeng as
compensation for their effort in managing TCH's properties.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Prior to the approval by the Board of Registrant, TCH and Yingfeng have taken
several preliminary actions in first quarter of 2007 in preparation for the full
pursuit of the Project, including selecting and purchasing necessary components
and software for TRT system, organizing and training the technician team for the
Project and developing the construction and installation plan for the TRT
system.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Financial Services.</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our primary focus with regard to value-added information services is the
provision of financial information services utilizing our Sifang Gutong
software. This software, developed by Chengao, utilizes the JAVA and BREW
platforms. JAVA and BREW utilize the more advanced 2.5G technology standard,
which enables high-capacity wireless data transmissions. As a result, services
offered over these platforms are more sophisticated and offer users higher
quality graphics and richer content and interactivity, commanding a premium
price over our other services. Our Sifang Gutong software enables our mobile
phone and pager customers to access quotes and retrieve customized
investment-related information, as well as access our currency exchange
information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Gutong provides our mobile phone and pager customers with the ability to
receive streaming real-time quotes, including stocks, most active issues,
largest gainers and losers, and mutual funds for securities trading on the
Shenzhen and Shanghai stock exchanges. Our Sifang Gutong software available to
mobile phone users includes a stock trading function that enables our mobile
phone customers to directly place orders to buy and sell securities listed on
the two aforementioned stock exchanges. Our trading window corresponds with the
hours that securities markets are open from 9:30 a.m. to 11:30 a.m., and from
1:00 p.m. to 3:00 p.m., Beijing Time.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We receive a continuous direct feed of detailed quote data, market information
and news. Our customers can create customized lists of stocks for quick access
to current trading information. Through our relationships with financial
information companies such as Shanghai Stock Information Company, we also
provide access to breaking news, charts, market commentary and analysis.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The value-added financial information we offer can only be accessed by a
customer on whose mobile phone or pager the end-user portion of our Sifang
Gutong software has been installed. We plan to pre-install the end-user portion
of our Sifang Gutong software in all of the Samsung mobile phones that we
distribute. With regard to mobile phones and pagers not distributed by us, we
will provide installation of our Sifang Gutong software free of charge upon
request.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 9</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Pursuant to the request of a Beijing retailer, we entered into an agreement with
Chengao and Sifang Information whereby Chengao installs the end-user portion of
our Sifang Gutong software into mobile phones owned by the retailer. The
retailer sells these phones at a premium price to consumers. In return for the
premium price, the consumers receive our value-added information services for
six months free of charge. The retailer passes the premium back to Chengao, who
retains a small installation fee and then passes the remainder on to us. This
relationship helps us market our value-added information services and enables us
to establish relationships with new customers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Other Services. We also provide icons and screen savers, Western horoscopes,
jokes and event-driven or entertainment news updates. These services represent
only a small portion of our value-added information services revenues at the
present time. However, we believe that providing wireless receiver users in
China access to entertainment-related services increases our ability to retain
our financial information subscribers and expand our subscriber base, and we
expect the entertainment-related services portion of our value-added information
services business will grow over time.</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Horoscopes. With this service, users can obtain daily Western horoscopes via
  their mobile phones or pagers.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Jokes. We send users of this service a variety of jokes on demand or via
  automatic daily messages.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  News. We automatically send periodic SMS messages on recent event-driven news,
  sports (especially soccer), or entertainment events to subscribers of this
  service. Mobile phone users can also download desired information on demand.
  We obtain our news content from government affiliated media companies and
  other local media.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Content Relationships. Our content collaborators authorize the inclusion of
their content in one or more of our value-added information services for a fixed
fee which we pay directly to the provider. Our agreements with our content
collaborators usually have a one-year term, and are non-exclusive. Currently,
our key content collaborators are:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Shanghai Stock Information Company.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Shanghai Wanguo Stock Information Company.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Shanghai Yibang Stock Information Company.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Shanghai Shiji Stock Information Company.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Marketing Relationships. Sifang Information and Tianci, our affiliated
value-added mobile phone service providers, have marketing relationships with
China Mobile and China Unicom. We sell and market our services principally
through China Mobile and China Unicom. We also sell and market through Sifang
Information's Web site, www.sifang.net, and promotional events, direct
marketing, media advertising and other activities.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We sell all of our paging value-added information services through our
affiliated value-added paging service provider, Sifang Information. We market
our paging value-added information services through traditional media outlets,
including newspapers and magazines, and directly to end-users.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Operator Channels. General. All of our paging value-added information services
are provided through the paging network owned by Sifang Information. We contract
directly with the pager users to collect all fees generated from our value-added
information services. We have an information service and cooperation agreement
with Sifang Information that provides us exclusive access to their paging
network for ten years. This agreement is automatically renewable for additional
one year terms unless we decide to terminate. All of our mobile phone
value-added information services are provided to mobile phone users by Sifang
Information through the networks of China Mobile and China Unicom. Previously,
mobile phone users paid for our services by purchasing pre-paid services cards.
Now, our services are billed to mobile phone customers in one of two ways: (1)
certain of our customers pay for our services in advance when they purchase our
services and a mobile phone together in a premium package (through our
relationship with Chengao and Sifang Information), and (2) our other customers
(who do not purchase our services as part of any such premium package) are
billed by the mobile operators, who collect the fees for our services, including
both our data access and short message services, from their mobile phone
subscribers. The mobile operators then pass those fees (net of fees charged by
the mobile operator) to our affiliated value-added service providers, Sifang
Information and Tianci, who in turn pass those fees to us in return for a small
fee pursuant to the terms of information service and cooperation agreements
between us and each of them.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 10</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our management team utilizes our experience in China to develop close ties with
the key personnel of the mobile operators at the central and provincial levels.
As of December 31, 2006, we had ten sales professionals strategically located in
provinces and municipalities concentrated in the eastern and southern regions of
China to work closely with the mobile operators at the local level, where
pricing and important marketing and operational decisions are made. Our sales
network enables us to work closely with operators to facilitate the approval
required for new service offerings and for related pricing and to enjoy enhanced
marketing and promotional support. We are also able to gain insight into
developments in the local markets and the competitive landscape, as well as new
market opportunities. Our sales professionals are well-incentivized; most of
their compensation is tied to usage of our services in the applicable region.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Coordinated Marketing Campaigns. Our affiliated wireless service providers
cooperate in marketing campaigns with China Mobile and China Unicom. These
network operators distribute literature marketing us and our affiliates.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Non-Operator Channels. We also focus on non-mobile operator sales and marketing
activities, such as:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  promoting Sifang Information's Web site, www.sifang.net, to potential users as
  a fun, easy-to-access place to request our wireless content and applications,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  engaging in direct marketing to mobile phone users by, for example, including
  advertising inserts in users' bills from Shanghai Mobile and Shanghai Unicom,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  engaging in direct marketing to stock market investors by, for example,
  including advertising inserts in investors' bills from brokerage companies
  such as GF Securities Co., Ltd., Guotai Junan Securities Co., Ltd., Everbright
  Securities Co., Ltd. and Guoxin Securities Co., Ltd.,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  utilizing our database of users to create targeted marketing campaigns,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  advertising in traditional media outlets such as newspapers and magazines, and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  we plan to pre-install the Samsung mobile phones we distribute with the
  end-user portion of our Sifang Gutong software, and place brochures touting
  our stock information, stock trading and currency exchange services in the
  packaging of those phones, before distributing them to retailers.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Customer Research. Our sales, marketing and product development activities are
supported by our five-member customer research department. This department
focuses our sales efforts in the following three distinct phases:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 11</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Customer Acquisition. Our customer research department analyzes the success
rates of various national and local marketing campaigns in which we are
involved, including by user segment and cost per user, in order to determine
which campaigns are the most effective. Using phone surveys, focus groups and
analyses of usage patterns, the department also considers demographic and other
market factors to identify product mixes and product categories which are
suitable for the current market environment.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Customer Conversion. To enhance our ability to convert one-time or occasional
customers into regular users of our services, our customer research department
analyzes customer and product churn rates across the market, average revenue per
user data and other information. In this way, it can identify different customer
segments and develop targeted marketing campaigns for those segments, including
cross-selling and up-selling marketing campaigns.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Customer Retention. Our customer research department evaluates ways to maximize
user interest in our services through, for example, providing feedback to our
product developers to improve product features based on customer information and
bundling older services with newly launched services. It also creates various
reward programs designed to enhance customer loyalty.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Customer Services. We pride ourselves in providing high quality customer
service. Our dedicated customer service center based in Shanghai provides our
users real-time support and is staffed by 20 full-time professionals. The center
currently operates everyday from 7:00 a.m. to 10:00 p.m. We strive to achieve
the fastest response times and highest customer satisfaction levels in the
industry.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Competitive Landscape</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There are currently three broad categories of wireless service providers in
China:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Portal service providers, which have established expertise in Internet content
  and have subsequently branched into mobile space. The portals serve as content
  aggregators offering a variety of wireless value-added services. These
  national portal operators include Sohu, NetEase, Sina, and Tom.com.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Dedicated service providers, whose businesses focus on offering a variety of
  wireless content directly to mobile users. These providers include Linktone,
  Newpalm and Mtone Wireless.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Niche service providers, which focus on a particular market segment or
  application that often builds on a pre-existing sector competency. These
  providers include Tencent, Enorbus, and Solute. We belong in this category
  because of our focus on financial information services.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may also face competition from international wireless service providers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As the mobile operators are becoming more selective in choosing their service
providers to promote high quality content, ensure high levels of customer
service and limit the number of providers with which they have to deal, scale is
becoming more important, and we believe the industry will likely experience
consolidation with the leading nationwide providers gaining more market share at
the expense of smaller local providers. Nationwide providers may also acquire
some of their smaller competitors to gain access to local relationships with the
mobile operators in China or new product expertise.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We estimate that we compete with between ten to twenty other sub-wholesalers for
the rights to distribute Samsung phones in the Shanghai region. The three main
competitive factors the wholesalers consider in granting a sub-wholesaler the
rights to distribute a particular model include:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 12</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Available Cash Flow. Sub-wholesalers must be able to pay for the mobile phones
they desire to purchase from first-tier wholesalers. First-tier wholesalers will
be hesitant to grant rights to distribute a particular model to a sub-wholesaler
if that sub-wholesaler does not have sufficient capital to make large purchases.
We believe that having adequate cash flow gives us a competitive advantage.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Relationships with Retailers. The wholesalers look to the types of relationships
sub-wholesalers have with large retailers when deciding which sub-wholesaler to
utilize. We have strong relationships with three large retailers in Shanghai and
sell approximately 65% of our mobile phones to these three retailers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Relationships with Wholesalers. We have relationships with the three major
wholesalers of Samsung phones in China and have been sub-wholesalers for those
three wholesalers for more than a year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Our Business Strategy</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our main objective is to maintain and strengthen our position as a provider of
wireless value-added information services in the Shanghai region. In order to
achieve this objective, we plan to, among other things, increase the number of
subscribers to our value-added information services by increasing the number of
mobile phones we distribute and pre-installing those phones with the end-user
portion of our Sifang Gutong software.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We launched an &quot;out-of-home&quot; digital television advertising business in January
2005. However, we have decided to shift our focus away from the digital
advertising business in light of the lack of demand for out-of-home digital
advertising in China. We believe that the lack of demand is caused by several
factors, including the availability of other more traditional advertising
outlets such as television, radio and newspapers, and the reduction of
advertising fees due to the merger of media companies. In addition, there are an
increasing number of competitors in the media industry, resulting in intense
market competition. Key strategies for achieving our goals are to:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Continue to expand and diversify our portfolio of wireless value-added
  information services, including new SMS, 2.5G and other next generation
  services such as those compatible with 3G;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Increase investment in sales, marketing and branding, both in conjunction with
  network operators and through independent activities, in order to promote
  customer awareness of our wireless value-added information and advertising
  services in China;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Continue to strengthen our relationships with China Mobile and China Unicom by
  increasing our sales presence at the national and local levels and through
  joint marketing and promotion activities;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Expand our marketing channels by continuing to develop integrated marketing
  campaigns with traditional media outlets and other media companies; and</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Employees</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table summarizes the functional distribution of our employees as
of December 31, 2005 and 2006:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 13</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<div align="center">
  <center>
  <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="20%" colSpan="2">
      <font face="Times New Roman" size="2"><b>December 31</b></font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2"><b>2005</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2"><b>2006</b></font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Business Development</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">10</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">10</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      Customer</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">20</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">20</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Human Resources</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">2</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">2</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      Legal and Administrative</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">2</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">2</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Products Development</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">25</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">25</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      Customer Research</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">5</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">5</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Finance</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">3</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">3</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      Investor Relations</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">2</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">1</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Sales and Marketing</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">25</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">20</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      Technical Support</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">10</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">5</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Total</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">109</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">93</font></td>
    </tr>
  </table>
  </center>
</div>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
All of our personnel are employed full-time and none of them are represented
under collective bargaining agreements. We consider our relations with our
employees to be good.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Wireless Technology Standards in China</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Several different wireless technology standards have been developed which
operate at different frequencies with both analog and digital radio signals.
First generation wireless telephone systems employ analog technology, while
newer systems employ digital technology. Digital wireless technology, commonly
referred to as second generation technology, or 2G, multiplies the number of
users that can be served by the same band of spectrum using analog technology.
The wireless technologies most relevant in China currently include:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>Global System for Mobile Communications, or GSM </b>- initially developed
  in order to facilitate unification and integration of telecommunications
  within the European Union has become widespread throughout most Asian
  countries. GSM technology breaks audio signals into sequential pieces of data
  of a defined length, places each piece into an information conduit at specific
  intervals and then reconstructs the pieces at the end of the conduit. A key
  component of the GSM system is the SIM card. Data stored on the card
  identifies the subscriber to the mobile network as well as the service
  authorized for that subscriber. Since the identity of the subscriber is held
  on the card, any mobile phone can be used in conjunction with the SIM card.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>Code Division Multiple Access, or CDMA</b> - a digital technology standard
  which has been used in commercial operation by several operators in certain
  countries such as the United States and Korea. Unlike GSM, CDMA technology is
  a continuous transmission technology which uses a coding system to mix
  discrete audio signals together during transmission and then separates those
  signals at the end of transmission.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Prior to the commercial rollout of third generation, or 3G, networks, 2.5G
technology standards have been developed for both the GSM and CDMA technologies
to offer higher data transmission speeds, enabling the use of more data
intensive products. Current 2.5G wireless technologies include:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>General Packet-Switched Radio Service, or GPRS </b>- offers faster data
  transmission with speeds ranging from 56 kilobits per second, or Kbps, to 114
  Kbps via a GSM network. GPRS supports a wide range of bandwidths and is
  particularly suited for sending and receiving small bursts of data, such as
  e-mail and Web browsing, as well as large volumes of data. GPRS also makes it
  possible for users to make telephone calls and transmit data simultaneously.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 14</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>CDMA 1x RTT</b> - an advanced CDMA-based technology which allows
  transmission of data at speeds of up to 144 Kbps, compared to a maximum of 64
  Kbps for second generation CDMA networks.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
3G represents several technology standards developed by The International
Telecommunications Union. Third generation technology has been developed for
both the GSM standard and CDMA standard.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Wireless value-added services can be offered through all of these technology
standards and most commonly include:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>Short Messaging Services, or SMS </b>- a service that enables a user to
  send and receive text messages comprised of words or numbers or an
  alphanumeric combination. SMS was created when it was incorporated into the
  GSM standard.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>Wireless Application Protocol, or WAP</b> - a software protocol standard
  that defines a standardized means of transmitting Internet-based content and
  data to handheld devices such as mobile phones and pagers with secure access
  to e-mail and text-based Web pages. WAP supports most wireless networks
  including GSM and CDMA.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>Multimedia Messaging Services, or MMS</b> - a method of transmitting
  graphics, video clips, sound files and short text messages over wireless
  networks using the WAP protocol. MMS, however, is not the same as e-mail in
  that MMS is based on the concept of multimedia messaging. An MMS message is
  coded so that the images, sounds and text are displayed in a predetermined
  order as one singular message. Furthermore, MMS does not support attachments
  as e-mail does.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  <b>JAVA </b>- a general programming environment that creates applications for
  the Internet or any other distributed networks. JAVA applications are intended
  to be independent of the hardware platform.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Market Overview</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Wireless Value-Added Services as a Revenue Driver for the Mobile Operators</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As the wireless market in China continues to develop, an increasing portion of
the mobile operators' users have relatively low per capita incomes. These
subscribers generally yield lower levels of average revenue per user, or ARPU,
because they are primarily users of pre-paid services. In addition, China's
wireless market is becoming increasingly competitive, as demonstrated by the
recent CDMA promotions by China Unicom, as well as the intra-city wireless
offerings by China's two fixed-line operators, China Telecom and China Netcom,
which offer users limited mobile services within a city based on Personal
Handyphone Service or Personal Access System technology. In addition, China
Telecom, China Netcom and possibly other parties are expected to be awarded two
wireless licenses, although the timing of such grants is unclear. Both China
Telecom and China Netcom are large, established companies with significant
assets and the entry by them or other companies into the Chinese wireless market
could lead to further competition among the mobile operators. Due to these
pressures on the traditional voice-related businesses of the mobile operators,
SMS and other wireless value-added services have become a key differentiator and
increasingly important driver for the growth prospects of China Mobile and China
Unicom. We believe wireless value-added services will play a key role in the
mobile operators' competitive positioning when attracting and retaining users as
well as in their efforts to reverse declining ARPU levels.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 15</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Against this competitive backdrop, the market for wireless value-added services
in China has expanded significantly and is expected to continue to grow at a
fast pace. Currently, SMS services continue to represent the bulk of the
wireless value-added services market in China. This market is increasingly
shifting towards next generation technologies, with mobile operators upgrading
their networks to GPRS and CDMA 1x RTT and users upgrading to next generation
mobile phones that can operate with technologies such as MMS and WAP. China
Mobile and China Unicom have recognized this opportunity and are collaborating
with select service providers, including us, to further develop 2.5G
applications and services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Operators' Wireless Value-Added Services Initiatives in China</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Mobile was the first to enter the market by introducing a popular trial
SMS program in connection with the Sydney Olympic Games in August 2000. China
Mobile later established its Monternet(TM) platform in November 2000. China
Unicom started its Uni-Info platform in May 2001. Monternet(TM) and Uni-Info
offer mobile phone users a single access point to order and pay for wireless
value-added services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
From the inception of Monternet(TM) and Uni-Info, China Mobile and China Unicom
have outsourced almost all content and applications for their platforms, meaning
that these operators, much like NTT DoCoMo and SK Telecom, rely almost entirely
upon third-party service providers to drive their network traffic, supply
attractive wireless services and increase revenue from their wireless
value-added services. In turn, the operators focus on the operation of their
networks. For their part, wireless value-added service providers in China rely
on the two operators, China Mobile and China Unicom, for the network
distribution of their content and services, billing and collection, and
remittance of revenues. Both operators have established similar fee
arrangements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In addition to their working relationships with third-party service providers,
China's mobile operators will likely form closer alliances with mobile phone
vendors in order to standardize user friendly access to and functionality for
wireless value-added services in all mobile phones.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Government Regulation</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following is a summary of the principal governmental laws and regulations
that are or may be applicable to wireless service providers like us in China.
The scope and enforcement of many of the laws and regulations described below
are uncertain. We cannot predict the effect of further developments in the
Chinese legal system, including the promulgation of new laws, changes to
existing laws or the interpretation or enforcement of laws, particularly with
regard to wireless value-added services, which is an emerging industry in China.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Regulation of Telecommunication Services</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The telecommunications industry, including certain wireless value-added
services, is highly-regulated in China. Regulations issued or implemented by the
State Council, the Ministry of Information Industries, and other relevant
government authorities cover many aspects of telecommunications network
operation, including entry into the telecommunications industry, the scope of
permissible business activities, interconnection and transmission line
arrangements, tariff policy and foreign investment.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The principal regulations governing the telecommunications services business in
China include:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Telecommunications Regulations (2000), or the Telecom Regulations. The Telecom
  Regulations categorize all telecommunications businesses in China as either
  infrastructure telecommunications businesses or value-added telecommunications
  businesses. The latter category includes SMS and other wireless value-added
  services. Under the Telecom Regulations, certain services are classified as
  being of a value-added nature and require the commercial operator of such
  services to obtain an operating license, including telecommunication
  information services, online data processing and translation processing, call
  centers and Internet access. The Telecom Regulations also set forth extensive
  guidelines with respect to different aspects of telecommunications operations
  in China.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 16</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Regulations for the Administration of Foreign-Invested Telecommunications
  Enterprises (2002), or the FI Telecom Regulations. The FI Telecom Regulations
  set forth detailed requirements with respect to capitalization, investor
  qualifications and application procedures in connection with the establishment
  of a foreign-invested telecom enterprise. Under the FI Telecom Regulations, a
  foreign entity is prohibited from owning more than 50% of the total equity in
  any value-added telecommunications business in China, subject to certain
  geographic limitations.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Administrative Measures for Telecommunications Business Operating License<br>
  (2001), or the Telecom License Measures. Under the Telecom License Measures,
  an approved value-added telecommunications service provider must conduct its
  business in accordance with the specifications recorded on its Telecom
  Business Operating License.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  In the third quarter of 2006, the Ministry of Information Industry of the
  People's Republic of China initiated a nation-wide management specific plan as
  well as introduced a series of policies and measures to regulate the SP
  market. With the introduction of these policies and measures that set very
  strict rules on the provisions of information services provided by value-added
  service providers, our advertising service business was seriously affected. We
  generated only $ 334,844 revenue from the above-mentioned advertising services
  in 2006.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In addition to regulations promulgated at the national level by the Chinese
government, the Shanghai municipal government has issued provisional regulations
requiring SMS service providers to obtain licenses from or register with the
local Ministry of Information Industries branch office before providing SMS
service within the city. At this time, it is unclear whether national
regulations will be promulgated regulating SMS services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our affiliates, Sifang Information and Tianci, each have a value-added
telecommunication services license issued by the Shanghai Municipal
Telecommunications Administration Bureau, which is the local office of the
Ministry of Information Industries. Each has also been granted an
inter-provincial value-added telecommunication license by the Ministry of
Information Industries.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Other Laws and Their Application</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Regulation of Internet Content Services. As a wireless value-added information
services provider, we do not engage in the Internet portal business which
typically involves the provision of extensive Internet content services,
including Chinese language Web navigational and search capabilities, content
channels, web-based communications and community services and a platform for
e-commerce, such as auction houses. Sifang Information registered with the
Shanghai Telecommunication Administration Bureau in January 2001 to provide
commercial services at the www.sifang.net web site.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As a commercial ICP provider, Sifang Information is prohibited from posting or
displaying any content that:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  opposes the fundamental principles determined in China's Constitution;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  compromises state security, divulges state secrets, subverts state power or
  damages national unity;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  harms the dignity or interests of the state;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  incites ethnic hatred or racial discrimination or damages inter-ethnic unity;</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 17</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  sabotages China's religious policy or propagates heretical teachings or feudal
  superstitions;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  disseminates rumors, disturbs social order or disrupts social stability;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  propagates obscenity, pornography, gambling, violence, murder or fear or
  incites the commission of crimes;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  insults or slanders a third party or infringes upon the lawful rights and
  interests of a third party; or</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  includes other content prohibited by laws or administrative regulations.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Failure to comply with these prohibitions may result in the closing of Sifang
Information's Web site.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Regulation of News Dissemination through SMS Services. Pursuant to a circular
issued by the Shanghai Communications Administration, distribution of news
content through wireless applications like SMS must be approved by relevant
government agencies. Both Sifang Information and Tianci have all necessary
approvals.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Regulation of Advertisements. The State Administration of Industry and Commerce,
or the SAIC, is the government agency responsible for regulating advertising
activities in China. The SAIC has not promulgated regulations specifically aimed
at wireless advertising through a media other than the Internet, such as through
SMS services. One provisional regulation issued by Shanghai municipal government
prohibits service providers from sending SMS advertisements without the client's
consent.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As part of our non-mobile operator marketing activities, we have developed
integrated marketing campaigns with traditional media outlets such as magazines
and newspapers and multinational corporations through certain cross-selling
efforts with companies, including Motorola and Samsung. If the SAIC were to
treat our integrated marketing campaigns or other activities as being
advertising activities, we would need to apply to the local SAIC for an
advertising license to conduct wireless advertising business (through SMSs, for
example). We can give no assurance that such application would be approved by
the SAIC. Failure to obtain such approval could result in penalties including
being banned from engaging in online advertising activities, confiscation of
illegal earnings and fines.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Foreign Exchange Controls. The principal regulations governing foreign exchange
in China are the Foreign Exchange Control Regulations (1996) and the
Administration of Settlement, Sale and Payment of Foreign Exchange Regulations<br>
(1996), or the Foreign Exchange Regulations. Under the Foreign Exchange
Regulations, Renminbi is freely convertible into foreign currency for current
account items, including the distribution of dividends. Conversion of Renminbi
for capital account items, such as direct investment, loans and security
investment, however, is still subject to the approval of the State
Administration of Foreign Exchange, or SAFE.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Under the Foreign Exchange Regulations, foreign-invested enterprises are
required to open and maintain separate foreign exchange accounts for capital
account items (but not for other items). In addition, foreign-invested
enterprises may only buy, sell and/or remit foreign currencies at those banks
authorized to conduct foreign exchange business after providing valid commercial
documents and, in the case of capital account item transactions, obtaining
approval from SAFE.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Intellectual Property and Proprietary Rights</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We rely primarily on a combination of copyright laws and contractual
restrictions to establish and protect our intellectual property rights. We
require our employees to enter into agreements requiring them to keep
confidential all information relating to our customers, methods, business and
trade secrets during and after their employment with us. Our employees are
required to acknowledge and recognize that all inventions, trade secrets, works
of authorship, developments and other processes, whether or not patentable or
copyrightable, made by them during their employment are our property. They also
sign agreements to substantiate our sole and exclusive right to those works and
to transfer any ownership that they may claim in those works to us.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 18</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
While we actively take steps to protect our proprietary rights, such steps may
not be adequate to prevent the infringement or misappropriation of our
intellectual property. This is particularly the case in China where the laws may
not protect our proprietary rights as fully as in the United States.
Infringement or misappropriation of our intellectual property could materially
harm our business. Sifang Information has registered the following Internet and
WAP domain name www.sifang.net.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Shanghai Sifang Communication Company (&quot;Sifang Communication&quot;) has registered
one trademark with China's Trademark Office. That trademark is our logo, a
square (the English translation of &quot;Sifang&quot; is &quot;square&quot;). China's trademark law
utilizes a &quot;first-to-file&quot; system for obtaining trademark rights. As a result,
the first applicant to file an application for registration of a mark will
preempt all other applicants. Prior use of unregistered marks, except &quot;well
known&quot; marks, is generally not a basis for legal action in China. We may not be
able to successfully defend or claim any legal rights in any trademarks for
which we apply in the future.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Pursuant to a license agreement between our affiliate, Sifang Communication, and
us, we have the right to use our registered trademark, our square logo, whenever
necessary. We also acquired all of Sifang Information's interest in the Sifang
Gutong software pursuant to the terms of the spin-off of Sifang Information's
business divisions focusing on value-added information services and distribution
of mobile phones. We have the right to use the word &quot;Sifang&quot; and to market
ourselves through www.sifang.net with regard to both of the spun-off divisions.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Many parties are actively developing and seeking patent protection for wireless
services-related technologies. We expect these parties to continue to take steps
to protect these technologies, including seeking patent protection. There may be
patents issued or pending that are held by others and that cover significant
parts of our technology, business methods or services. Disputes over rights to
these technologies are likely to arise in the future. We cannot be certain that
our products do not or will not infringe valid patents, copyrights or other
intellectual property rights held by third parties. We may be subject to legal
proceedings and claims from time to time relating to the intellectual property
of others.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Terminated 2006 Acquisition</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In December 2005, TCH entered into a series of agreements to purchase (i) 95% of
the equity interests of Shanghai Kena Energy Saving Electric Co Ltd (&quot;Kena&quot;) for
an aggregate purchase price of RMB 28,500,000 (approximately $3,532,000); (ii) a
related patent from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000); and (iii) related rights to make a patent
application from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000). The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February 10, 2006, these agreements were amended to impose an additional
condition on Mr. Zhang Naiyao, the transferor of the patent and holder of the
right to make the patent application, that if he fails to provide the necessary
technical assistance services to enable TCH to use the patented technology in
producing products on a large scale that meet the standards set by the Company
within one year, TCH shall have the right to demand the return of the relevant
payment received by him in full and to terminate the agreement for the
assignment of the patent and the right to apply for registration of the patent.
The amendments also set forth the arrangement for payment of the purchase price
between TCH and Sifang Information. The purchase price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for registration of the patent shall be paid by Sifang Information on
behalf of TCH. According to the amended agreements, the amount of the purchase
consideration paid by Sifang Information on behalf of TCH will be applied to
offset the trade and other receivables owed to TCH by Sifang Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 19</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Kena was established on April 26, 2005 and it specializes in the research,
development and manufacture of energy-saving products, as well as illumination
projects in China. The patent and patent application mentioned above relate to a
&quot;three phase transformer&quot; which is used in connection with a power supply system
and utilizes technology that allows manufacturers to produce transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mr. Zhang Naiyao failed to meet the condition mentioned-above within the period
prescribed. In 2006, we decided not to pursue the above-mentioned acquisition of
Kena. All the agreements in connection with the Kena acquisition were terminated
by TCH and Kena. We also reviewed the future economic value of the deposit for
the anticipated business acquisition of Kena and determined that future
undiscounted cash flows associated with this deposit were uncertain and may not
be sufficient to recover their carrying values and so was fully written down as
of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>RISK FACTORS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In addition to the other information contained in this annual report, including
the documents we incorporate by reference, you should consider the following
factors that may affect our future results and financial condition before
investing in our securities. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. We are under no duty
to update any of the forward-looking statements after the date of this report to
conform such statements to actual results or to changes in our expectations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Risks Related to Our Business</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend upon contractual arrangements with our affiliated value-added mobile
phone service providers, Sifang Information and Tianci, for the success of our
business. These arrangements may not be as effective in providing operational
control as direct ownership of these businesses and may be difficult to enforce.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Because we conduct our business only in China, and because we are restricted by
the Chinese government from owning telecommunications or Internet operations in
China, we depend on our affiliated value-added mobile phone service providers,
Sifang Information and Tianci, in which we have no direct ownership interest,
but with which we have entered into information service and cooperation
agreements, to provide those services to mobile phone users in China through
contractual agreements with the mobile operators, China Mobile and China Unicom.
These arrangements may not be as effective in providing control over our
value-added information services to mobile phone users in China as would be
direct ownership of these businesses. For example, Sifang Information or Tianci
could fail to take actions required to operate our business, such as entering
into service contracts with China Mobile or China Unicom. Moreover, a portion of
the fees for our services are paid by the mobile operators directly to Sifang
Information and Tianci, which are then obligated to transfer all of those fees
to us, in return for a small fee. If Sifang Information or Tianci fails to
perform their obligations under these agreements, we may have to rely on legal
remedies under Chinese law, which we cannot assure you would be effective or
sufficient.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 20</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In the opinion of our Chinese counsel, Sifang Information and Tianci each
possess such licenses, permits, certificates, authorities and approvals, issued
by appropriate governmental agencies or bodies in the People's Republic of
China, as are necessary to conduct its business as presently conducted as well
as to perform its obligations under any contracts between it and China Mobile
and China Unicom, respectively. In addition, in the opinion of Chinese Legal
Group (Shanghai), TCH is not in breach of or in default under any laws of the
People's Republic of China or any approval, consent, waiver, authorization,
exemption, permission, endorsement or license granted by any People's Republic
of China governmental agencies. There are, however, substantial uncertainties
regarding the interpretation and application of current and future Chinese laws
and regulations, as discussed below.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend on one software developer for a significant portion of our software
development, as well as for important marketing relationships.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We rely on Shanghai Chengao Industrial Co., Ltd., or Chengao, to develop a
significant portion of our software, including our Sifang Gutong software. We
also rely on Chengao to provide us with an important marketing relationship
regarding the mobile phone version of our Sifang Gutong software. If we lose our
relationship with Chengao, we could have a difficult time finding a suitable
replacement in the short term. Our corporate structure could be deemed to be in
violation of current or future Chinese laws and regulations which could
adversely affect our ability to operate our business effectively or at all.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In connection with China's entry into the World Trade Organization, or WTO,
foreign investment in telecommunications and Internet services in China was
liberalized to allow for 30.0% foreign ownership in value-added
telecommunication and Internet services in 2002, 49.0% in 2003, and 50.0%
thereafter. In order to meet these ownership requirements, we have entered into
information service and cooperation agreements with Sifang Information and
Tianci. We do not have any direct ownership interest in Sifang Information or
Tianci. The original shareholder structure of Sifang Holdings was identical to
the current shareholder structure of Sifang Information, and each of Sifang
Information and Tianci are beneficially owned 69% by Tai Caihua, our president
and the chairman of our board of directors. It is possible that the relevant
Chinese authorities could, at any time, assert that any portion or all of TCH's,
Sifang Information's, or Tianci's existing or future ownership structure and
businesses violate existing or future Chinese laws, regulations or policies. It
is also possible that the new laws or regulations governing the
telecommunication or Internet sectors in China that have been adopted or may be
adopted in the future will prohibit or restrict foreign investment in, or other
aspects of, TCH's, Sifang Information's or Tianci's current or proposed
businesses and operations. In addition, these new laws and regulations may be
retroactively applied. In any such case, we could be required to restructure our
operations, which could adversely affect our ability to operate our business
effectively or at all.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend on China Mobile and China Unicom for delivery of our value-added
information services to mobile phone users in China, and the termination or
alteration of Sifang Information's and Tianci's various contracts with either of
them or their provincial or local affiliates could materially and adversely
impact our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our affiliated value-added mobile phone service providers, Sifang Information
and Tianci, contract with the two principal mobile phone operators in China,
China Mobile and China Unicom, to offer our wireless value-added information
services to mobile phone users through these mobile phone operators, which
service nearly all of China's approximately 282 million mobile phone
subscribers. Given their dominant market position, our affiliated value-added
mobile phone service providers' negotiating leverage with these operators is
limited. If our affiliated value-added mobile phone service providers' various
contracts with either operator are terminated or adversely altered, it may be
impossible for our affiliated value-added mobile phone service providers to find
appropriate replacement operators with the requisite licenses and permits,
infrastructure and customer base to offer our services, and our business would
be significantly impaired.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 21</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our value-added information services are provided to mobile phone users in China
pursuant to contracts Sifang Information and Tianci have with China Mobile and
China Unicom and their provincial or local affiliates. Each of these contracts
is non-exclusive, and has a limited term (generally one year). Our affiliates
usually renew these contracts or enter into new ones when the prior contracts
expire, but on occasion the renewal or new contract can be delayed by periods of
one month or more. The terms of these contracts vary, but the operators are
generally entitled to terminate them in advance for a variety of reasons or, in
some cases, for no reason in their discretion. For example, several of our
affiliates' contracts with the mobile operators can generally be terminated if:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  our affiliate fails to achieve performance standards which are established by
  the applicable operator from time to time,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  our affiliate breaches its obligations under the contracts, which include, in
  many cases, the obligation not to deliver content that violates the operator's
  policies and applicable law,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  the operator receives high levels of customer complaints about our affiliate's
  services, or</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  the operator sends written notice to our affiliate that it wishes to terminate
  the contract at the end of the applicable notice period.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our affiliates may also be compelled to alter their arrangements with these
mobile operators in ways which adversely affect our business. China Mobile and
China Unicom have unilaterally changed their policies as applied to third-party
service providers in the past, and may do so again in the future. We may not be
able to adequately respond to negative developments in the contractual
relationships between our affiliates and China Mobile or China Unicom in the
future because we do not have a contractual relationship with China Mobile or
China Unicom.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our business could be adversely affected if China Mobile or China Unicom or both
begin providing their own wireless value-added services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our wireless value-added information services business may be adversely affected
if China Mobile or China Unicom or both decide to begin providing their own
wireless value-added services to mobile phone users. In that case, we would face
enhanced competition, and our services could be fully or partially denied access
to their networks.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend in part on China Mobile and China Unicom to maintain accurate records
and to continue to pay our affiliated value-added wireless service providers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend in part on China Mobile and China Unicom to maintain accurate records
of the fees paid by mobile phone users and to pay our affiliated value-added
wireless service providers. Specifically, the mobile operators provide our
affiliates with monthly statements that do not provide itemized information
regarding which of our services are being paid for. Our business and results of
operation could be adversely affected if these mobile phone companies
miscalculate the revenue generated from our services and our affiliates' portion
of that revenue, or refuse to pay our affiliates altogether.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our revenues and cost of services are affected by billing and transmission
failures which are often beyond our control.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 22</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our affiliates do not collect fees for our services owed to them by China Mobile
and China Unicom in a number of circumstances, including if:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  the delivery of our service to a customer is prevented because his or her
  phone is turned off for an extended period of time, the customer's prepaid
  phone card has run out of value or the customer has ceased to be a customer of
  the applicable operator,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  China Mobile or China Unicom experiences technical problems with their
  networks which prevent the delivery of our services to the customer,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  we experience technical problems with our technology platform that prevent
  delivery of our services,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  our affiliates experience technical problems with their technology platforms
  that prevent delivery of our services, or</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  the customer refuses to pay for our service due to quality or other problems.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
These situations are known in the industry as billing and transmission failures,
and we do not recognize any revenue for services which are characterized as
billing and transmission failures. The failure rate can vary among the
operators, and by province, and also has fluctuated significantly in the past.
If actual billing and transmission failures exceed our estimates, our revenues
could be materially adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Mobile and China Unicom may impose higher service or network fees on our
affiliated value-added service providers if we are unable to satisfy customer
usage and other performance criteria.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Fees for our wireless value-added information services are charged on a monthly
subscription or per use basis. Based on our contractual arrangement and those of
our wireless value-added service providers, we rely on China Mobile and China
Unicom to bill and collect fees for our services from mobile phone users.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Mobile and China Unicom generally charge our affiliated value-added
service providers service fees of 15% and 30% of the revenues generated by their
services, respectively. To the extent that the number of messages sent by Sifang
Information over China Mobile's network exceeds the number of messages their
customers send to it, Sifang Information must pay per message network fees,
which decrease in several provinces as the volume of customer usage of our
services increases. The number of messages sent by Sifang Information will
exceed those sent by end-users, for example, if a user sends Sifang Information
a single message to order a game but Sifang Information in turn must send that
user several messages to confirm his or her order and deliver the game itself.
Tianci's service fees owed to China Unicom could also rise if Tianci fails to
meet certain customer usage, revenue and other performance criteria. We cannot
be certain that our affiliates will be able to continue to satisfy these
criteria in the future or that the mobile operators will keep the criteria at
their current levels. Any increase in China Mobile's or China Unicom's network
fees and service charges could reduce our gross margins.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Mobile and China Unicom may terminate their relationships with our
affiliates if our affiliates fail to achieve minimum customer usage, revenue and
other criteria.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 23</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our business could be adversely affected if our affiliated value-added mobile
phone service providers fail to achieve minimum customer usage, revenue and
other criteria imposed or revised by China Mobile and China Unicom at their
discretion from time to time. China Mobile and China Unicom, through their
national and local offices, have historically preferred to work only with a
small group of the best performing wireless value-added service providers, based
upon the uniqueness of the service offered by each provider, total number of
users, usage and revenue generated in the applicable province or municipality,
the rate of customer complaints, and marketing expenditures in the applicable
province or municipality.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The services our affiliated value-added mobile phone service providers offer and
the prices they charge are subject to approval by China Mobile and China Unicom,
and if requested approvals are not granted in a timely manner, our business
could be adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our affiliated value-added mobile phone service providers must obtain approval
from China Mobile and China Unicom with respect to each service that they
propose to offer to their customers and the pricing for each such service. In
addition, any changes in the pricing of our affiliates' existing services must
be approved in advance by these operators. There can be no assurance that such
approvals will be granted in a timely manner or at all. Moreover, under some of
our affiliates' contracts with the operators, prices cannot be changed more than
once every six months and prices must be within fixed parameters, depending on
the service. Any failure of our affiliates to obtain, or any delay in obtaining,
such approvals could place us at a competitive disadvantage in the market and
adversely affect our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We operate in a rapidly evolving industry, which makes it difficult for
investors to evaluate our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We began commercially offering wireless value-added information services to
mobile phone and pager users in China in January 2002, and since that time, the
technologies and services used in the wireless value-added information services
industry in China have developed rapidly. As a result of this rapid and
continual change in the industry, the prospects of our value-added information
service business should be considered in light of the risks and difficulties
frequently encountered by businesses in an early stage of development. These
risks include our ability to:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  attract and retain users for our wireless value-added information services,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  expand the content and services that we offer and, in particular, develop and
  aggregate innovative new content and service offerings,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  respond effectively to rapidly evolving competitive and market dynamics and
  address the effects of mergers and acquisitions among our competitors,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  build relationships with strategic partners, and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  increase awareness of our brand and user loyalty.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Due to these factors, there can be no certainty that we will maintain or
increase our current share of the highly competitive wireless value-added
information services market in which we operate.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The success of much of our wireless value-added information services is
significantly dependent on our ability to obtain and reformat desirable content
and technology from third parties.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 24</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We obtain much of our content, including financial information, games, logos,
music, news and other information, from third parties. Furthermore, we expect
that we will develop and purchase technology in connection with our development
of next generation services such as MMS, JAVA and BREW. As the market for
wireless value-added information services develops, content and technology
providers may attempt to increase their profits from distribution arrangements
by demanding greater fees or a share of revenues, which would adversely affect
our financial performance. Many of our arrangements with content and technology
providers are non-exclusive, have a term of one year, and are subject to
renewal. If our competitors are able to obtain such content in a similar or
superior manner or to develop, purchase or license the same technologies, it
could adversely affect the popularity of our services and our negotiating
leverage with third-party providers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
If we fail to establish and maintain economically attractive relationships with
content and technology providers and to thereafter successfully reformat their
products, we may not be able to attract and retain customers or maintain or
improve our financial performance.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend on our Sifang Gutong software continuing to be compatible with new
mobile phone models.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There can be no assurance that our Sifang Gutong software will be compatible
with new mobile phones developed by manufacturers such as Samsung. If the
software is no longer compatible, we will be forced to engage Chengao or an
alternative software developer to develop software that is compatible with the
new mobile phones or we will have to develop the software ourselves. If we are
unable to either engage a software developer or develop software in house that
is compatible with new mobile phones, we will lose a significant portion of our
value-added information services revenue, including all of the pre-charged
subscription fee revenues we receive pursuant to our information services and
cooperation agreement among us, Chengao, and Sifang Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We face intense competition from other service providers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Chinese markets for wireless value-added and advertising services are
intensely competitive. We believe there were more than 800 wireless value-added
service providers (including the three groups discussed below) as of June 30,
2004. We compete directly or indirectly with three groups of wireless
value-added service providers in China:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  portal service providers, which have established expertise in Internet content
  and have subsequently branched into mobile space. The portals serve as content
  aggregators offering a variety of wireless value-added services,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  dedicated service providers, whose businesses focus on offering a variety of
  wireless content directly to mobile phone users, and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  niche service providers, which focus primarily on a particular market segment
  or application that often builds on a pre-existing sector competency.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We have faced direct or indirect competition from all three groups since our
entry into this market. Moreover, there are low barriers to entry for new
competitors in the wireless value-added services market. As a result, our
existing or potential competitors may in the future achieve greater market
acceptance and gain additional market share, which in turn could reduce our
revenues. There is increasing number of competitors in the media industry and
the reduction of advertising fees, resulting in intense market competition. Our
advertising services have also facing direct or indirect competitions from other
more traditional advertising outlets such as television, radio and newspapers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Most of our value-added information services revenues are derived from the
Shanghai municipal area and surrounding provinces, and the termination or
alteration of our affiliates' contracts with the mobile operators, or a general
economic downturn in those areas, could have a particularly adverse effect on
our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 25</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Per capita income levels and mobile phone penetration rates (i.e., the number of
mobile subscribers divided by the population of China) in China are generally
higher in the coastal and southern provinces, and most of our revenues are
derived from those areas, including the municipality of Shanghai and the
provinces of Beijing and Jiangsu. If our affiliates' contracts with the mobile
operators with respect to those areas are terminated or adversely modified, or
if there is a general economic downturn in those areas, it could have a
particularly adverse effect on our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Rapid growth and a rapidly changing operating environment strain our limited
resources.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As our value-added information services customer base increases, we will need to
increase our investment in our technology infrastructure, facilities and other
areas of operations, in particular our product development, customer service and
sales and marketing departments, which are important to our future success. If
we are unable to manage our growth and expansion effectively, the quality of our
services and our customer support could deteriorate and our business may suffer.
Our future success will depend on, among other things, our ability to:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  develop and quickly introduce new services, adapt our existing services and
  maintain and improve the quality of all of our services, particularly as new
  mobile technologies such as 3G are introduced,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  expand the percentage of our value-added information services revenues which
  are recurring and are derived from monthly subscription based services,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  continue to enter into and maintain relationships with desirable content
  providers,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  continue training, motivating and retaining our existing employees and attract
  and integrate new employees, including our senior management, most of whom
  have been with our company for less than one year,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  develop and improve our operational, financial, accounting and other internal
  systems and controls, and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  maintain adequate controls and procedures to ensure that our periodic public
  disclosure under applicable laws, including U.S. securities laws, is complete
  and accurate.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Any failures of the mobile telecommunications network, the Internet or our
technology platform may reduce use of our services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Both the continual accessibility of China Mobile's and China Unicom's mobile
networks and the performance and reliability of China's Internet infrastructure
are critical to our ability to attract and retain our value-added information
services customers. Moreover, our business depends on our ability to maintain
the satisfactory performance, reliability and availability of our technology
platform. The servers which constitute the principal system hardware for our
operations are located in one location in Shanghai. Any server interruptions,
break-downs or system failures, including failures caused by sustained power
shutdowns, floods or fire causing loss or corruption of data or malfunctions of
software or hardware equipment, or other events outside our control that could
result in a sustained shutdown of all or a material portion of the mobile
networks, the Internet or our technology platform, could adversely impact our
ability to provide our services to our value-added information services
customers and decrease our revenues.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 26</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Computer viruses and hacking may cause delays or interruptions on our systems
and may reduce use of our services and harm our reputation.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Computer viruses and hacking may cause delays or other service interruptions on
our systems. &quot;Hacking&quot; involves efforts to gain unauthorized access to
information or systems or to cause intentional malfunctions or loss or
corruption of data, software, hardware or other computer equipment. In addition,
the inadvertent transmission of computer viruses could expose us to a material
risk of loss or litigation and possible liability. We may be required to expend
significant capital and other resources to protect our systems against the
threat of such computer viruses and hacking and to rectify any damage to our
systems. Moreover, if a computer virus or hacking which affects our systems is
highly publicized, our reputation could be materially damaged and usage of our
services may decrease.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may be held liable for information we purchase and reformat.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may face liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the reformatted content to which we
provide access through our wireless value-added information services. For
example, SMS news updates provided by us could possibly be deemed to contain
state secrets in violation of applicable Chinese law. In addition, third parties
could assert claims against us for losses incurred in reliance on information
distributed by us. We may incur significant costs in investigating and defending
these claims, even if they do not result in liability.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may not be able to adequately protect our intellectual property, and we may
be exposed to infringement claims by third parties.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We rely on contractual restrictions on disclosure to protect our intellectual
property rights. Monitoring unauthorized use of our information services is
difficult and costly, and we cannot be certain that the steps we take will
effectively prevent misappropriation of our technology and content. Our
management may determine in the future to make application for copyright,
trademark or trade secret protection if management determines that such
protection would be beneficial and cost-effective.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
From time to time, we may have to resort to litigation to enforce our
intellectual property rights, which could result in substantial costs and
diversion of our resources. In addition, third parties may initiate litigation
against us for alleged infringement of their proprietary rights. In the event of
a successful claim of infringement and our failure or inability to develop
non-infringing technology or content or license the infringed or similar
technology or content on a timely basis, our business could suffer. Moreover,
even if we are able to license the infringed or similar technology or content,
license fees that we pay to licensors could be substantial or uneconomical.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our ability to generate revenues could suffer if the Chinese market for wireless
value-added services does not develop as anticipated.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The wireless value-added services market in China has evolved rapidly over the
last four years, with the introduction of new services, development of consumer
preferences, market entry by new competitors and adaptation of strategies by
existing competitors. We expect each of these trends to continue, and we must
continue to adapt our strategy to successfully compete in our market.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In particular, we currently offer a wide range of wireless value-added
information services for mobile phones using 2.5G technologies. There can be no
assurance, however, that these 2.5G technologies and any services compatible
with them will be accepted by consumers or promoted by the mobile operators.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 27</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Moreover, there are numerous other technologies in varying stages of
development, such as third generation mobile technologies, which could radically
alter or eliminate the market for SMS or 2.5G services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Accordingly, it is extremely difficult to accurately predict consumer acceptance
and demand for various existing and potential new offerings and services, and
the future size, composition and growth of this market. Furthermore, given the
limited history and rapidly evolving nature of our market, we cannot predict the
price that wireless subscribers will be willing to pay for our services or the
services of our affiliated value-added service providers or whether subscribers
will have concerns about security, reliability, cost and quality of service
associated with wireless services. If acceptance of our wireless value-added
information services is different than anticipated, our ability to maintain or
increase our revenue and profits could be materially and adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The popularity of our services which operate with next generation technology
standards are necessarily dependent on the market penetration of mobile phones
that are compatible with those standards, which is beyond our control.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mobile phone users can access our MMS, WAP, JAVA, BREW and other services which
operate with next generation technology standards only if they purchase mobile
phones that are compatible with those standards. In particular, mobile phones
that are 2.5G-compatible have historically been significantly more expensive in
China than mobile phones using older technology such as GSM. Although the prices
of 2.5G-compatible mobile phones have been dropping rapidly in recent quarters,
we cannot be certain whether this trend will continue or the extent to which
existing users will be willing to upgrade their mobile phones to obtain the
latest technology. The pricing, marketing and other factors which affect the
sales of more sophisticated mobile phones are all outside of our control, and
weak sales of mobile phones for which we have developed services could adversely
affect our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The telecommunication laws and regulations in China are evolving and subject to
interpretation and will likely change in the near future. If we are found to be
in violation of current or future Chinese laws or regulations, we could be
subject to severe penalties.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Although wireless value-added services are subject to general regulations
regarding telecommunication services, we believe that currently there are no
Chinese laws at the national level explicitly governing wireless value-added
services, such as our services related to MMS, WAP, JAVA, and BREW, and no
Chinese government authority has been specifically designated to regulate these
services. Many providers of wireless value-added services have obtained various
value-added telecommunication services licenses, such as the licenses possessed
by our Chinese affiliates, Sifang Information and Tianci. These value-added
telecommunication licenses were issued by the local Shanghai Municipal
Telecommunications Administration Bureau, and may not be sufficient to offer
wireless value-added services on a national basis. Sifang Information and Tianci
are in the process of applying with the Ministry of Information Industries for
an inter-provincial value-added telecommunication license in accordance with the
Ministry's general regulations regarding telecommunication services. However, we
cannot predict whether either will be granted that license. Moreover, we cannot
be certain that any local or national value-added telecommunication license
requirements will not conflict with one another or that any given license will
be deemed sufficient by the relevant governmental authorities for the provision
of this category of service. It is also possible that new national legislation
might be adopted to regulate such services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
If we or our affiliates are found to be in violation of any existing or future
Chinese laws or regulations regarding wireless value-added services or Internet
access, the relevant Chinese authorities have the power to, among other things:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 28</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  levy fines;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  confiscate our income or the income of our affiliated value-added service
  providers;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  revoke our business license or the business licenses of our affiliated
  value-added service providers;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  shut down our servers or the servers of our affiliated value-added service
  providers or block any Web sites that we or our affiliated value-added service
  providers may operate;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  require us to discontinue any portion or all of our wireless value-added
  information services business; or</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  require our affiliated value-added service providers to discontinue any
  portion or all of their wireless value-added services business.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Chinese government, China Mobile or China Unicom may prevent us from
distributing, and we may be subject to liability for, content that any of them
believe is inappropriate.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China has enacted regulations governing telecommunication service providers,
Internet access and the distribution of news and other information. In the past,
the Chinese government has stopped the distribution of information over the
Internet that it believes violates Chinese law, including content that is
obscene, incites violence, endangers national security, is contrary to the
national interest, or is defamatory. In addition, our affiliated value-added
service providers may not publish certain news items, such as news relating to
national security, without permission from the Chinese government. Furthermore,
the Ministry of Public Security has the authority to cause any local Internet
service provider to block any Web site maintained outside China at its sole
discretion.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Mobile and China Unicom also have their own policies regarding the
distribution of inappropriate content by wireless value-added service providers
and have recently punished certain providers for distributing content deemed by
them to be obscene. Such punishments have included censoring of content,
delaying payments of fees by the mobile operators to the offending service
provider, forfeiture of fees owed by the mobile operators to the offending
service provider and suspension of the service on the mobile operators'
networks. Accordingly, even if our affiliated wireless value-added service
providers comply with Chinese governmental regulations relating to licensing and
foreign investment prohibitions, if the Chinese government, China Mobile or
China Unicom were to take any action to limit or prohibit the distribution of
information or to limit or regulate any current or future content or services
available to users, our revenues could be reduced and our reputation harmed.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Chinese government is expected to grant licenses to offer wireless services
in China to China Telecom, China Netcom and possibly other parties with which
our affiliated wireless value-added service providers have not yet developed
close relationships. If those parties receive licenses and are successful in the
market but our affiliates are unable to develop cooperative relationships with
them, our business could be adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
It is also possible that China Telecom, China Netcom and any other parties
receiving wireless licenses may decide to offer wireless value-added services
created by them, rather than by third-party service providers such as our
affiliated wireless value-added service providers. In that case, our business
could be adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 29</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Government regulation of the telecommunications and Internet industries may
become more complex.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Government regulation of the telecommunications and Internet industries is
highly complex. New regulations could increase our costs of doing business and
prevent us from efficiently delivering our services. These regulations may stop
or slow down the expansion of our wireless value-added information services
customer base and limit access to our services. In the third quarter of 2006,
the Ministry of Information Industry of the People's Republic of China initiated
a nation-wide management specific plan as well as introduced a series of
policies and measures to regulate the SP market. With the introduction of these
policies and measures that set very strict rules on the provisions of
information services provided by value-added service providers, the advertising
service business of us was seriously affected. We generated very little revenue
from the value-added advertising services in 2006 and determined that future
undiscounted cash flows associated with the assets involved in the advertisement
services provided to Tianci Real Estate were uncertain, and may not be
sufficient to recover their carrying values and so these assets were written
down to zero as of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Also in 2006, we decided not to pursue the acquisition of Kena under a series of
agreements signed in 2005. All the agreements in connection with the Kena
acquisition were terminated by TCH and Kena. We also reviewed the future
economic value of the deposit for the anticipated business acquisition of Kena
and determined that future undiscounted cash flows associated with this deposit
were uncertain and may not be sufficient to recover their carrying values and so
was fully written down as of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The above-mentioned situation forced us to take certain actions and continues to
implement changes designed to improve the Company's financial results and
operating cash flows. The action involves change of business operations from the
mobile phone distribution business and provision of information value-added
services to sales of energy-saving products. The place of business is also going
to reallocate from Shanghai to Shaanxi Province.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We are dependent on three main first-tier wholesalers to supply all of our
mobile phones.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our performance depends on whether we can continue to secure contracts with the
three first-tier wholesalers of Samsung mobile phones on whom we rely. We have
no long-term purchase contracts or other contracts that provide continued
supply, pricing or access to new mobile phone models and any of the first-tier
wholesalers on whom we rely could discontinue selling to us at any time. We may
not be able to acquire new Samsung and Nokia models in the future and we may not
be able to acquire the models that we need in sufficient quantities or on terms
that are acceptable to us in the future. As a result, our revenues may decrease.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our performance is dependent on the popularity of Samsung's and Nokia's mobile
phone models.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We primarily distribute mobile phones manufactured by Samsung and Nokia. Thus we
are dependant on Samsung's and Nokia's ability to create and deliver high
quality mobile phone models in a cost effective and timely manner. Nokia is the
market leader in worldwide mobile phone industry and rapidly growing mobile
phone market in China. Samsung is a leading world-class competitor of mobile
phones based on both the CDMA network and the GSM network in China. There can be
no assurance that Samsung and Nokia will continue to create high quality mobile
phone models that are popular with consumers. As a result, our revenues may
decrease. In addition, our success depends on our ability to anticipate and
respond to changing mobile phone model trends and consumer demands in a timely
manner. The models we distribute must appeal to a broad range of consumers whose
preferences cannot always be predicted with certainty and may change between
sales seasons. If we misjudge which mobile phone models will be popular or the
market for the models we distribute, our sales may decline or we may be required
to sell our models at lower prices.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 30</p>
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We rely on cash flow to purchase mobile phones from wholesalers, and any
significant decrease in cash flow could have a negative impact on our ability to
meet customer demand.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
It is important that we have sufficient cash flow to purchase enough mobile
phones from the first-tier wholesalers on whom we rely. If our cash flow
decreases significantly, we will not be able to purchase a sufficient quantity
of inventory to meet our customers' demands, which would have a negative impact
on our sales, and may cause the first-tier wholesalers on whom we rely to look
to other sub-wholesalers to distribute their mobile phones. This development
would have a negative impact on our revenues.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our customers are under no obligation to do business with us, and if they
terminate or materially reduce their relationship with us it would adversely
impact our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
One of the factors the first-tier wholesalers on whom we rely consider when
determining who they will use as a sub-wholesaler is the sub-wholesaler's
relationship with retailers. Currently approximately 72% of our mobile phone
sales are made to five retailers. We have no long-term sales contracts or other
contracts that provide continued selling or pricing and any of the retailers we
supply could discontinue buying from us at any time. If we lose our
relationships with our five largest retailers, we will have a difficult time
finding new large retailers to purchase our Samsung and Nokia mobile phones and
may lose our relationships with the first-tier wholesalers on whom we rely. This
would have a negative impact on our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We face certain risks relating to customer service, and any resulting problems
could adversely affect our sales.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Any material disruption or slowdown in our order processing systems resulting
from labor disputes, mechanical problems, human error or accidents, fire,
natural disasters, or comparable events could cause delays in our ability to
receive and distribute orders and may cause orders to be lost or to be shipped
or delivered late. As a result, customers may cancel orders or refuse to receive
goods on account of late shipments, which would result in a reduction in our net
sales and could result in increased administrative and shipping costs.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We face risks associated with the concentration of our distribution operations
in one location.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We conduct all of our distribution operations from one facility in Shanghai,
China. Any disruption in the operations at our distribution center could have a
negative impact on our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We face competition from distributors selling other mobile phone models.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Despite the fact that we distribute nine Samsung mobile phone models and two
Nokia's mobile phone models in the Shanghai, China region, we face competition
from distributors of different models of mobile phones manufactured by Samsung
and Nokia in the Shanghai region and from distributors of phones manufactured by
companies other than these two brands that distribute in the Shanghai region.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Competition is based on a variety of factors including maintenance of product
quality, competitive pricing, delivery efficiency, customer service and
satisfaction levels and the ability to anticipate technological changes and
changes in customer preferences. The first-tier wholesalers on whom we rely or
Samsung and/ or Nokia may acquire, startup, or expand their own distribution
systems to sell directly to our customers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 31</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We are dependent on advertising contracts, some of which are short term. If
these contracts are terminated or completed without replacement, our results of
operations would be materially adversely affected.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We are dependent upon &quot;Bank Digital TV's Cooperation Agreement&quot; and the
Advertisement Agency Contract, where TCH will assist in the promotion of TV ads
for various customers, including Tianci Real Estate, a related party. With the
introduction of the policies and measures adopted by China's Ministry of
Information Industry in 2006 that set very strict rules on the provisions of
information services provided by value-added service providers, our advertising
services was seriously affected. The Advertisement Agency Contract between
Tianci Real Estate and Sifang Media was not renewed after it was terminated in
November 2005. As the result, the Company determined that future undiscounted
cash flows associated with the assets involved in the advertisement services
were uncertain, and may not be sufficient to recover their carrying values and
so these assets were written down to zero as of December 31, 2006. TCH received
a net fee of [$NIL] from Tianci Real Estate during the years ended December 31,
2006, which was a significant decrease compare to the net fee of $1,879,965
received from Tianci Real Estate during the year ended December 31, 2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As to the services that TCH provided through Sifang Media to assist in the
promotion of TV ads for the customers of Sifang Media, for the same reason
described above, TCH received a net fee of $334,844 for providing the service
via Sifang Media during the fiscal year of 2006, which is also a significant
decease compared to $881,633 received during the fiscal year of 2005
respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We depend on key personnel for the success of our business. Our business may be
severely disrupted if we lose the services of our key executives and employees
or fail to add new senior and middle managers to our management.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our future success is heavily dependent upon the continued service of our key
executives, particularly Tai Caihua, our president and chairman of our board of
directors, Fu Sixing, our chief executive officer, Qian Fang, our chief
financial officer, and Huang Tianqi, our chief technology officer. Each of our
executive officers has entered into a non-competition agreement with TCH. We
also rely on a number of key technology staff for the operation of our company.
Our future success is also dependent upon our ability to attract and retain
qualified senior and middle managers to our management team. If one or more of
our current or future key executives or employees are unable or unwilling to
continue in their present positions, we may not be able to easily replace them,
and our business may be severely disrupted. In addition, if any of these key
executives or employees joins a competitor or forms a competing company, we
could lose customers and suppliers and incur additional expenses to recruit and
train personnel. Each of our executive officers has entered into non-competition
agreements with TCH. We do not maintain key-man life insurance for any of our
key executives.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We also rely on a number of key technology staff for the operation of our
company. Given the competitive nature of our industry, the risk of key
technology staff leaving our company is high and could disrupt our operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our management does not devote full-time efforts to the Company and our
management may have potential conflicts of interest.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our executive officers spend approximately 30% of their time managing Sifang
Information. Thus, they do not devote full-time effort to the Company. In
addition, as discussed in Item 12, &quot;Certain Relationships and Related
Transactions&quot;, the Company has had numerous significant transactions with
businesses controlled by, and with people who are related to, the officers and
directors of the Company. Our management may thus have potential conflicts of
interest.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 32</p>
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We have limited business insurance coverage.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The insurance industry in China is still at an early stage of development.
Insurance companies in China offer limited business insurance products, and do
not, to our knowledge, offer business liability insurance. As a result, we do
not have any business liability insurance coverage for our operations. Moreover,
while business disruption insurance is available, we have determined that the
risks of disruption and cost of the insurance are such that we do not require it
at this time. Any business disruption, litigation or natural disaster might
result in substantial costs and diversion of resources.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
A downturn in the Chinese economy may slow down our growth and profitability.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The growth of the Chinese economy has been uneven across geographic regions and
economic sectors. There can be no assurance that growth of the Chinese economy
will be steady or that any downturn will not have a negative effect on our
business. Our profitability, will decrease if expenditures for wireless
value-added services decrease due to a downturn in the Chinese economy. More
specifically, increased penetration of wireless value-added services in the less
economically developed central and western provinces of China will depend on
those provinces achieving certain income levels so that mobile phones and
related services become affordable to a significant portion of the population.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The uncertain legal environment in China could limit the legal protections
available to you.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Chinese legal system is a civil law system based on written statutes. Unlike
common law systems, it is a system in which decided legal cases have little
precedential value. In the late 1970s, the Chinese government began to
promulgate a comprehensive system of laws and regulations governing economic
matters. The overall effect of legislation enacted over the past 20 years has
significantly enhanced the protections afforded to foreign invested enterprises
in China. However, these laws, regulations and legal requirements are relatively
recent and are evolving rapidly, and their interpretation and enforcement
involve uncertainties. These uncertainties could limit the legal protections
available to foreign investors, such as the right of foreign invested
enterprises to hold licenses and permits such as requisite business licenses.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Any recurrence of Avian influenza, or another widespread public health problem,
could adversely affect our business and results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
A renewed outbreak of Avian influenza or another widespread public health
problem in China, where all of our revenue is derived, and in Shanghai, where
our operations are headquartered, could have a negative effect on our
operations. Our operations may be impacted by a number of health-related
factors, including the following:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  quarantines or closures of some of our offices which would severely disrupt
  our operations,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  the sickness or death of our key officers and employees, and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  a general slowdown in the Chinese economy.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Any of the foregoing events or other unforeseen consequences of public health
problems could adversely affect our business and results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Changes in China's political and economic policies could harm our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 33</p>
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<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The economy of China has historically been a planned economy subject to
governmental plans and quotas and has, in certain aspects, been transitioning to
a more market-oriented economy. Although we believe that the economic reform and
the macroeconomic measures adopted by the Chinese government have had a positive
effect on the economic development of China, we cannot predict the future
direction of these economic reforms or the effects these measures may have on
our business, financial position or results of operations. In addition, the
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD. These
differences include:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  economic structure;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  level of government involvement in the economy;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  level of development,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  level of capital reinvestment;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  control of foreign exchange;</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  methods of allocating resources; and</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  balance of payments position.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As a result of these differences, our business may not develop in the same way
or at the same rate as might be expected if the Chinese economy were similar to
those of the OECD member countries.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Restrictions on currency exchange may limit our ability to receive and use our
revenues effectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Because almost all of our future revenues may be in the form of Renminbi, any
future restrictions on currency exchanges may limit our ability to use revenue
generated in Renminbi to fund any future business activities outside China or to
make dividend or other payments in U.S. dollars. Although the Chinese government
introduced regulations in 1996 to allow greater convertibility of the Renminbi
for current account transactions, significant restrictions still remain,
including primarily the restriction that foreign-invested enterprises may only
buy, sell or remit foreign currencies, after providing valid commercial
documents, at those banks authorized to conduct foreign exchange business. In
addition, conversion of Renminbi for capital account items, including direct
investment and loans, is subject to governmental approval in China, and
companies are required to open and maintain separate foreign exchange accounts
for capital account items. We cannot be certain that the Chinese regulatory
authorities will not impose more stringent restrictions on the convertibility of
the Renminbi, especially with respect to foreign exchange transactions.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The value of our securities will be affected by the foreign exchange rate
between U.S. dollars and Renminbi.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The value of our common stock will be affected by the foreign exchange rate
between U.S. dollars and Renminbi. For example, to the extent that we need to
convert U.S. dollars into Renminbi for our operational needs and should the
Renminbi appreciate against the U.S. dollar at that time, our financial position
and the price of our common stock may be adversely affected. Conversely, if we
decide to convert our Renminbi into U.S. dollars for the purpose of declaring
dividends on our common stock or for other business purposes and the U.S. dollar
appreciates against the Renminbi, the U.S. dollar equivalent of our earnings
from our subsidiaries in China would be reduced.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 34</p>
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<b>Risks Related to our Common Stock</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The market price for our common stock may be volatile.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The market price for our common stock is likely to be highly volatile and
subject to wide fluctuations in response to factors including the following:</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  actual or anticipated fluctuations in our quarterly operating results,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  announcements of new services by us or our competitors,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  changes in financial estimates by securities analysts,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  conditions in the wireless value-added services market,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  changes in the economic performance or market valuations of other companies
  involved in wireless value-added services or distribution of mobile phones,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  announcements by our competitors of significant acquisitions, strategic
  partnerships, joint ventures or capital commitments,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  additions or departures of key personnel,</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  potential litigation, or</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  conditions in the mobile phone market.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In addition, the securities markets have from time to time experienced
significant price and volume fluctuations that are not related to the operating
performance of particular companies. These market fluctuations may also
materially and adversely affect the market price of our common stock.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Shareholders could experience substantial dilution.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may issue additional shares of our capital stock to raise additional cash for
working capital. If we issue additional shares of our capital stock, our
shareholders will experience dilution in their respective percentage ownership
in the company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We have no present intention to pay dividends.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Neither during the preceding two fiscal years nor during the year ended December
31, 2005 did we pay dividends or make other cash distributions on our common
stock, and we do not expect to declare or pay any dividends in the foreseeable
future. We intend to retain any future earnings for working capital and to
finance current operations and expansion of our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
A large portion of our common stock is controlled by a small number of
shareholders.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 35</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
A large portion of our common stock is held by a small number of shareholders.
As a result, these shareholders are able to influence the outcome of shareholder
votes on various matters, including the election of directors and extraordinary
corporate transactions including business combinations. In addition, the
occurrence of sales of a large number of shares of our common stock, or the
perception that these sales could occur, may affect our stock price and could
impair our ability to obtain capital through an offering of equity securities.
Furthermore, the current ratios of ownership of our common stock reduce the
public float and liquidity of our common stock which can in turn affect the
market price of our common stock.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We may be subject to &quot;penny stock&quot; regulations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Securities and Exchange Commission, or SEC, has adopted rules that regulate
broker-dealer practices in connection with transactions in &quot;penny stocks.&quot; 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 NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). Penny stock rules require a broker-dealer, prior to a transaction in a
penny stock not otherwise exempt from those rules, to deliver a standardized
risk disclosure document prepared by the SEC, which specifies information about
penny stocks and the nature and significance of risks of the penny stock market.
A broker-dealer must also provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker-dealer, and our sales person in
the transaction, and monthly account statements indicating the market value of
each penny stock held in the customer's account. In addition, the penny stock
rules require that, prior to a transaction in a penny stock not otherwise exempt
from those rules, the broker-dealer must 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 trading activity in the secondary market for
stock that becomes subject to those penny stock rules. These additional sales
practice and disclosure requirements could impede the sale of our securities.
Whenever any of our securities become subject to the penny stock rules, holders
of those securities may have difficulty in selling those securities.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Where You Can Find More Information</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference room in Washington, D.C.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 2. DESCRIPTION OF PROPERTY</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We currently occupy two office spaces in the Shanghai region. We lease the first
office space, located at 429 Guangdong Road, Shanghai, People's Republic of
China 200001, for approximately $50,000 a year. This office space contains our
corporate headquarters, and is approximately 250 square meters. We own the
second office space, located at 689 Laoshandong Road, Shanghai, People's
Republic of China 200120, which houses our administration, technical team and
servers, and is approximately 800 square meters. We believe that these two
properties are adequately covered by insurance. In addition, we believe that we
will be able to obtain adequate facilities, principally through the leasing of
appropriate properties, to accommodate our future expansion plans.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 3. LEGAL PROCEEDINGS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company is not currently involved in any material pending legal proceedings</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
None.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 36</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>PART II</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our common stock is traded on the NASD's Over-the-Counter Bulletin Board under
the symbol &quot;CHDW.&quot; (&quot;CREG&quot; after March 8, 2007). On August 6, 2004 we changed
our name from Boulder Acquisitions, Inc. to China Digital Wireless, Inc. and
changed our symbol from &quot;BAQI&quot; to &quot;CHDW.&quot; On March 8, 2007, we changed our name
from China Digital Wireless, Inc. to China Recycling Energy Corporation, and
changed our symbol from &quot;CHDW&quot; to &quot;CREG&quot;. On March 31, 2007, the last reported
sales price for our common stock was $0.20 per share.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth, for quarters indicated, the range of closing
high and low bid prices for our common stock as reported by NADS
Over-the-Counter Bulletin Board, as adjusted for all previously effected stock
splits.</p>
<div align="center">
  <center>
  <table dir="ltr" style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2"><b>
      Common Stock</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2"><b>
      By Quarter Ended</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2"><b>High</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2"><b>Low</b></font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2"><b>
      Fiscal 2005</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">March 31, 2005</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$5.50</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$3.42</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">June
      30, 2005</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$5.20</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$1.40</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">September 30, 2005</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$3.01</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$1.41</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      December 31, 2005</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$2.49</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$1.60</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2"><b>
      Fiscal 2006</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">March 31, 2006</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.80</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.70</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">June
      30, 2006</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$0.29</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$0.22</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">September 30, 2006</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.14</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.12</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2">
      December 31, 2006</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$0.27</font></td>
      <td vAlign="bottom" align="middle" width="10%">
      <font face="Times New Roman" size="2">$0.25</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%"><font face="Times New Roman" size="2"><b>
      Fiscal 2007</b></font></td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
      <td vAlign="bottom" align="middle" width="10%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="60%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">March 31, 2007</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.20</font></td>
      <td vAlign="bottom" align="middle" width="10%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">$0.20</font></td>
    </tr>
  </table>
  </center>
</div>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As of March 31, 2007, there were 17,147,268 shares of our common stock
outstanding held by approximately 2,553 shareholders of record.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We did not pay any cash dividends on our common stock in fiscal 2004, 2005 or
2006. We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
finance operations and the expansion of our business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 37</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Overview of Business Background</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Holdings was formed under the laws of the Cayman Islands on February 9,
2004 for the purpose of holding a 100% equity interests in TCH. TCH was
established as a foreign investment enterprise in Shanghai under the laws of the
PRC on May 25, 2004, with a registered capital of $7.2 million.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Information is a Shanghai-based privately owned enterprise established
under the laws of the PRC on August 14, 1998. Sifang Information is engaged in
the business of pager and mobile phone distribution and provides value added
information services to the customers in the Shanghai metropolitan area. In
March 2004, Sifang Information spun off its mobile phone distribution business
and the majority of its value added information services business by presenting
a set of carve-out financial statements for the years ended December 31, 2002
and 2003 and three months ended March 31, 2004 as if the spun-off business had
been a stand-alone company for two years and one quarter. On March 31, 2004,
Sifang Information transferred the spun-off business into TCH. Being a receiving
entity under common control, TCH initially recognized all the assets and
liabilities transferred at their carrying amounts in the accounts of Sifang
Information at the date of transfer under the guidance of SFAS No. 141, Appendix
D. On May 26, 2004 Sifang Information exchanged 100% of equity interest in TCH
for a 100% equity interest in Sifang Holdings. Since the ultimate owners of the
three entities were the same owners and the three entities remained under common
control, the ownership exchange transaction was accounted for at historical
costs under the guidance of SFAS No. 141, Appendix D. Prior to May 26, 2004,
there were no activities in Sifang Holdings. As a result of exchanging the
ownership between TCH and Sifang Holdings, TCH's historical financial statements
become the historical financial statements of Sifang Holdings.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Information operates in a business segment that is subject to certain
restrictions imposed by the government of the PRC. For example, paging
facilities, radio transmitting stations and transmitting equipment owned by
Sifang Information are not allowed to be owned by foreign investment enterprises
in accordance with PRC government regulations. Therefore, Sifang Information
still maintains a small part of its business and paging facilities in order to
stay in compliance with relevant regulations and laws in the PRC.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As a result of the spin-off, TCH engages in the business of mobile phone
distribution and provides access to certain information reformatted by TCH to
pager and mobile phone (collectively &quot;wireless receiver&quot;) users. TCH purchases
mobile phones from the first tier distributors and sells them to retailers with
a mark-up. In the process of providing value-added information services through
entering into monthly subscription agreements with various users, TCH purchases
trading activity information from stock exchanges, comments and analysis on PRC
stock markets provided by certain reputable security and investment companies,
lottery information, weather forecast, and other value-added products and
reformats the aforementioned information through decoding and recoding and then
has the reformatted information transmitted by Sifang Information, via service
contracts, to pager users. The information is constantly saved in TCH's server
in order for mobile phone users to dial in via China Mobile or China Unicom. By
signing a monthly subscription agreement, wireless users agree to make advance
payments for either three or six-month subscription periods.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We launched a new digital media project to move into the media market in China
in 2005. In conjunction with charitable organizations, we have installed
donation boxes with digital TV incorporated on top of them in the main lobbies
of commercial banks, hotels, malls and other public locations to call the
public's attention to the charity and broadcast commercial advertisements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 38</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Discussion and Analysis of Operating Results</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Fiscal Year Ended December 31, 2006 Compared to the Fiscal Year Ended December
31, 2005</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Revenue</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Total Revenues</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Total revenue consists of product sales, product sales to related parties, and
net information and advertising service revenue. Total revenue for the 2006
fiscal year decreased by $17,529,586, representing a decrease of approximately
85.8%, to $2,889,436, as compared to $20,419,022 for the same period of the
prior year. The decrease was mainly due to (1) the significant decline of
products sales to non-related and related third parties and (2) the serious
negative effect on our advertising services imposed by China's more strict
national ruling on advertisement services adopted in 2006. The market for mobile
phones in China is also gradually becoming saturated.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Product Sales</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In the year ended December 31, 2005, Samsung and Nokia's mobile phones accounted
for 89% and 8% of our total product sales and other brands accounted for the
balance, compared to the 2004 fiscal year, in which Samsung's mobile phones
accounted for about 97% of our total product sales and other name brands mobile
phones accounted for the remaining 3%. During 2005 market competition for mobile
phone sales intensified, causing us to decrease our overall mark-up ratio to
2.1% in order to maintain our market position, in comparison with a mark-up
ratio of 6.4% for the same period the prior year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Revenue from product sales for our 2006 fiscal year decreased by $5,725,793,
representing a decrease of approximately 99.1%, to $ 49, 276 as compared to
$5,775,069 for the prior year. The decrease was mainly due to market factors.
The market for mobile phones in China is becoming saturated along with
intensified competition developing among mobile phone distributors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We entered an agreement to distribute select Nokia mobile phones exclusively in
the Shanghai region of China in May 2005 and obtained the right to distribute
two popular models of Nokia's mobile phones. Initially, we believed that this
agreement would enhance both our market share and profitability. However, as a
result of the sudden change in the market factors during the latter half of 2005
and 2006, the sales mark-up of the Nokia mobile phones to our customers dropped
significantly. As a result, the management of the Company continued to cease the
mobile phone distribution business in December 2006. The continued cease of the
said business also contributed to the significant decline of our product sales.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Product Sales to a Related Party</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We distributed Samsung mobile phones to our related party, Shanghai Shantian
Telecommunication Co. Ltd. (&quot;Shantian&quot;), in which Sifang Information holds a 51%
equity interest, for its retail market channel and facility. Revenue from
product sales to related third parties for our 2006 fiscal year decreased by $
9,894,763, representing a decrease of approximately 93.2%, to $ 713,524 as
compared to $10,608,287 for the prior year. Accounts receivable includes $nil
and $1,583,512 due from Shantian as of December 31, 2006 and 2005 respectively.
The decrease was also mainly due to market factors. The market for mobile phones
in China is becoming saturated along with intensified competition developing
among mobile phone distributors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 39</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There were no mobile phone sales to Tianci Industry and Tianci Group during the
year ended December 31, 2005 and During the year ended December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Information Service Revenue, Net</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Total information service revenue net of related business tax and service fee
for the 2006 fiscal year increased by $517,724, representing a increase of
approximately 40.6%, to $1,791,792 compared to $1,274,068 for the the prior
year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Advertising Service Revenue, Net</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Revenue from advertisement services, net of related business tax and service
fee, for our 2006 fiscal year decreased by $ 2,426,754, representing a decrease
of approximately 87.9%, to $ 334,844 as compared to $2,761,598 for the prior
year. The decrease was mainly because there was no service fee received from
Tianci Real Estate during the year ended December 31, 2006 as the Advertisement
Agency Contract between Tianci Real Estate and Sifang Media was terminated in
November 2005.The decrease was mainly due to the introduction of the policies
and measures adopted by China's Ministry of Information Industry in 2006 that
set very strict rules on the provisions of information services provided by
value-added service providers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In 2005, We launched a new digital media project to move into the media market.
In conjunction with charitable organizations, we have installed donation boxes
with digital TV incorporated on top of them in the main lobbies of commercial
banks, hotels, malls and other public locations to call the public's attention
to the charity and broadcast commercial advertisements. We also reached an
agreement with CCF, a national non-profit charitable organization, which enables
the Company to install donation boxes for CCF in banks and other commercial
locations throughout China that will also have the Company's out-of-home digital
television advertising media platform attached. We believed the earnings
potential from the advertising service will be a new source of profit in view of
the upcoming Special Olympic World Summer Games in 2007 and World Exposition in
2010 to be held in Shanghai. In addition, during the 2006 fiscal year, TCH
rendered advertisement designing and producing services to Tianci Real Estate, a
related party, for publicity and promoting its apartment.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
However, in the third quarter of 2006, the Ministry of Information Industry of
the People's Republic of China initiated a nation-wide management specific plan
as well as introduced a series of policies and measures to regulate the SP
market. These policies and measures set very strict rules on the provisions of
information services provided by value-added service providers and started to
show their effects on the industry in December 2006. Our advertising service
business was seriously affected. We generated very little revenue from the above
mentioned projects we launched in 2005. We also determined that future
undiscounted cash flows associated with the assets involved in the advertisement
services provided to Tianci Real Estate were uncertain, and may not be
sufficient to recover their carrying values and so these assets were written
down to zero as of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Cost of Goods Sold</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The cost of goods sold for the 20065 fiscal year decreased by $15,061,459 to
$963,500, compared to $16,024,959 for the prior year, representing a decrease of
approximately 94%. The percentage of decrease, which was lower than the decrease
in revenue from product sales, resulted from the declining product markup as the
Chinese market is gradually becoming saturated.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 40</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always"><font face="Times New Roman" size="2"></p>
<p align="justify"><b>Cost of Service</b></p>
<p align="justify">The cost of service for the 2005 fiscal year increased by
$519,724 to $1,342,902 compared to $823,178 for the prior year, representing a
increase of approximately 63.1%. The increase was mainly due to the increase of
information fees paid to content providers for the value-added service. During
the 2006 fiscal year, we continued to maintain current fee structures and to
establish collaborative relationships or partnerships with mobile operators and
certain information content providers in China. </p>
<p align="justify"><b>Gross Profit </b></p>
<p align="justify">After taking into account the cost of goods sold and cost of
service, our gross profit for the 2006 fiscal year decreased by $2,987,851 to
$583,034, representing a decrease of approximately 83.7%, compared to gross
profit of $3,570,885 for the prior year. The decrease in gross profit was
primarily attributable to the continuing decline in mobile phone sales to
non-related and related parties and decline in advertising services during the
2006 fiscal year. </p>
<p align="justify">The following table summarizes certain information related to
the various components of revenue. </font><br>
&nbsp;</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    <b><font face="Times New Roman" size="2">&nbsp;</font></b></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>
    Advertising</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>Sales
    of</b></font></td>
    <td vAlign="bottom" align="right" width="2%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>Mobile</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>Beep</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font size="2"><b>&nbsp;</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font size="2"><b>&nbsp;</b></font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    <b><font face="Times New Roman" size="2">&nbsp;</font></b></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>service</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>mobile</b></font></td>
    <td vAlign="bottom" align="right" width="2%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>phone</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>pagers</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font size="2"><b>&nbsp;</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px"><font size="2"><b>&nbsp;</b></font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    <b>2006</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>revenue</b></font></td>
    <td vAlign="bottom" align="right" width="2%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>phones</b></font></td>
    <td vAlign="bottom" align="right" width="2%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>service</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>service</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>
    Corporate</b></font></td>
    <td vAlign="bottom" align="right" width="1%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px"><b>Total</b></font></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" width="44%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    &nbsp;</td>
    <td style="BORDER-TOP: medium none" vAlign="bottom" width="44%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 40pt">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 50pt">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" bgColor="#e9f1f8" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Revenue, net</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">334,844</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">762,800</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">
    <font face="Times New Roman" size="2">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;1,430,252</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">361,540</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">$</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">2,889,436</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Cost of revenue</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">110,876</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">963,500</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">1,043,204</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">188,822</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">2,306,402</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" bgColor="#e9f1f8" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Gross profit</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">223,968</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(200,700)</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">387,048</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">172,718</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">583,034</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Gross Profit Ratio</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" bgColor="#e9f1f8" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Depreciation</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">110,924</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">78,442</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">189,366</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Interest expense</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" bgColor="#e9f1f8" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Net income (loss)</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">224,745</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(509,518)</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">102,293</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(45,895)</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(10,349,043)</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(10,577,418)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Total assets</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">(4,464,612)</font></td>
    <td vAlign="bottom" align="right" width="1%">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">4,464,612</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="88%" bgColor="#e9f1f8" colSpan="2">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-LEFT: 15px; TEXT-INDENT: -15px">
    Expenditure for long-lived assets</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p dir="ltr" style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">
    <font face="Times New Roman" size="2">-</font></td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="1%" bgColor="#e9f1f8">
    <font face="Times New Roman" size="2">
    <p style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 0px; MARGIN-RIGHT: 4px">-</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Sales and Marketing Expenses</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sales and marketing expenses for the 2006 fiscal year increased by $20,088 to
$154,727 compared to $134,639 the prior year, representing a increase of
approximately 14.9%. The increase was primarily due to the increase in
commission fees paid to the salesmen for mobile phones and advertising expenses.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>General and Administrative Expenses</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
General and administrative expenses for the 2006 fiscal year decreased by $283,
209 to $967,957 compared to $1,251,166 for the same period of the prior year,
representing a 22.6% decrease.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 41</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Impairment Costs</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In 2006, during the course of our strategic review of the assets involved in the
mobile phone sales and information service operations, we determined that future
undiscounted cash flows associated with these assets were uncertain and may not
be sufficient to recover their carrying values and so these assets were written
down to zero as of December 31, 2006. Also in 2006, we decided not to pursue the
acquisition of Kena under a series of agreements signed in 2005. All the
agreements in connection with the Kena acquisition were terminated by TCH and
Kena. We also reviewed the future economic value of the deposit for the
anticipated business acquisition of Kena and determined that future undiscounted
cash flows associated with this deposit were uncertain and may not be sufficient
to recover their carrying values and so was fully written down as of December
31, 2006. As the result, the total amount of impairment costs of $7,114,047 for
Fiscal 2006 was charged to the statement of operations, which included $ 856,457
for property and equipment and $ 6,257,590 for deposit for business acquisition.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Due From Related Parties</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The amount due from Sifang Information and Sifang Media as of December 31, 2006
are trade related and relating to the mobile phone distribution business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During January 2006, the Company entered into an agreement with Sifang
Information for the establishment of a new joint venture entity with a third
party. The purpose of the joint venture entity is to act as a sole advertising
agent of TCH. The Company advanced a total of $2,499,969 to Sifang Information
to contribute to the joint venture. This, together with the trade receivables
related to the mobile phone distribution business, made up a total balance of
$6,446,275 receivable from Sifang Information as of December 31, 2006. As of
December 31, 2006, the Company decided to provide a provision of $3,000,000 for<br>
1) the full amount advance to the joint venture and 2) the long outstanding
portion of the receivable from Sifang Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Governmental subsidy</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the year ended December 31, 2006, the Company received a general
government subsidy from the local bureau, which is equivalent to 3.5% of the
taxable income of TCH throughout the period from January 2005 to December 2005.
The subsidy is non-recurring and subject to government approval. The amount of
such government subsidy for the years ended December 31, 2006 and 2005 was
$118,262 and $108,476 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Interest income (expense)</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During our 2006 fiscal year, the interest income derived from bank deposits was
$ 5,135.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Income Tax</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company's PRC subsidiary, TCH, is registered at Pudong District in Shanghai
and subject to a favorable income tax rate of 15% compared to a normal income
tax rate of 33% (30% for the central government and 3% for the local government)
under current PRC tax laws. Sifang Information is registered in the Shanghai
downtown area and has been treated by the Shanghai Municipal Administration of
Labor as an enterprise that provides unemployed and handicapped people with
jobs. Accordingly, Sifang Information is also entitled to a favorable income tax
rate of 15% and qualified for an income tax exemption for three years from
January 1, 2000 to December 31, 2002, and a 50% income tax reduction for three
years from January 1, 2003 to December 31, 2005. The income tax provisions
presented in the Company's financial statements are based on the actual income
tax rates of TCH at 15% for both years ended December 31, 2006 and 2005. The
deferred tax assets are determined based on the income tax rates applicable at
the TCH level.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There is no income tax for companies domiciled in the Cayman Islands.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 42</p>
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Accordingly, the Company's consolidated financial statements do not present any
income tax provisions related to Cayman Islands tax jurisdiction.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The total income tax for our fiscal 2006 was $ 36,633, compared to $481,743 for
the same period of the prior year</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Comprehensive Income (Loss)</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We recorded comprehensive loss of $ 9,825,415 for the 2006 fiscal year, a
$11,921,918 decrease compared to comprehensive income of $2,096,503 for the
prior year, representing a decrease of approximately 568.7%. The comprehensive
loss was attributable to (i) the decrease in the gross profit generated in the
2006 fiscal year, (ii) the impairment cost in 2006 (iii) the appreciation of
Chinese RMB to US dollars.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Net Earning (Loss) Per Share</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We recorded a net loss per share in 2006 fiscal year. The net loss per share for
the 2006 fiscal year was $ 0.62, a $ 0.73 decrease compared to the $0.11 net
earning per share for the prior year. The loss was attributable to (i) the
decrease in the gross profit generated in the 2006 fiscal year, (ii) the
impairment cost in 2006 (iii) the appreciation of Chinese RMB to US dollars.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Liquidity and Capital Resources</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our cash balance decreased from $3,578,367 as of December 31, 2005 to $252,000
as of December 31, 2006. This decrease in cash and cash equivalents was
primarily due to the decrease in the collection of accounts receivable. At
December 31, 2006 and 2005, our net working capital was $9,877,040 and
$3,346,637 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Net cash used in operating activities was $ 4,079,333 during our 2006 fiscal
year, compared to net cash generated from operating activities of $ 5,290,767
during the prior year. The loss of net cash flow from operating activities was
due mainly to the adjustment of $ 10,577,418 to reconcile net earnings to net
cash from operating activities and the non-collection of $ 3,351,306 due from
related parties in 2006 fiscal year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Net cash generated in investing activities for the 2006 fiscal year decreased to
$963, compared to net cash used in investing activities of $3,551,569 for the
same period of the prior year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Net cash provided by financing activities for the 2006 fiscal year was $ 0
compared to $1,500,000 for the same period of the prior year. We did not
generate any cash from financing activities in 2006 fiscal year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Recent Accounting Pronouncements</b></p>
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In May 2005, the FASB issued SFAS No. 154, &quot;Accounting Changes and Error
Corrections&quot; (&quot;SFAS 154&quot;), which replaces Accounting Principles Board Opinions
No. 20, &quot;Accounting Changes&quot; and SFAS No. 3, &quot;Reporting Accounting changes in
Interim Financial Statements-An Amendment of APB Opinion No. 28&quot;. SFAS 154
provides guidance on the accounting for and reporting of accounting changes. It
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
The adoption of this statement did not have a material effect on the Company's
financial position or results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 43</p>
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In September 2005, the FASB's Emerging Issues Task Force (&quot;EITF&quot;) reached a
final consensus on Issue 04-13, &quot;Accounting for Purchases and Sales of Inventory
with the Same Counterparty&quot; (&quot;EITF 04-13&quot;). EITF 04-13 requires that two or more
legally separate exchange transactions with the same counterparty be combined
and considered a single arrangement for purposes of applying APB Opinion No. 29,
&quot;Accounting for Nonmonetary Transactions&quot;, when the transactions are entered
into in contemplation of one another. EITF 04-13 is effective for new
arrangements entered into, or modifications or renewals of existing
arrangements, in interim or annual periods beginning after March 15, 2006. The
Company does not expect that the adoption of this statement would have a
material effect on the Company's financial position or results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In February 2006, the FASB issued SFAS No. 155, &quot;Accounting for Certain Hybrid
Instruments-an amendment of FASB Statements 133 and 140&quot;, which is effective for
all financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The statement improves
financial reporting by eliminating the exemption from applying SFAS No. 133 to
interests in securitized financial assets so that similar instruments are
accounted for similarly regardless of the form of the instruments. The Statement
also improves financial reporting by allowing a preparer to elect fair value
measurement at acquisition, at issuance, or when a previously recognized have to
bifurcated, if the holder elects to account for the whole
instrument-by-instrument basis, in cases in which a derivative would otherwise
have to bifurcated, if the holder elects to account for the whole instrument on
a fair value basis. The Company does not expect that the adoption of this
statement would have a material effect on the Company's financial position or
results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In July 2006, the FASB issued FIN 48, &quot;Accounting for Uncertainty in Income
Taxes-an Interpretation of FASB Statement No. 109&quot;, which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
the Company recognizes in its consolidated financial statements the impact of a
tax position if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative effect of
the change in accounting principle, if any, recorded as an adjustment to opening
retained earnings. The Company is currently evaluating the impact of adopting
FIN 48 on its consolidated financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In September 2006, the SEC released SAB No. 108, &quot;Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements&quot; (&quot;SAB 108&quot;). SAB 108 provides interpretive guidance on the
SEC's views on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement.
The provision of SAB 108 is effective for the Company in the current fiscal year
ended December 31, 2006. The Company is currently evaluating the impact of SAB
108 but does not believe that the application of SAB 108 would have a material
effect on its financial position, cash flows nor results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In September 2006, the FASB issued SFAS No.157, &quot;Fair Value Measurements&quot; (&quot;SFAS
157&quot;), which defines fair value, establishes guidelines for measuring fair value
and expands disclosures regarding fair value measurements. SFAS 157 does not
require any new fair value measurements but rather eliminates inconsistencies in
guidance found in various prior accounting pronouncements. SFAS 157 will be
effective for the Company starting January 1, 2008. Earlier adoption is
permitted, provided the company has not yet issued financial statements,
including for interim periods, for that fiscal year. The Company is currently
evaluating the impact of SFAS 157 on its consolidated financial position, cash
flows and results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed
by management to have a material impact on our present or future consolidated
financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 7. FINANCIAL STATEMENTS</b></p>
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The consolidated financial statements of China Digital Wireless, Inc. and its
subsidiaries including the notes thereto, together with the report thereon of
Zhong Yi (Hong Kong ) C.P.A. Company, Ltd. are presented beginning at page F-1.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE</b></p>
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None</p>
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Page 44</p>
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<b>ITEM 8A. CONTROLS AND PROCEDURES</b></p>
<font FACE="Times New Roman" SIZE="2">
<p align="justify">Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting. The Company's
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles in the United States of America. The Company's
internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles in the United States of America, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and (iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company's assets that could
have a material effect on the financial statements. </p>
<p align="justify">Any system of internal control, no matter how well designed,
has inherent limitations, including the possibility that a control can be
circumvented or overridden and misstatements due to error or fraud may occur and
not be detected in a timely manner. Also, because of changes in conditions,
internal control effectiveness may vary over time. Accordingly, even an
effective system of internal control will provide only reasonable assurance with
respect to financial statement preparation. </p>
<p align="justify">Management assessed the effectiveness of the Company's
internal control over financial reporting as of December 31, 2006. In making
this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in &quot;Internal
Control-Integrated Framework.&quot; Based on that evaluation, our management
concluded that as of December 31, 2006, our internal control over financial
reporting was not effective because of the material weaknesses described below.
A material weakness is a deficiency, or a combination of deficiencies, in
internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the registrant's annual or interim
financial statements will not be prevented or detected on a timely basis. In its
assessment of the Company&#146;s internal control over financial reporting as of
December 31, 2006, management determined that our internal control over
financial reporting was subject to the following material weaknesses: </p>
<p align="justify">Inadequate staffing and supervision within the accounting
operations of our company - The relatively small number of employees who are
responsible for accounting functions prevents us from segregating duties within
our internal control system. The inadequate segregation of duties is a weakness
because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews. </p>
<p align="justify">Lack of expertise in U.S accounting principles among the
personnel in our Chinese headquarters - Our books are maintained at our
executive offices in the City of Xi&#146;an, then translated into English and
adjusted to reflect U.S accounting principles by outside financial consultant.
The lack of personnel in our Xi&#146;an office who are trained in U.S. accounting
principles is a weakness because it could lead to improper classification of
items and other failures to make the entries and adjustments necessary to comply
with U.S. GAAP. </p>
<p align="justify">Lack of Internal Audit System - The company lacked of
internal audit department, which was ineffective in preventing and detecting
control lapses and errors in the accounting of certain key areas like revenue
recognition, purchase approvals, inter-company transactions, cash receipt and
cash disbursement authorizations, inventory safeguard and proper accumulation
for cost of products, in accordance with the appropriate costing method used by
the company. The Company&#146;s management has identified the steps necessary to
address the material weaknesses existing in 2006 described above, as follows:
</p>
<p align="justify">1.&nbsp;&nbsp;&nbsp;&nbsp; Hiring additional accounting and
operations personnel and engaging outside contractors with technical accounting
expertise, as needed, and reorganizing the accounting and finance department to
ensure that accounting personnel with adequate experience, skills and knowledge
relating to complex, non-routine transactions are directly involved in the
review and accounting evaluation of our complex, non-routine transactions; </p>
<p align="justify">2.&nbsp;&nbsp;&nbsp;&nbsp; Involving both internal accounting
and operations personnel and outside contractors with technical accounting
expertise, as needed, early in the evaluation of a complex, non-routine
transaction to obtain additional guidance as to the application of generally
accepted accounting principles to such a proposed transaction; </p>
<p align="justify">3.&nbsp;&nbsp;&nbsp;&nbsp; Documenting to standards
established by senior accounting personnel and the principal accounting officer
the review, analysis and related conclusions with respect to complex,
non-routine transactions; </p>
<p align="justify">4.&nbsp;&nbsp;&nbsp;&nbsp; Requiring senior accounting
personnel and the principal accounting officer to review complex, non-routine
transactions to evaluate and approve the accounting treatment for such
transactions; </p>
<p align="justify">5.&nbsp;&nbsp;&nbsp;&nbsp; Interviewing prospective new
Directors for our Board including a member who is appropriately credentialed as
a financial expert with a goal to establish both an Audit and Compensation
committee as well as sufficient independent Directors; and </p>
<p align="justify">6.&nbsp;&nbsp;&nbsp;&nbsp; Evaluating the internal audit
function in relation to the Company&#146;s financial resources and requirements. </p>
<p align="justify">This Annual Report does not include an attestation report of
the Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management's report in this Annual Report. </p>
</font>
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<font face="Times New Roman">Page 45</font></p>
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<b>ITEM 8B. OTHER INFORMATION</b></p>
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Not applicable</p>
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<b>PART III</b></p>
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<b>ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT</b></p>
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The following table provides information about our executive officers and
directors and their respective ages and positions as of December 31, 2006 and
March 30, 2007:</p>
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As of December 31, 2006</p>
<div align="center">
  <center>
  <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2"><b>Name</b></font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2"><b>Age</b></font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2"><b>Title</b></font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">&nbsp;</td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">&nbsp;</td>
      <td dir="ltr" vAlign="bottom" width="50%">&nbsp;</td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Tai Caihua</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">49</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director, President, Chairman of the
      Board</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Huang Tianqi</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">34</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Director, Chief Technology Officer</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Jing Weiping</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">42</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Mao Ming</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">44</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Song Jing</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">30</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Fu Sixing</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">45</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Director, Chief Executive Officer</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Yu Ruijie</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">43</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Zhang Xiaodong</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">38</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Huang Wei</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">43</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Qian Fang</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">47</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Chief Financial Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<font face="Times New Roman" size="2">As of March 31, 2007</font></p>
<div align="center">
  <center>
  <table dir="ltr" style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2"><b>Name</b></font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2"><b>Age</b></font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2"><b>Title</b></font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">&nbsp;</td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">&nbsp;</td>
      <td dir="ltr" vAlign="bottom" width="50%">&nbsp;</td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Ku Guohua</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">45</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director, President, Chairman of the
      Board, Chief Technology Officer</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Wu Guangyu</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">35</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Chief Executive Officer</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Zheng Hanqiao</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">49</font></td>
      <td dir="ltr" vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Director</font></td>
    </tr>
    <tr>
      <td dir="ltr" vAlign="bottom" width="15%">
      <font face="Times New Roman" size="2">Mingda Rong</font></td>
      <td dir="ltr" vAlign="bottom" align="middle" width="15%">
      <font face="Times New Roman" size="2">39</font></td>
      <td dir="ltr" vAlign="bottom" width="50%">
      <font face="Times New Roman" size="2">Director, Chief Financial Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The change of the Board incurred on January 24, 2007, a group of individuals
(&quot;Purchasers&quot;) entered a share purchase agreement with a group of shareholders
(&quot;Sellers&quot;) of China Digital Wireless, Inc. (&quot;Company&quot;) to purchase 12,911,835
shares of Company's common stocks owned by Sellers, $ 0.001 par value, for an
aggregate purchase price of $ 490, 000.00. Purchasers are Guohua Ku, Hanqiao
Zheng, Ping Sun, Qianping Huang, Xiaohong Zhang and Lixia Zhang. Sellers are
Caihua Tai, Ming Mao, Ying Shi, Sixing Fu, Xiaodong Zhang, Tianqi Huang, Wei
Huang, Jing Song, Ruijie Yu, and Weiping Jing, all of whom are shareholders of
Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In connection with the share purchase agreement date on January 24, 2007,
Caihhua Tai (Chiarman of the Board and President of the Company), Ming Mao
(Director), Sixing Fu(Director, Chief Executive Officer), Xiaodong
Zhang(Director), Tianqi Huang(Director, Chief Technology Officer), Wei Huang
(Director), Jing Song (Director), Ruijie Yu (Director), and Weiping Jing
(Director) resigned from their positions in the Board and the offices of
Company. Fang Qian also resigned from her position as the Chief Financial
Officer of the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Guohua Ku, Hanqiao Zheng, Guangyu Wu and Mingda Rong become the Directors of the
Board. The Board also appointed the following individuals to the following
offices: Guohua Ku, President and Chairman of the Board of Directors, Chief
Technology Officer Guangyu Wu, Chief Executive Officer, Secretary Mingda Rong,
Chief Financial Officer</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Tai Caihua has served as our president, chairman of our board of directors and a
member of our board of directors since June 23, 2004. Mr. Tai has been (i) the
president and sole director of our wholly owned subsidiary, Sifang Holdings,
since February 2004; (ii) chairman of the board of directors of Sifang Holdings'
wholly owned subsidiary, TCH, since our inception in May 2004; (iii) director
and general manager of Shanghai Tianci Industry (Group) Co., Ltd., one of our
affiliates, since January 1994 and (iv) a director of Sifang Information, one of
our affiliates, since December 2001. Mr. Tai holds a Masters of Business
Administration from the Macau University of Science and Technology.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Huang Tianqi has served as our chief technology officer since June 23, 2004 and
a member of our board of directors since June 24, 2004. Mr. Huang has served as
chief technology officer of Sifang Holdings and vice-general manager, chief
technology officer and a director of TCH since their inception in February 2004
and May 2004, respectively. Mr. Huang also serves as the vice-general manager
and a member of the board of directors of Sifang Information. Before becoming
vice-general manager, Mr. Huang was the chief technology officer at Sifang
Information for seven years. Mr. Huang graduated from Nanjing University of
Posts and Telecommunications with a Bachelors Degree and from Shanghai Jiao Tong
University with a Masters of Science Degree.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 46</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Jing Weiping has served as a member of our board of directors since June 24,
2004. Mr. Jing has served as a member of the board of directors of TCH since our
inception in May 2004 and as a Director of Sifang Information since 2001. Mr.
Jing has served as the manager of the technology assurance department of Sifang
Information for the past nine years. Mr. Jing received his Bachelors Degree from
Dong Hua University.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mao Ming serves as a member of our board of directors. He was elected to our
board of directors June 24, 2004. He has been (i) the general manager and a
member of the board of directors of TCH since our inception in May 2004; and<br>
(ii) the general manager and a director of Sifang Information since January
1998. Mr. Mao graduated from China PLA Measurement College with a Bachelors
Degree and from the Macau University of Science and Technology with a Masters of
Business Administration.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Song Jing has served as a member of our board of directors since June 24, 2004.
Mr. Song has served as vice-general manager and a member of the board of
directors of TCH since our inception in May 2004 and as general manager of
Shanghai Shan Tian Telecommunication Co., Ltd., an affiliate of ours, since
November 2003. Previously, Mr. Song served as director and general manager of
Shanghai Zhong Si Hua Hao Co., Ltd. for one year and assistant general manager
of both Shanghai Hua Si Trading Co., Ltd. and Shanghai Qi Shi Trading Co., Ltd
for five years. Mr. Song holds a Masters of Business Administration from Joseph
L. Rotman School of Management, University of Toronto.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Fu Sixing has served as our chief executive officer since June 23, 2004 and a
member of our board of directors since June 24, 2004. Mr. Fu has served as
executive manager of Sifang Holdings and as the head of the research and
development department and a director of TCH since their inception in February
2004 and May 2004, respectively. During the past seven years, Mr. Fu has served
as (i) the assistant to general manager of Shanghai Tianci Industry (Group) Co.,
Ltd.; (ii) a director and the general manager of Shanghai Sifang Health
Technology Co., Ltd. and (iii) directorate secretary of Sifang Information. Mr.
Fu received a Bachelors of Science in Physics from Nanjing University, a Masters
of Social Science in Economics from Huadong Normal University and a Doctorate of
Business Administration from the University of Southern California.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Yu Ruijie has served as a member of our board of directors since June 24, 2004.
Mr. Yu has served (i) as head of the Systems Department and a director of TCH
since our inception in May 2004 and (ii) as the head of the Systems Department
of Sifang Information since January 1994. Mr. Yu received a Bachelors Degree in
Computer Science from Shanghai University of Engineering Science.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Zhang Xiaodong has served as a member of our board of directors since June 24,
2004. Mr. Zhang has served as the head of the projection department of TCH since
our inception in May 2004. Mr. Zhang also serves as a director and the head of
the projection department of Sifang Information. For the past nine years, Mr.
Zhang has served as head of the wireless engineering department at Sifang
Information. Mr. Zhang graduated from Shanghai Jiao Tong University with a
Bachelors Degree and received a Masters Degree from the Macao University of
Science and Technology.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Huang Wei has served as a member of our board of directors since June 24, 2004.
Mr. Huang has served as (i) the vice-general manager of TCH since our inception
in May 2004 and (ii) vice-general manager and a director of Sifang Information
since 1993. Mr. Huang graduated from Nanjing University of Air Force and
Politics with a Bachelors Degree in Logistics.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Qian Fang has served as our Chief Financial Officer since January 1, 2005. Ms.
Fang has served as Manager of Accounting of TCH since 1999. Ms. Fang graduated
from China Cable-TV University with a Bachelors Degree in Accounting and is a
Certified Public Accountant.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 47</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
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Guohua Ku, aged 45, graduated from Northwestern University (China) with the
Master of Business Administration. He had served as the senior technology and
marketing officer for several large Chinese state-owned companies. He gained
tremendous experiences and developed exceptional expertise on the development
and operation of TRT programs and energy recycling systems.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Hanqiao Zheng, aged 49, graduated from Northwestern University of Agricultural
and Forestry Technologies. He worked in the Weinan Municipal Government from
1982 to 1996 and afterwards served at a management position in Shaanxi Province
Machinery Import/Export Co., Ltd.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Guangyu Wu, aged 35, graduated from the International Finance Program of
Heilongjiang Harbin Investment Institute. He owns the title of Senior Economist
and had worked in several large financial and commercial institutions including
China Construction Bank, SEG Trust, and Sunark Pegasus Group. He is specialized
in financial investment, business administration and strategic planning.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Mingda Rong, aged 39, is a Chinese certified public accountant. He graduated
from the Open University of Hong Kong with the Master of Business
Administration. He served as the accountant in Xi'an Institute of Finance and
Economics from 1989 to 2000. After that he worked in Xi'an Sigma CPA firm.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Family Relationships</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Except as set forth herein, there are no family relationships among our
directors or officers. The spouse of Mr. Tai Caihua (the President and Chairman
of our Board of Directors), Ms. Shi Ying, is a sibling of Huang Wei, a member of
our Board of Directors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Audit Committee and Audit Committee Financial Expert</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Our board of directors established our audit committee in April 2005. The audit
committee reviews and recommends to the directors the independent auditors to be
selected to audit our financial statements; meets with the independent auditors
and financial management to review the scope of the proposed audit procedures to
be utilized; reviews with the independent auditors, internal auditor, and our
financial and accounting personnel, the internal accounting and financial
controls, and elicits any recommendations for the improvement thereof; reviews
our financial statements and reports the results of the annual audit to the
board of directors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Section 16(a) Beneficial Ownership Compliance</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors and certain other shareholders to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
directors and certain other shareholders are required by regulation to furnish
us with copies of all Section 16(a) forms they file. During 2006, our President
and Chairman Tai Caihua filed a Form 4 . As of March 31, 2007, two of our
directors, Guohua Ku and Hanqiao Zheng have filed a Form 3.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 10. EXECUTIVE COMPENSATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
None of the executive officers received salary and bonus compensation in excess
of $100,000 during the 2006 fiscal year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 48</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth, as of December 31, 2006 and March 31, 2007, the
number and percentage of our 17,147,268 outstanding shares of common stock that
were beneficially owned by (i) each director and executive officer of China
Digital, (ii) each person known to China Digital to be the beneficial owner of
five percent or more of the outstanding shares of common stock of China Digital,
and (iii) all directors and officers of China Digital as a group. Unless
otherwise indicated, the person or entity listed in the table is the beneficial
owner of, and has sole voting and investment power with respect to, the shares
indicated.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>As of December 31, 2006</b></p>
<div align="center">
  <center>
  <table dir="ltr" style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td vAlign="bottom" width="50%"><b><font face="Times New Roman" size="2">
      Name</font></b></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2"><b>Amount of Shares</b></font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2"><b>Percent of <br>
      Voting Shares</b></font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Caihua Tai</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">8,639,220</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">40.3%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">Ying
      Shi</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">1,791,743</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">10.5%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Jing Song</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">413,480</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">2.4%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">Ming
      Mao</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">413,480</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">2.4%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Ruijie Yu</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">
      Tianqi Huang</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Sixing Fu</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">Wei
      Huang</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Weiping Jing</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">
      Xiaodong Zhang</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">275,652</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">1.6%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Directors and Executive officers as
      a group</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">12,911,835</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">75.2%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2"><b>
      As of March 31, 2007</b></font></td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><b><font face="Times New Roman" size="2">
      Name</font></b></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2"><b>Amount of Shares</b></font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2"><b>Percent of<br>
      Voting Shares</b></font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
      <td vAlign="bottom" align="right" width="15%">&nbsp;</td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Guohua Ku</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">9,073,700</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">52.9%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">
      Hanqiao Zheng</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">2,406,365</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">14.0%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Ping Sun</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">745,880</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">4.3%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">
      Qianping Huang</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">157,755</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">0.9%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Xiaohong Zhang</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">72,018</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">0.4%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%"><font face="Times New Roman" size="2">
      Lixia Zhang</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">456,117</font></td>
      <td vAlign="bottom" align="right" width="15%">
      <font face="Times New Roman" size="2">2.7%</font></td>
    </tr>
    <tr>
      <td vAlign="bottom" width="50%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">Directors and Executive officers as
      a group</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">12,911,835</font></td>
      <td vAlign="bottom" align="right" width="15%" bgColor="#e9f1f8">
      <font face="Times New Roman" size="2">75.2%</font></td>
    </tr>
  </table>
  </center>
</div>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 49</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(1) Under applicable rules promulgated by the SEC pursuant to the Securities
Exchange Act of 1934, as amended, or the Exchange Act, a person is deemed the
&quot;beneficial owner&quot; of a security with regard to which the person, directly or
indirectly, has or shares (a) the voting power, which includes the power to vote
or direct the voting of the security, or (b) the investment power, which
includes the power to dispose or direct the disposition of the security, in each
case irrespective of the person's economic interest in the security. Under these
SEC rules, a person is deemed to beneficially own securities which the person
has the right to acquire within 60 days through (x) the exercise of any option
or warrant or (y) the conversion of another security. (2) In determining the
percent of our common stock owned by a person (a) the numerator is the number of
shares of our common stock beneficially owned by the person, including shares
the beneficial ownership of which may be acquired within 60 days upon the
exercise of options or warrants or conversion of convertible securities, and (b)
the denominator is the total of (i) the 17,147,268 shares of our common stock
outstanding on March 31, 2007 and (ii) any shares of our common stock which the
person has the right to acquire within 60 days upon the exercise of options or
warrants or conversion of convertible securities. Neither the numerator nor the
denominator include shares which may be issued upon the exercise of any other
options or warrants or the conversion of any other convertible securities.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following related parties are related through common ownership with the
major shareholder of the Company:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Shanghai Sifang Information Technology Co. (&quot;Sifang Information&quot;) Shanghai
Tianci Industry Co. Ltd. (&quot;Tianci Industry&quot;) Shanghai Tianci Industry Group Co.
Ltd. (&quot;Tianci Group&quot;) Shanghai Shantian Telecommunication Co. Ltd. (&quot;Shantian&quot;)
Shanghai Sifang Telecommunication Co. Ltd. (&quot;Sifang Telecom&quot;) Shanghai Tianci
Real Estate Co. Ltd. (&quot;Tianci Real Estate&quot;) Shanghai Sifang Media Co., Ltd. (&quot;Sifang
Media&quot;).</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the year ended December 31, 2006, TCH sold Samsung GSM mobile phones
valued at $713,524 at a gross profit margin of 4% or $26,531 to Shanghai
Shantian Telecommunication Co. Ltd. (&quot;Shantian&quot;), compared to $10,608,287 at a
gross profit margin of 4% or $382,371 for the year ended December 31, 2005.
Accounts receivable includes $nil and $1,583,512 due from Shantian as of
December 31, 2006 and 2005 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In January 2005, Sifang Media and TCH entered into the &quot;Bank Digital TV's
Cooperation Agreement&quot;, where TCH will assist in the promotion of TV ads for
various customers, including Tianci Real Estate. TCH received a net fee of
$332,239 and $1,879,965 from Tianci Real Estate for providing the service during
the years ended December 31, 2006 and 2005 respectively. The Advertisement
Agency Contract between Tianci Real Estate and Sifang Media was terminated in
November 2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
TCH, through Sifang Media, entered into certain agreements with customers, where
TCH will assist in the promotion of TV ads for these customers. TCH received a
net fee of $334,844 and $881,633 for providing the service via Sifang Media
during the fiscal year of 2006 and 2005 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Pursuant to the service agreements between TCH and Sifang Information, TCH was
allowed to use Sifang Information's facility (which may not be owned by foreign
investors at the present time) to transmit the reformatted information and
Sifang Information also provided other management support and marketing services
to TCH.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Information signed a leasing agreement with the Tianci Real Estate for
leasing its apartment for office use. During the years ended December 31, 2006
and 2005, TCH paid rental expense of $50,378 and $49,565 respectively to Tianci
Real Estate.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 50</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The amount due from Sifang Information and Sifang Media as of December 31, 2005
are trade related and relating to the mobile phone distribution business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During January 2006, the Company entered into an agreement with Sifang
Information for the establishment of a new joint venture entity with a third
party. The purpose of the joint venture entity is to act as a sole advertising
agent of TCH. The Company advanced a total of $2,499,969 to Sifang Information
to contribute to the joint venture. This, together with the trade receivables
related to the mobile phone distribution business, made up a total balance of
$6,446,275 receivable from Sifang Information as of December 31, 2006. As of
December 31, 2006, the Company decided to provide a provision of $3,000,000 for:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
1) the full amount advance to the joint venture and </p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
2) the long outstanding portion of the receivable from Sifang Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On February 23, 2004, we sold 987,915 shares of restricted common stock for
gross proceeds of $300,000, pursuant to a subscription agreement, to Halter
Financial Group, Inc., an entity owned by Timothy P. Halter, a former member of
the Board of Directors and the Company's former Chief Executive Officer.
Additionally, in consideration for agreeing to serve as an officer and director
of the Company, Timothy P. Halter was granted a warrant to purchase up to
131,722 shares of common stock of the Company. The warrant was exercised on June
14, 2004, and we received gross proceeds of $40,000 upon exercise.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On February 23, 2004, we agreed to pay Little and Company Investment Securities,
an entity owned by Glenn A. Little, our former controlling shareholder, officer
and director, $30,000 in consulting fees related to the transaction discussed in
the previous paragraph and in consideration for maintaining the corporate
entity. To formalize this obligation, we issued a $30,000 non-interest bearing
promissory note maturing on February 23, 2005. Concurrent with the transaction
discussed in the previous paragraph, we and Little and Company Investment
Securities executed an Exchange Agreement whereby we issued 98,792 shares of
common stock in satisfaction of the outstanding promissory note.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On June 23, 2004, we entered into a Stock Purchase Agreement with Halter
Financial Group, Inc. pursuant to which we sold 166,667 shares of common stock
of the Company in exchange for $190,000. Timothy P. Halter is the sole
shareholder and President of Halter Financial Group, Inc. Pursuant to the Stock
Purchase Agreement, we granted to Halter Financial Group, Inc. an option to
require the Company to purchase up to 166,667 shares of common stock of the
Company at a price of $1.14 per share, such option being exercisable at any time
after the date that is six months after the Company files a registration
statement on Form SB-2 with the SEC, registering the shares purchased by Halter
Financial Group, Inc., up to and including the earlier of (i) the date that such
registration statement is declared effective by the SEC or (ii) Halter Financial
Group, Inc.'s shares are eligible for resale under Rule 144 under the Securities
Act of 1933.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 13. EXHIBITS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Exhibit Number Description</b></p>
<table id="AutoNumber1" style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">3.1 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Articles of Incorporation of
    the Registrant. (1)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">
    <p style="MARGIN-LEFT: 40pt">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">3.2 </td>
    <td vAlign="top" width="99%">Second Amended and Restated Bylaws of the
    Registrant. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">4.1 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Common Stock Specimen. (4)</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 51</p>
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<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; MARGIN-TOP: 0px; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; MARGIN-BOTTOM: 0px; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #ffffff; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
*</p>
<table id="AutoNumber1" style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td vAlign="top" width="1%">10.1 </td>
    <td vAlign="top" width="99%">Securities Exchange Agreement by and among
    Boulder Acquisitions, Inc., Sifang Holdings Co., Ltd. and the stockholders
    of Sifang Holdings Co., Ltd. dated effective as of June 23, 2004. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">
    <p style="MARGIN-LEFT: 40pt">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.2 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Information Service and
    Cooperation Agreement by and among Shanghai Sifang Information Technology
    Co. Ltd. and Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004.
    (3)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.3 </td>
    <td vAlign="top" width="99%">Information Service and Cooperation Agreement
    by and among Shanghai Sifang Information Technology Co. Ltd. and Shanghai
    TCH Data Technology Co. Ltd. dated as of June 1, 2004. (3)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.4 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Information Service and
    Cooperation Agreement by and among Shanghai Sifang Information Technology
    Co. Ltd., Shanghai Chengao Industrial Co. Ltd. and Shanghai TCH Data
    Technology Co. Ltd. dated as of June 1, 2004. (3)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.5 </td>
    <td vAlign="top" width="99%">Information Service and Cooperation Agreement
    by and among Shanghai Tianci Industrial (Group), Co. Ltd. and Shanghai TCH
    Data Technology Co. Ltd. dated as of June 1, 2004. (3)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.6 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Business and Related Assets
    Transfer Agreement between Shanghai Sifang Information Technology Co. Ltd.
    and Shanghai TCH Data Technology Co. Ltd. dated as of May 26, 2004. (3)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.7 </td>
    <td vAlign="top" width="99%">Stock Purchase Agreement by and between Halter
    Financial Group, Inc. and Boulder Acquisitions, Inc. dated as of June 23,
    2004. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.8 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Stock Purchase Agreement by and between Chinamerica Fund, LP and Boulder
    Acquisitions, Inc. dated as of June 28, 2004. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.9 </td>
    <td vAlign="top" width="99%">Stock Purchase Agreement by and between
    Chinamerica Acquisition, LLC and Boulder Acquisitions, Inc. dated as of June
    28, 2004. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.10 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">Stock Purchase Agreement by
    and between Gary Evans and Boulder Acquisitions, Inc. dated as of June 28,
    2004. (2)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.11 </td>
    <td vAlign="top" width="99%">Selling Stockholders Agreement by and among
    Boulder Acquisitions, Inc. and the Selling Stockholders listed on Schedule A
    thereto dated as of June 28, 2004. (5)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.12 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">English Summary of the Equity
    Transfer Termsheet for Shanghai Kena Energy Saving Electric Co., Ltd. by and
    among Shanghai TCH Data Technology Co. Ltd., Mr. Zhang Naiyao, Mr. Tai Yi,
    and Ms. Zheng Chang dated as of December 29, 2005. (6)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.13 </td>
    <td vAlign="top" width="99%">English Summary of the Agreement relating to
    the assignment of debt under the Equity Transfer Agreement by and among
    Shanghai TCH Data Technology Co. Ltd., Mr. Zhang Naiyao, Mr. Tai Yi, Ms.
    Zheng Chang and Shanghai Sifang Information Technology Co. Ltd. dated as of
    December 29, 2005. (6)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.14 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">English Summary of an
    Agreement relating to transfer of patent ownership by and between Shanghai
    TCH Data Technology Co. Ltd. and Mr. Zhang Naiyao dated as of December 29,
    2005. (6)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">&nbsp;</td>
    <td vAlign="top" width="99%">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%">10.15 </td>
    <td vAlign="top" width="99%">English Summary of an Agreement relating to
    transfer of right to make patent application by and between Shanghai TCH
    Data Technology Co. Ltd. and Mr. Zhang Naiyao dated as of December 29, 2005.
    (6)</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="top" width="1%" bgColor="#e9f1f8">10.16 </td>
    <td vAlign="top" width="99%" bgColor="#e9f1f8">English Summary of an
    Agreement in relation to assignment of debt under the Agreements for the
    transfer of patent rights by and among Shanghai TCH Data Technology Co.
    Ltd., Mr. Zhang Naiyao and Shanghai Sifang Information Technology Co. Ltd.
    dated as of December 29, 2005 (as amended by the parties on February 10,
    2006). (6)</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 52</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<table id="AutoNumber1" dir="ltr" style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" borderColor="#111111" height="451" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">10.17 </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">
    <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Share Purchase Agreement Dated on January 24, 2007 between individual
    purchasers and shareholders of China Digital Wireless, Inc. (7)</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">
    <p style="MARGIN-LEFT: 40pt">&nbsp;</td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    &nbsp;</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">10.18
    </td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    TRT Joint Operation Agreement between Shanghai TCH Data Technology Co. Ltd.
    and Xi'an Yingfeng Science and Technology Co.Ltd. dated February 1, 2007.(8)</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15"></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15"></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">14 </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">Code of
    Ethics.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">&nbsp;</td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    &nbsp;</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">21.1
    </td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    Subsidiaries of the Registrant. (4)</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15"></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15"></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">
    <a href="creg10sba4ex311.htm" style="text-decoration: none">31.1 </a></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">
    <font FACE="Times New Roman" SIZE="2">
    <a href="creg10sba4ex311.htm" style="text-decoration: none">President and Chairman of the Board
    Certification furnished pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002. </a> </font></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">&nbsp;</td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    &nbsp;</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#e9f1f8" height="15">
    <a href="creg10sba4ex312.htm" style="text-decoration: none">31.2 </a></td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#e9f1f8" colSpan="2" height="15">
    <a href="creg10sba4ex312.htm" style="text-decoration: none">Chief Financial Officer Certification furnished pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.</a></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15"></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15"></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">
    <a href="creg10sba4ex313.htm" style="text-decoration: none">31.3</a></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">
    <font FACE="Times New Roman" SIZE="2">
    <a href="creg10sba4ex313.htm" style="text-decoration: none">Chief Executive Officer Certification
    furnished pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. </a> </font></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15" bgcolor="#E9F1F8">
    </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15" bgcolor="#E9F1F8">
    </td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15" bgcolor="#E9F1F8">
    <a href="creg10sba4ex321.htm" style="text-decoration: none">32.1</a></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15" bgcolor="#E9F1F8">
    <font FACE="Times New Roman" SIZE="2">
    <a href="creg10sba4ex321.htm" style="text-decoration: none">President and Chairman of the Board
    Certification furnished pursuant to Section 906 of the Sarbanes-Oxley Act of
    2002. </a> </font></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#FFFFFF" height="15">&nbsp;</td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#FFFFFF" colSpan="2" height="15">
    &nbsp;</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" bgColor="#FFFFFF" height="15">
    <a href="creg10sba4ex322.htm" style="text-decoration: none">32.2 </a></td>
    <td dir="ltr" vAlign="top" width="99%" bgColor="#FFFFFF" colSpan="2" height="15">
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    <a href="creg10sba4ex322.htm" style="text-decoration: none">Chief Financial Officer Certification furnished pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.</a></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15" bgcolor="#E9F1F8"></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15" bgcolor="#E9F1F8"></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15" bgcolor="#E9F1F8">
    <a href="creg10sba4ex323.htm" style="text-decoration: none">32.3</a></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15" bgcolor="#E9F1F8">
    <font FACE="Times New Roman" SIZE="2">
    <a href="creg10sba4ex323.htm" style="text-decoration: none">Chief Executive Officer Certification
    furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. </a> </font></td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15" bgcolor="#FFFFFF"></td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15" bgcolor="#FFFFFF"></td>
  </tr>
  <tr>
    <td dir="ltr" style="BORDER-BOTTOM: 1px solid" vAlign="top" width="1%" height="16">
    </td>
    <td dir="ltr" style="BORDER-BOTTOM: 1px solid" vAlign="top" width="50%" height="16">
    </td>
    <td dir="ltr" vAlign="top" width="49%" height="16"></td>
  </tr>
  <tr>
    <td dir="ltr" style="BORDER-TOP: 1px solid; BORDER-BOTTOM: medium none" vAlign="top" width="1%" height="16">
    </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15"></td>
  </tr>
  <tr>
    <td dir="ltr" style="BORDER-TOP: medium none" vAlign="top" width="1%" height="30">
    (1) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="30">Previously
    filed as an exhibit to the Registrant's Annual Report on Form 10-KSB/A for
    the fiscal year ended December 31, 2001, which was filed with the Commission
    on January 28, 2002, and which is incorporated herein by reference.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">(2) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">Previously
    filed as an exhibit to the Registrant's Current Report on Form 8-K dated
    July 8, 2004, and which is incorporated herein by reference.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="30">(3) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="30">Previously
    filed as an exhibit to the Registrant's Quarterly Report on Form 10-QSB for
    the period ended June 30, 2004 as filed with the Commission on August 23,
    2004, and which is incorporated herein by reference</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="30">(4) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="30">Previously
    filed as an exhibit to the Registrant's Registration Statement on Form SB-2
    as filed with the Commission on November 12, 2004, and which is incorporated
    herein by reference.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="30">(5) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="30">Previously
    filed as an exhibit to the Registrant's Post-Effective Amendment No. 1 on
    Form SB-2 as filed with the Commission on September 12, 2005, and which is
    incorporated herein by reference.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">(6) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">Previously
    filed as an exhibit to the Registrant's Current Report on Form 8-K dated
    February 17, 2006, and which is incorporated herein by reference.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">(7) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">Previously
    filed as an exhibit to the Registrant's Current Report on Form 8-K dated
    January 24, 2007.</td>
  </tr>
  <tr>
    <td dir="ltr" vAlign="top" width="1%" height="15">(8) </td>
    <td dir="ltr" vAlign="top" width="99%" colSpan="2" height="15">Previously
    filed as an exhibit to the Registrant's Current Report on Form 8-K dated
    April 9, 2007.</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Fees Paid to Independent Public Accountants for 2006 and 2005</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Audit Fees</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 53</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The aggregate audit fees for 2006 were $114,000. The amounts include fees for
professional services rendered by Grobstein, Horwath &amp; Company, LLP in
connection with the audit of our consolidated financial statements as of and for
the 2005 fiscal year and reviews of our unaudited consolidated interim financial
statements for the first, second and third quarters of 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The aggregate audit fees for 2005 were $236,267. The amounts include fees for
professional services rendered by Grobstein, Horwath &amp; Company, LLP in
connection with the audit of our consolidated financial statements for the 2004
fiscal year and reviews of our unaudited consolidated interim financial
statements for the first, second and third quarters of 2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Audit-Related Fees</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There was $ 9,000 audit-related fee billed by Grobstein, Horwath &amp; Company, LLP
in connection with this Form 10-KSB/A for fiscal year 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Tax Fees</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There were $ 8,000 fees for tax services billed by Grobstein, Horwath &amp; Company,
LLP for tax services rendered to the Company for 2006 fiscal years.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>All Other Fees</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There were no additional aggregate fees billed by Grobstein, Horwath &amp; Company,
LLP for other services rendered to the Company for the 2005 or 2006 fiscal
years.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Policy on audit committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The audit committee pre-approves all audit and non-audit services provided by
the independent auditors prior to the engagement of the independent auditors
with respect to such services. The Company's independent auditors may be engaged
to provide non-audit services only after the audit committee has first
considered the proposed engagement and has determined in each instance that the
proposed services are not prohibited by applicable regulations and the auditors'
independence will not be materially impaired as a result of having provided
these services. In making this determination, the audit committee takes into
consideration whether a reasonable investor, knowing all relevant facts and
circumstances, would conclude that the auditors' exercise of objective and
impartial judgment on all issues encompassed within the auditors' engagement
would be materially impaired. The audit committee may delegate its approval
authority to pre-approve services provided by the independent auditors to one or
more of the members of the audit committee, provided that any such approvals are
presented to the audit committee at its next scheduled meeting.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>SIGNATURES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 54</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
&nbsp;</p>
<div align="center">
  <center>
  <div align="center">
    <center>
    <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="60%" border="0">
      <tr>
        <td dir="ltr" width="1%"><font face="Times New Roman" size="2">By</font></td>
        <td dir="ltr" style="BORDER-BOTTOM: 1px solid" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">/s/Hanqiao Zheng</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Hanqiao Zheng</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">President and Chairman of the
        Board</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">(Principal Executive Officer)</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">&nbsp;</td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Date: June 12, 2008</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" style="BORDER-BOTTOM: medium none" align="middle" width="59%">
        &nbsp;</td>
      </tr>
      <tr>
        <td dir="ltr" width="1%"><font face="Times New Roman" size="2">By</font></td>
        <td dir="ltr" style="BORDER-TOP: medium none; BORDER-BOTTOM: 1px solid" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">/s/Guangyu Wu</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Guangyu Wu</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Chief Executive Officer</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">(Principal Executive Officer)</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">&nbsp;</td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Date: June 12, 2008</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">&nbsp;</td>
      </tr>
      <tr>
        <td dir="ltr" width="1%"><font face="Courier New PSMT" size="2">By</font></td>
        <td dir="ltr" style="BORDER-BOTTOM: 1px solid" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">/sMingda Rong</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Mingda Romg</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Chief Financial Officer</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">(Principal Executive Officer)</font></td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">&nbsp;</td>
      </tr>
      <tr>
        <td dir="ltr" width="1%">&nbsp;</td>
        <td dir="ltr" align="middle" width="59%">
        <font face="Courier New PSMT" size="2">Date: June 12, 2008</font></td>
      </tr>
    </table>
    </center>
  </div>
  <p dir="ltr" align="center"><font face="Times New Roman" size="2">Page 55</font></p>
  </center>
</div>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA RECYCLING ENERGY CORPORATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
(KNOWN AS &quot;CHINA DIGITAL WIRELESS, INC.&quot; PRIOR TO MARCH 8, 2007)</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Consolidated Financial Statements</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
For The Years Ended December 31, 2006 (Restated) and 2005</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
(With Reports of Independent Registered Public Accounting Firm Thereon)</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>Certified Public Accountants</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA DIGITAL WIRELESS, INC.</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</b><br>
&nbsp;</p>
<div align="center">
  <center>
  <table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="80%" border="0">
    <tr>
      <td width="66%" height="19">&nbsp;</td>
      <td align="middle" width="32%" height="19"><font size="2">Page</font></td>
    </tr>
    <tr>
      <td width="66%" height="17"></td>
      <td align="middle" width="32%" height="17"></td>
    </tr>
    <tr>
      <td width="66%" bgColor="#e9f1f8" height="19"><font size="2">Report of
      Independent Registered Public Accounting Firm -</font></td>
      <td align="middle" width="32%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    </tr>
    <tr>
      <td width="65%" bgColor="#e9f1f8" height="19"><font size="2">Zhong Yi
      (Hong Kong)C.P.A. Company Limited</font></td>
      <td align="middle" width="32%" bgColor="#e9f1f8" height="19">
      <font size="2">F-2</font></td>
    </tr>
    <tr>
      <td width="65%" height="19"><font size="2">Report of Independent
      Registered Public Accounting Firm -</font></td>
      <td align="middle" width="32%" height="19">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%" height="19"><font size="2">Grobstein, Horwath &amp;Company LLP</font></td>
      <td align="middle" width="32%" height="19"><font size="2">F-3</font></td>
    </tr>
    <tr>
      <td width="66%" bgColor="#e9f1f8" height="19"><font size="2">Consolidated
      Balance Sheets</font></td>
      <td align="middle" width="32%" bgColor="#e9f1f8" height="19">
      <font size="2">F-4</font></td>
    </tr>
    <tr>
      <td width="65%" height="19"><font size="2">Consolidated Statements of
      Operations And Comprehensive</font></td>
      <td align="middle" width="32%" height="19">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%" height="19"><font size="2">Income (Loss)</font></td>
      <td align="middle" width="23%" height="19"><font size="2">F-5 - F-6</font></td>
    </tr>
    <tr>
      <td width="66%" bgColor="#e9f1f8" height="19"><font size="2">Consolidated
      Statements of</font></td>
      <td align="middle" width="32%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    </tr>
    <tr>
      <td width="66%" bgColor="#e9f1f8" height="19"><font size="2">Cash Flows</font></td>
      <td align="middle" width="23%" bgColor="#e9f1f8" height="19">
      <font size="2">F-7 - F-8</font></td>
    </tr>
    <tr>
      <td width="65%" height="19"><font size="2">Consolidated Statements of
      Stockholders' Equity</font></td>
      <td align="middle" width="32%" height="19"><font size="2">F-9</font></td>
    </tr>
    <tr>
      <td width="65%" bgColor="#e9f1f8" height="19"><font size="2">Notesto
      Consolidated Financial Statements</font></td>
      <td align="middle" width="23%" bgColor="#e9f1f8" height="19">
      <font size="2">F-10 - F-30</font></td>
    </tr>
  </table>
  </center>
</div>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 1</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
To the Board of Directors and Stockholders of China Digital Wireless, Inc.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We have audited the accompanying consolidated balance sheet of China Digital
Wireless, Inc. and Subsidiaries (&quot;the Company&quot;) as of December 31, 2006 and the
related consolidated statements of operations and comprehensive income,
stockholders' equity and cash flows for the year ended December 31, 2006. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform an audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform an audit of the
Company's internal control over financial reporting. Our audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 2006 and the consolidated results of operations and
cash flows for the year ended December 31, 2006 in conformity with accounting
principles generally accepted in the United States of America.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
consolidated financial statements, the Company has incurred substantial losses
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3.
These consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As discussed in Note 2, the Company&#146;s consolidated financial statements as of
December 31, 2006 and for the year then ended have been restated.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
Zhong Yi (Hong Kong) C.P.A. Company Limited Certified Public Accountants</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
Hong Kong, China<br>
April 12, 2007 (March 5, 2008 as to the effects of the restatement discussed in
Note 2)</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 2</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
To the Shareholders and Board of Directors China Digital Wireless, Inc. and
Subsidiary</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We have audited the accompanying consolidated balance sheets of China Digital
Wireless, Inc. and Subsidiary (the &quot;Company&quot;) as of December 31, 2004 and 2005
and the related consolidated statements of income and comprehensive income,
shareholders' equity and cash flows for each of the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal controls over financial reporting. Our audits included consideration of
internal controls over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of China
Digital Wireless, Inc. and Subsidiary as of December 31, 2004 and 2005, and the
consolidated results of their operations and cash flows for each of the years
then ended in conformity with accounting principles generally accepted in the
United States of America.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As discussed in Note 14 to the consolidated financial statements, the Company
has had numerous significant transactions with businesses controlled by, and
with people who are related to, the officers and directors of the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>GROBSTEIN, HORWATH &amp; COMPANY LLP<br>
</b>Sherman Oaks, California<br>
March 31, 2006</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 3</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always"><font size="2"></p>
<p align="center"><b>CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES <br>
CONSOLIDATED BALANCE SHEETS</b><br>
AS OF DECEMBER 31, 2006 AND 2005<br>
(Currency expressed in United States Dollars (&quot;US$&quot;), except for number of
shares)</p>
</font>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" height="962" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">ASSETS</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Current assets:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cash and cash equivalents</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">252,000</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,578,367</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Accounts receivable, net</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">844,977</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Inventories, net</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">62,386</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Advances and deposits to suppliers</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">755,635</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">19,970</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deferred tax assets</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">VAT recoverable</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,702</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Due from related parties</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,446,275</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,094,969</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Total current assets</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">4,464,612</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">7,613,515</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Non current assets:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Property and equipment, net</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,105,756</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deposit for business acquisition</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,257,590</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">7,363,346</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">TOTAL ASSETS</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">4,464,612</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$ </font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">14,976,861</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">LIABILITIES AND
    STOCKHOLDERS' EQUITY</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Current liabilities:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Accounts payable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">881,218</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Advance from customers</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">141,832</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,399</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deferred revenue</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">33,299</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">31,598</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">VAT payable</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">92,649</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Income tax payable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">437</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">193,586</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Due to related parties</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">223,399</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Other current liabilities</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">942,407</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">375,960</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Total current liabilities</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,117,975</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,804,809</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Stockholders' equity:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Common stock,</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 30px">$0.001 par value; 100,000,000 shares
    authorized;</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 30px">17,147,268 shares issued and outstanding</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,148</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,148</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Additional paid-in capital</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">4,229,845</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">4,229,845</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Statutory reserves</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">574,666</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">554,466</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Accumulated other comprehensive income</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,037,674</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">285,671</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">(Accumulated deficits) retained earnings</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(2,512,696)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">8,084,922</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Total stockholders' equity</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,346,637</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">13,172,052</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">4,464,612</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$ </font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">14,976,861</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
See accompanying notes to consolidated financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 4</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)</b><br>
FOR THE YEARS ENDED DECEMBER 31,<br>
2006 AND 2005 (Currency expressed in United States<br>
Dollars (&quot;US$&quot;), except for number of shares)</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(restated)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(see Note 2)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Revenues:</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Product sales</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">555,961</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">5,775,069</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Product sales - related parties</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">713,524</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,608,287</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Information service, net</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,285,107</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,274,068</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Advertising service, net</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">334,844</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,761,598</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">Total revenues</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,889,436</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">20,419,022</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Cost of
    revenue</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cost of revenue</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">504,347</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">5,800,878</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cost of revenue - related parties</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">686,993</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,224,081</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cost of information service</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,004,186</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">681,624</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cost of advertising service</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">110,876</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">141,554</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">Total cost of revenue</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,306,402</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">16,848,137</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Gross
    profit</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">583,034</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,570,885</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Operating
    expenses:</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Sales and marketing</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">154,727</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">134,639</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Allowance for doubtful accounts</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,631</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: medium none" vAlign="bottom" width="52%">
    <font size="2">
    <p style="MARGIN-LEFT: 15px">Written-off on amounts due from related parties</font></td>
    <td style="BORDER-BOTTOM: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,000,000</font></td>
    <td style="BORDER-BOTTOM: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">
    <p style="MARGIN-LEFT: 30px; TEXT-INDENT: -15px"><font size="2">Impairment
    on deposit for business<br>
    acquisition and property equipment</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">7,114,047</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: medium none" vAlign="bottom" width="52%">
    <font size="2">
    <p style="MARGIN-LEFT: 15px">General and administrative</font></td>
    <td style="BORDER-TOP: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">967,957</font></td>
    <td style="BORDER-TOP: medium none" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: medium none; BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,251,166</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 3px double" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">11,247,362</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 3px double" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,385,805</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Total
    operating expenses</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">(Loss) income from operations</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <font size="2">(10,664,328)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,185,080</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Other
    income (expense):</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Interest income</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">5,135</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Government subsidy</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">118,202</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">108,476</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Other income</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">206</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">8,387</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Interest expense</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(9,093)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">(Loss) income before income
    taxes</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%"><font size="2">(10,540,785)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,292,850</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">Income tax
    expense</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(36,633)</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(481,743)</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">Net (loss) income</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$ </font></td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <font size="2">(10,577,418)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,811,107</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">Other comprehensive income:</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%" bgColor="#e9f1f8"><font size="2">- Foreign
    currency translation adjustment</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">752,003</font></td>
    <td vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 1px solid" vAlign="bottom" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">285,396</font></td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td vAlign="bottom" width="52%"><font size="2">Comprehensive (loss) income</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <font size="2">(9,825,415)</font></td>
    <td vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" vAlign="bottom" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,096,503</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 5</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES<br>
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)<br>
</b>(CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005 <br>
(Currency expressed in United States Dollars (&quot;US$&quot;), except for number of
shares)</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(restated)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(see Note 2)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Net (loss) income per
    common share -</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Basic and diluted</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <font size="2">(0.62)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">0.11</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Weighted average number of
    common shares</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">outstanding - Basic and
    diluted</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,147,268</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,054,368</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
See accompanying notes to consolidated financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 6</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS</b><br>
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005<br>
(Currency expressed in United States Dollars (&quot;US$&quot;))</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(restated)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(see Note 2)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Cash flows from operating
    activities:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Net (loss) income</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%"><font size="2">(10,577,418)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,811,107</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Adjustments to reconcile
    net (loss) income to net</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">cash (used in) provided by
    operating activities:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Depreciation</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">189,366</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">239,716</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Allowance for doubtful accounts</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,631</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(3,450)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Impairment on deposit for business</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">&nbsp;&nbsp; acquisition and property and equipment</font></td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">7,114,047</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Written-off on amount due from related parties</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,000,000</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Loss (gain) on disposal of property and
    equipment</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">58,970</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(8,914)</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Changes in assets and
    liabilities:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Accounts receivable</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">834,346</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,778,282</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Inventories</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">62,386</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">39,310</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Advances and deposits to suppliers</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(735,665)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">130,442</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deferred tax assets</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">15,926</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Due from related parties</font></td>
    <td align="right" width="12%" colSpan="2"><font size="2">(3,351,306)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(929,345)</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Accounts payable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(881,218)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">825,379</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Advance from customers</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">135,433</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,399</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deferred revenue</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,701</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(586,096)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">VAT payable</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(103,351)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(120,886)</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Income tax payable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(193,149)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(119,177)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Due to related parties</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(223,399)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">123,139</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Other current liabilities</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">566,447</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">88,935</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Net cash (used in) generated from operating
    activities</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(4,079,333)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">5,290,767</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Cash flows from investing activities:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Purchase of property and equipment</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(425,525)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Proceeds on disposal of property and equipment</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">963</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">309,214</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Due from related parties</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(3,435,258)</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Net cash generated from (used in) investing
    activities</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">963</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(3,551,569)</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Cash flows from financing
    activities:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">&nbsp;&nbsp;&nbsp; Common stock proceeds
    held in escrow</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,500,000</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Net cash generated from financing activities</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,500,000</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Foreign currency
    translation adjustment</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">752,003</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">263,658</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">NET CHANGE IN CASH AND CASH EQUIVALENTS</font></td>
    <td align="right" width="12%" colSpan="2"><font size="2">(3,326,367)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,502,856</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">CASH AND CASH EQUIVALENTS,
    BEGINNING OF YEAR</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,578,367</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">75,511</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">CASH AND CASH EQUIVALENTS, END OF YEAR</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">252,000</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;3,578,367</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 7</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)</b><br>
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005<br>
&nbsp;(Currency expressed in United States Dollars (&quot;US$&quot;))</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(restated)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(see Note 2)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">SUPPLEMENTAL DISCLOSURE OF
    CASH FLOW INFORMATION</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cash paid for income taxes</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">23,582</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">590,481</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">
    <p style="MARGIN-LEFT: 15px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">Cash paid for interest expenses</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">NON-CASH INVESTING AND FINANCING ACTIVITIES</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    <p style="MARGIN-LEFT: 15px">Deposit for business acquisition in exchange
    for reduction in</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">&nbsp;&nbsp; accounts receivable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px; MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,257,590</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
See accompanying notes to consolidated financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 8</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
<b>&nbsp;CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES<br>
&nbsp;CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</b><br>
&nbsp;FOR THE YEARS ENDED DECEMBER 31,<br>
&nbsp;2006 AND 2005 (Currency expressed in United States<br>
&nbsp;Dollars (&quot;US$&quot;), except for number of shares)</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="30%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td width="5%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td width="5%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    &nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">&nbsp;</td>
    <td align="right" width="5%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">Accumulated</font></b></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td width="5%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td width="5%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%"><b>
    <font size="2">Additional</font></b></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    &nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">&nbsp;</td>
    <td align="right" width="5%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">other</font></b></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="middle" width="25%" colSpan="3"><b><font size="2">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock</font></b></td>
    <td width="5%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%"><b>
    <font size="2">paid-in</font></b></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    &nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%"><b>
    <font size="2">Statutory</font></b></td>
    <td align="right" width="5%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">comprehensive</font></b></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%"><b>
    <font size="2">No. of share</font></b></td>
    <td align="right" width="5%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%"><b>
    <font size="2">Amount</font></b></td>
    <td width="5%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <b><font size="2">capital</font></b></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    &nbsp;</td>
    <td style="BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <b><font size="2">reserves</font></b></td>
    <td align="right" width="5%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%"><b>
    <font size="2">income</font></b></td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="10%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="5%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="10%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="5%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" width="10%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" width="5%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="BORDER-LEFT: medium none" width="10%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="5%" bgColor="#e9f1f8">&nbsp;</td>
    <td width="10%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">Balance as of December 31,
    2004</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">17,018,692</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">17,019</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">4,229,974</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">275</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Issuance of common stock in exchange for</font></td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">
    <p style="MARGIN-LEFT: 15px">lock up agreements</font></td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">128,576</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">129</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <font size="2">(129)</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td width="41%" bgColor="#e9f1f8" colSpan="2"><font size="2">Transfer from
    retained earnings to statutory</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">reserves</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">554,466</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Components of comprehensive income</font></td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">
    <p style="MARGIN-LEFT: 15px">- Foreign currency translation</font></td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">285,396</font></td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">Net income for the year</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">17,147,268</font></td>
    <td style="BORDER-LEFT: medium none" align="right" width="5%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">17,148</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">4,229,845</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">554,466</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">285,671</font></td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">Balance as of December 31,
    2005</font></td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: 1px solid; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Components of comprehensive income</font></td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%"><font size="2">
    <p style="MARGIN-LEFT: 15px">- Foreign currency translation</font></td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%"><font size="2">
    <p style="MARGIN-RIGHT: 4px">752,003</font></td>
  </tr>
  <tr>
    <td width="41%" bgColor="#e9f1f8" colSpan="2"><font size="2">Transfer from
    retained earnings to statutory</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-LEFT: 15px">reserves</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">20,200</font></td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td width="30%"><font size="2">Net loss for the year</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none; BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
    <td align="right" width="5%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">-</font></td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: 1px solid; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-LEFT: medium none" align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="5%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="30%" bgColor="#e9f1f8"><font size="2">Balance as of December 31,
    2006</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">17,147,268</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 3px double" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">17,148</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 3px double" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">4,229,845</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: 3px double" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">574,666</font></td>
    <td style="BORDER-RIGHT: medium none; BORDER-TOP: medium none; BORDER-LEFT: medium none; BORDER-BOTTOM: medium none" align="right" width="5%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="10%" bgColor="#e9f1f8">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px">1,037,674</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
&nbsp;</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="64%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">Retained</font></b></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">earnings</font></b></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">Total</font></b></td>
  </tr>
  <tr>
    <td width="64%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">(accumulated</font></b></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">(restated)</font></b></td>
  </tr>
  <tr>
    <td width="64%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">deficits)</font></b></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><b><font size="2">(see Note 2)</font></b></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Balance as of December 31,
    2004</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">6,828,281</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">11,075,549</font></td>
  </tr>
  <tr>
    <td width="64%"><font size="2">Issuance of common stock in exchange for</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%"><font size="2">&nbsp;&nbsp;&nbsp; lock up agreements</font></td>
    <td align="right" width="12%"><font size="2">-</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Transfer from retained
    earnings to statutory</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">&nbsp;&nbsp;&nbsp; reserves</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(554,466)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="64%"><font size="2">Components of comprehensive income</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%"><font size="2">- Foreign currency translation</font></td>
    <td align="right" width="12%"><font size="2">-</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">285,396</font></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Net income for the year</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">1,811,107</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">1,811,107</font></td>
  </tr>
  <tr>
    <td width="64%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%"><font size="2">Balance as of December 31, 2005</font></td>
    <td align="right" width="12%"><font size="2">8,084,922</font></td>
    <td align="right" width="12%"><font size="2">$</font></td>
    <td align="right" width="12%"><font size="2">13,172,052</font></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Components of comprehensive
    income</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%"><font size="2">- Foreign currency translation</font></td>
    <td align="right" width="12%"><font size="2">-</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%"><font size="2">752,003</font></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Transfer from retained
    earnings to statutory</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">&nbsp;&nbsp;&nbsp; reserves</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(20,200)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="64%"><font size="2">Net loss for the year (restated)</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(10,577,418)</font></td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(10,577,418)</font></td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="64%" bgColor="#e9f1f8"><font size="2">Balance as of December 31,
    2006 (restated)</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(2,512,696)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">346,637</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
See accompanying notes to consolidated financial statements.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
F- 9</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>1. ORGANIZATION AND BUSINESS BACKGROUND</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
China Digital Wireless, Inc. (&quot;CHDW&quot;) through its subsidiary sells mobile phones
to retailers, distributors, and related parties, provides advertising services
and provides information services to users of mobile phones and pagers.
Substantially all of its operations are conducted in Shanghai, People's Republic
of China (&quot;PRC&quot;).</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In order to meet ownership requirements under Chinese law that restrict a
foreign company from operating in certain industries such as value-added
telecommunication, advertising service and internet services, CHDW's subsidiary
has entered into information service and cooperation agreements with two of
CHDW's affiliates that are incorporated in China: Shanghai Sifang Information
Technology Co. (&quot;Sifang Information&quot;) and Shanghai Tianci Industry Co. Ltd (&quot;Tianci
Industry&quot;). CHDW holds no ownership interest in Sifang Information or Tianci
Industry. Sifang Information and Tianci Industry contract with China Mobile
Communications Corporation (&quot;China Mobile&quot;), and China United Telecommunications
Corporation (&quot;China Unicom&quot;), to provide wireless value-added information
services to wireless receiver customers in China via China Mobile and China
Unicom. Sifang Information transmits those services to customers of China Mobile
and China Unicom on behalf of itself and Tianci Industry pursuant to a signed
agreement between Sifang Information and Tianci Industry.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Recapitalization and Reorganization</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On June 23, 2004, Boulder Acquisitions, Inc. (&quot;Boulder Acquisitions&quot;) entered
into a stock exchange agreement with Sifang Holdings Co. Ltd. (&quot;Sifang
Holdings&quot;) and certain shareholders. Pursuant to the stock exchange agreement,
Boulder Acquisitions issued 13,782,636 shares of its common stock in exchange
for a 100% equity interest in Sifang Holdings, making Sifang Holdings a wholly
owned subsidiary of Boulder Acquisitions.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Boulder Acquisitions was incorporated under the laws of the State of Colorado on
May 8, 1980 as Boulder Brewing Company (&quot;Boulder Brewing&quot;). Boulder Brewing was
the successor to a general partnership formed in 1979. From the initial
inception of the original partnership through 1990, Boulder Brewing was in the
business of operating a microbrewery in Boulder, Colorado. During 1990, as a
result of various debt defaults, Boulder Brewing's assets were foreclosed upon
and all business operations were ceased. Boulder Brewing has effectively had no
operations, assets or liabilities since its fiscal year ended December 31, 1990.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In September 2001, Boulder Brewing changed its state of incorporation from
Colorado to Nevada by means of a merger with and into Boulder Acquisitions, a
Nevada corporation formed on September 6, 2001 solely for the purpose of
effecting the reincorporation. The Articles of Incorporation and Bylaws of the
Nevada corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation eliminated the provision for Boulder
Acquisitions to issue preferred stock.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The above stock exchange transaction resulted in those shareholders of Sifang
Holdings obtaining a majority voting interest in Boulder Acquisitions. Generally
accepted accounting principles in the United States of America require that the
company whose shareholders retain the majority interest in a combined business
be treated as the acquirer for accounting purposes. Consequently, the stock
exchange transaction has been accounted for as a recapitalization of Sifang
Holdings as Sifang Holdings acquired a controlling equity interest in Boulder
Acquisitions, as of June 23, 2004. The reverse acquisition process utilizes the
capital structure of Boulder Acquisitions and the assets and liabilities of
Sifang Holdings recorded at historical cost.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 1</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Holdings is the continuing operating entity for financial reporting
purposes, and the financial statements prior to June 23, 2004 represent Sifang
Holdings' financial position and results of operations. As of June 23, 2004,
Boulder Acquisitions had only cash of $310,051, and stockholders' equity of
$310,051 with 1,585,705 shares of common stock outstanding, all of which were
included in the consolidated financial statements of Sifang Holdings. Although
Sifang Holdings is deemed to be the acquiring corporation for financial
accounting and reporting purposes, the legal status of Boulder Acquisitions as
the surviving corporation did not change. Subsequent to June 30, 2004, Boulder
Acquisitions changed its name to China Digital Wireless, Inc.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Business History</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
CHDW's business is primarily conducted through its wholly-owned subsidiary
Sifang Holdings and Sifang Holdings' wholly-owned subsidiary TCH Data Technology
Co., Ltd. (&quot;TCH&quot;), that collectively with CHDW are referred to as the &quot;Company&quot;.
Sifang Holdings was established under the laws of the Cayman Islands on February
9, 2004 for the purpose of holding a 100% equity interest in TCH. TCH was
established as a foreign investment enterprise in Shanghai under the laws of the
PRC on May 25, 2004, with registered capital of $7.2 million.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
CHDW's current operations were originally a business division of Sifang
Information. Sifang Information is a Shanghai-based privately owned enterprise
established under the laws of the PRC on August 14, 1998. Sifang Information is
engaged in the business of pager and mobile phone distribution and provides
value added information services to the customers in the Shanghai metropolitan
area. In March 2004, Sifang Information spun off its mobile phone distribution
business and the majority of its value added information services business to
TCH. As the acquiring entity under common control, TCH initially recognized all
the assets and liabilities transferred at their carrying amounts in the accounts
of Sifang Information at the date of transfer under the guidance of Statements
of Financial Accounting Standards (&quot;SFAS&quot;) No. 141, &quot;Business Combinations&quot;
Appendix D.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On May 26, 2004, Sifang Information exchanged 100% of its equity interest in TCH
for a 100% equity interest in Sifang Holdings. Since the ultimate owners of the
three entities were the same owners and the three entities remained under common
control, the ownership exchange transaction was accounted for at historical
costs under the guidance of SFAS No. 141 Appendix D. Prior to May 26, 2004,
Sifang Holdings conducted no business activities. As a result of the exchange of
ownership between TCH and Sifang Holdings, TCH's historical financial statements
became the historical financial statements of Sifang Holdings.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As a result of the spin-off, the Company now engages in the business of mobile
phone distribution and provides pager and mobile phone users with access to
certain value-added information reformatted by TCH. TCH purchases mobile phones
from first tier distributors and sells them to retailers and distributors with a
mark-up. In the process of providing value-added information services through
entering into monthly subscription agreements with various users, TCH purchases
trading activity information from stock exchanges, comments and analysis on PRC
stock markets provided by certain reputable security and investment companies,
lottery information, weather forecast, and other value-added products and
reformats the aforementioned information through decoding and recoding and then
has the reformatted information transmitted by Sifang Information, via service
contracts, to pager users. The value-added information is constantly saved on
TCH's server in order for mobile phone users to dial in via China Mobile or
China Unicom. By signing a monthly subscription agreement, wireless receiver
users agree to make advance payments for its services for either three or
six-month subscription periods.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In the spin-off process, the cost of sales included in the Company's financial
statements is directly related to the product revenue and the cost of services
is directly related to different types of service. The business taxes (similar
to sales taxes in the U.S.) are related only to service revenue at a tax rate of
approximately 3.3%. The selling expenses are allocated based on the relationship
between expense and revenue (such as commission) and payroll records. The
general and administrative expenses are allocated based on management hours
spent and payroll records. The income tax provision has been calculated on a
separate company basis and is in line with the historical actual income tax
provision at the Sifang Information level assuming that all income taxes had
been paid by Sifang Information and no income tax liability was in existence in
the periods reported in the accompanying financial statements. Management
believes that the costs, operating expenses, interest expense, and income tax
provision included in the Company's financial statements are a reasonable
representation of the costs and expenses that would have been incurred if the
Company had performed these functions as a stand-alone company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 2</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>2. RESTATEMENT OF FINANCIAL STATEMENT</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The financial statements for the year ended December 31, 2006 have been restated
to reflect the correction of error on the impairment on deposit for business
acquisition and property and equipment of approximately $7.1 million to the
consolidated statement of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table presents the effects of the restatement adjustment on the
accompanying consolidated financial statements as of and for the year ended
December 31, 2006:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There is no impact of the restatement on the Consolidated Balance Sheet.</p>
<table style="MARGIN-LEFT: 0pt; BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%">
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="124" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>As Previously</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="125" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="125" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    &nbsp;<b>Net</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="124" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Reported</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="125" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Restated</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="125" colSpan="2">
    <p style="PADDING-RIGHT: 1.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="center">
    <b>Adjustment</b></td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    <b>Consolidated Statement of Operations and Comprehensive loss</b></td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Operating expenses</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="10" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    4,133,315</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    11,247,362</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="16" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="89" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (7,114,047)</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    (Loss) income from operations</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="10">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (3,550,281)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (10,664,328)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="16">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="89">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (7,114,047)</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    (Loss) income before income taxes</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="10" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (3,426,738)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (10,540,785)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="16" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt; BORDER-BOTTOM: #000000 1.5pt solid" vAlign="top" align="left" width="89" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (7,114,047)</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Net (loss) income</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (3,463,371)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (10,577,418)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (7,114,047)</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Comprehensive (loss) income</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (2,711,368)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (9,825,415)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89" bgColor="#e9f1f8">
    <p style="PADDING-RIGHT: 0.8pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (7,114,047)</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89">
    &nbsp;</td>
  </tr>
  <tr>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="317">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 18pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: -18pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    Net (loss) income per common share &#151; basic and diluted </td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="13">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="10">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (0.20)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="94">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (0.62)</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="20">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="11">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    &nbsp;</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="16">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt">
    $</td>
    <td style="PADDING-RIGHT: 7.2pt; PADDING-LEFT: 7.2pt; PADDING-BOTTOM: 0pt; PADDING-TOP: 0pt" vAlign="top" align="left" width="89">
    <p style="PADDING-RIGHT: 0.85pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="right">
    (0.42)</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There is no impact of the restatement on the Consolidated Statement of
Stockholders&#146; Equity.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>3. GOING CONCERN UNCERTAINTIES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
These consolidated financial statements have been prepared assuming that Company
will continue as a going concern, which contemplates the realization of assets
and the discharge of liabilities in the normal course of business for the
foreseeable future.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As of December 31, 2006, the Company had a working capital of $3,346,637, a
negative operating cash flow of $4,079,333 and the accumulated deficits of
$2,512,696. Management has taken certain actions and continues to implement
changes designed to improve the Company's financial results and operating cash
flows. The action involves change of business operations from the mobile phone
distribution business and provision of information value-added services to sales
of energy-saving products, which is described in Note 20(c). The place of
business is also going to reallocate from Shanghai to Xian Province. Management
believes that these actions will enable the Company to improve future
profitability and cash flow in its continuing operations through December 31,
2007. As a result, the financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of the Company's ability to continue as a going concern.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 3</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Basis of Presentation These accompanying consolidated financial statements
  have been prepared in accordance with generally accepted accounting principles
  in the United States of America (&quot;US GAAP&quot;) and pursuant to the rules and
  regulations of the Securities and Exchange Commission (&quot;SEC&quot;) for annual
  financial statements.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Use of Estimates In preparing these consolidated financial statements,
  management makes estimates and assumptions that affect the reported amounts of
  assets and liabilities in the balance sheets and revenues and expenses during
  the year reported. Actual results may differ from these estimates.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Basis of Consolidation The consolidated financial statements include the
  accounts CHDW, its wholly owned subsidiary, Sifang Holdings, and its wholly
  owned subsidiary TCH. Substantially all of the Company's revenues are derived
  from the operations of TCH, which represents substantially all of the
  Company's consolidated assets and liabilities.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Subsidiaries are those entities in which the Company, directly or indirectly,
controls more than one half of the voting power; has the power to govern the
financial and operating policies; to appoint or remove the majority of the
members of the board of directors; or to cast majority of votes at the meeting
of directors.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
All significant inter-company balances and transactions within the Company have
been eliminated on consolidation.</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Cash and Cash Equivalents Cash and cash equivalents are carried at cost and
  represent cash on hand, demand deposits placed with banks or other financial
  institutions and all highly liquid investments with an original maturity of
  three months or less as of the purchase date of such investments.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Accounts Receivable Accounts receivable are recorded at the invoiced amount
  and do not bear interest. The Company extends unsecured credit to its
  customers in the ordinary course of business but mitigates the associated
  risks by performing credit checks and actively pursuing past due accounts. An
  allowance for doubtful accounts is established and determined based on
  managements' assessment of known requirements, aging of receivables, payment
  history, the customer's current credit worthiness and the economic
  environment. As of December 31, 2006, the Company recorded an allowance for
  doubtful accounts of $10,631.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Inventories Inventories consist primarily of mobile phones and are stated at
  the lower of cost or net realizable value, with cost being determined on a
  weighted average basis. Since 2004, the Company's major vendor began providing
  rebates and credits if the Company meets certain sales volume levels
  prescribed by the vendor. As a result, the Company is entitled to receive
  certain rebates and credits for the inventory held and sold by the Company
  within the specified period of time as defined by its vendor through
  submitting the necessary application forms. In general, once the vendor
  approves these applications the amounts of these rebates and credits will be
  deducted from the Company's accounts payable to its vendor and decrease the
  cost of goods sold or inventory held correspondingly. As of December 31, 2006,
  the Company recorded no inventories.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Property and Equipment, Net Property and equipment are stated at cost less
  accumulated depreciation and accumulated impairment losses, if any.
  Depreciation is calculated on the straight-line basis over the following
  expected useful lives from the date on which they become fully operational:</li>
</ul>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="1%">
    <p style="MARGIN-LEFT: 28pt">&nbsp;</td>
    <td width="39%">&nbsp;</td>
    <td align="middle" width="31%"><b><font size="2">Depreciable life</font></b></td>
    <td align="middle" width="30%">&nbsp;</td>
  </tr>
  <tr>
    <td width="1%">
    <p style="MARGIN-LEFT: 28pt">&nbsp;</td>
    <td width="39%" bgColor="#e9f1f8"><font size="2">Buildings</font></td>
    <td align="middle" width="31%" bgColor="#e9f1f8"><font size="2">20 years</font></td>
    <td align="middle" width="30%">&nbsp;</td>
  </tr>
  <tr>
    <td width="1%">
    <p style="MARGIN-LEFT: 28pt">&nbsp;</td>
    <td width="39%"><font size="2">Software</font></td>
    <td align="middle" width="31%"><font size="2">2 - 3 years</font></td>
    <td align="middle" width="30%">&nbsp;</td>
  </tr>
  <tr>
    <td width="1%">
    <p style="MARGIN-LEFT: 28pt">&nbsp;</td>
    <td width="39%" bgColor="#e9f1f8"><font size="2">Office and other equipment</font></td>
    <td align="middle" width="31%" bgColor="#e9f1f8"><font size="2">2 - 5 years</font></td>
    <td align="middle" width="30%">&nbsp;</td>
  </tr>
  <tr>
    <td width="1%">
    <p style="MARGIN-LEFT: 28pt">&nbsp;</td>
    <td width="39%"><font size="2">Motor vehicles</font></td>
    <td align="middle" width="31%"><font size="2">2 - 5 years</font></td>
    <td align="middle" width="30%">&nbsp;</td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Expenditure for maintenance and repairs is expensed as incurred, whereas
betterment and renewals are generally capitalized in their respective property
accounts. The gain or loss on the disposal of property, plant and equipment is
the difference between the net sales proceeds and the carrying amount of the
relevant assets and is recognized in the consolidated statement of operations.</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Capitalization of Software Costs The Company's software is developed by an
  independent third party to enable pager users to accept certain recoded
  information which is transmitted by the Company, through affiliates, and
  enables mobile phone users to dial into the Company's server. The software is
  developed for internal use and gives the Company the ability to provide value
  added information services. In accordance with SOP 98-1 &quot;Accounting for the
  Costs of Computer Software Developed or Obtained for Internal Use,&quot; the
  Company capitalizes the external cost incurred to develop this internal-use
  software by an engineering company at the application development stage and
  amortizes that cost over the estimated economic life of the software (two or
  three years) which is consistent with the expected life of a particular type
  of mobile phone.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 4</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<ul>
  <li><font face="Times New Roman" size="2">
  <p align="justify">Impairment of Long-life Assets In accordance with SFAS No.
  144, &quot;Accounting for the impairment of Long-Lived Assets and for Long-Lived
  Assets to be Disposed of', a long-lived assets and certain identifiable
  intangible assets held and used by the Company are reviewed for impairment
  whenever events or changes in circumstances indicate that the carrying amount
  of an asset may not be recoverable. For the purposes of evaluating the
  recoverability of long-lived assets, the recoverability test is performed
  using undiscounted net cash flows related to the long-lived assets. The
  Company reviewed long-lived assets to determine their carrying values for
  impairment test and recognized an impairment charge of $7,114,047 relating to
  deposit for business acquisition and property and equipment for the year ended
  December 31, 2006. </font></li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Revenue Recognition The Company derives revenues from the sale of mobile
  phones, advertisement designing service and the provision of wireless
  information services that are used on mobile phones, pagers and prepaid phone
  cards. The Company additionally earns commission income (&quot;Agency Income&quot;) from
  the sale of CDMA mobile phones on the behalf of a related party. The Company
  recognizes its revenues net of related business taxes and value-added taxes.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Mobile Phone Sales:</b><br>
Revenues generated from the sale of mobile phones are recognized upon delivery
to the distributor or retailer and the transfer of title and risk of loss.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Advertising Servicing Revenue, Net:</b><br>
Advertising revenues are derived from advertisement designing, masterminding and
producing services. The Company recognizes service revenues over the term of the
noted agreement at the time of completion of the services. The Company records
the revenue from Shanghai Sifang Media Co., Ltd. (&quot;Sifang Media&quot;) on a net basis
in compliance with EITF 99-19, &quot;Reporting Revenue Gross as a Principle versus
Net as an Agent&quot; because the Company is not the primary obligor in the
arrangement and they receive a fixed fee from Shanghai Sifang Media Co., Ltd.
and they have no latitude in determining prices.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Information Services:</b><br>
The Company recognizes service revenues over the term of the noted agreement
and/or when the services have been provided to the end user.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>i) Information Services - TCH:</b><br>
By signing a subscription agreement, wireless receiver users agree to make
payments for three to six-month subscriptions in advance. TCH records the
proceeds as deferred revenue and amortizes the deferred revenue over the
subscription period. When customers buy a pre-charged service card, the Company
records the proceeds as deferred revenue. When a customer starts to use this
card to access the Company's server and starts to use a pager to access the
aforementioned information, the Company identifies the subscription period and
amortizes the deferred revenue over the subscription period.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>ii) Information Services - Installing Agent:</b><br>
In response to a retailer's request, the Company has an installing agent who
installs the Company's software on mobile phones, which are owned by the
retailer. The retailer sells these phones for a premium covering a fee to be
paid to the installing agent and pre-charged six-month subscription fees to be
paid to the Company. After a customer using such a phone dials into the server
to access the desired information, the server records a unique identification
number installed on the mobile phone, which indicates that a specific phone user
starts his or her subscription period. After the Company receives a detailed
list from the installing agent regarding the number of phones that have been
installed with the Company's software, the Company matches this information with
a detailed list from the retailer setting forth how many such phones have been
sold. Based on the number of such phones sold, the Company records accounts
receivable and deferred revenue accordingly. At the date on which a customer
starts to dial into the server, the six-month subscription period begins and the
Company amortizes deferred revenue accordingly.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 5</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>iii) Information Services - China Mobile and/or Unicom: </b><br>
The Company's affiliates, Sifang Information and Shanghai Tianci Industrial
Group Co., Ltd. (&quot;Tianci Group&quot;), contract with China Mobile and/or China Unicom
(collectively, &quot;Mobile Operators&quot;) for the transmission of the Company's
value-added information services. The Mobile Operators bill and collect from
customers and then pass those fees (net of billing and collection service fees
charged by the Mobile Operators) to Sifang Information and Tianci Group who in
turn pass those fees to the Company. The Company recognizes net revenues based
on the total amount paid by its customers, for which the Mobile Operators bill
and collect on behalf of the Company. There is a time lag ranging from 10 days
to 45 days between the end of the service period and the date the Mobile
Operators send out their billing statements due to the segregated billing
systems of each of the provincial subsidiaries of the Mobile Operators. The
Company has not recognized service revenue based on the records provided by its
own server but has performed a reconciliation on a monthly basis of the revenues
recognized by the Company's server to the Mobile Operator's billing statement.
In addition, the Mobile Operators charge a network usage fee based on a fixed
per message fee multiplied by the excess of messages sent over messages
received. (This type of service is not covered by a monthly service subscription
and the Company has no control over whether it will occur or not.) Network usage
fees charged by the Mobile Operators are reduced for messages received by the
Company because the Mobile Operators separately charge the sender a fee for
these transmissions.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company records the revenue from the Mobile Operators on a net basis in
compliance with EITF 99-19, &quot;Reporting Revenues Gross as a Principle versus Net
as an Agent&quot; because the Company:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
- - Is not the primary obligor in the arrangement, as it relies on Sifang
Information to transmit the information services to the end user,<br>
- - Has limited ability to adjust the cost of services by adjusting the design or
marketing of the service,<br>
- - Has limited ability to determine prices, the Company must follow the price
policy within ranges prescribed by Mobile Operators, and<br>
- - Has limited ability to assume risk of non-payment by customers.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company's dependence on the substance and timing of the billing systems of
the mobile telecommunications operators may require the Company to estimate
portions of its reported revenue for information services from time to time. As
a result, subsequent adjustments may be made to the information service revenue
in the Company's consolidated financial statements. As the Company does not bill
its information services users directly, the Company depends on the billing
systems and records of the mobile telecommunications operators to record the
volume of its information services provided, to charge its users through mobile
telephone bills, to collect payments from its users, and to pay the Company.</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Cost of Sales </b></p>
<ul>
  <li dir="ltr">
  <p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Cost of sales consists primarily of purchase costs of mobile phones,
  subscription costs of certain value-added information services such as trading
  activity information from stock exchanges, comments and analysis on the PRC
  stock markets provided by certain reputable security and investment companies,
  lottery information, and weather forecast.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 6</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>Deferred Revenue</b></p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Deferred revenue consists of primarily of payments received in advance from
  customers.<ul>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Value-Added Tax TCH is subject to value-added tax (&quot;VAT&quot;) imposed by the PRC
    on TCH's domestic product sales. The output VAT is charged to customers who
    purchase mobile phones from TCH and the input VAT is paid when TCH purchases
    mobile phones from its vendors. The VAT rate applied for TCH is 17%. The
    input VAT can be offset against the output VAT.</li>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Advertising Expenses The Company expenses advertising costs as incurred in
    accordance with the American Institute of Certified Public Accountants (&quot;AICPA&quot;)
    Statement of Position 93-7, &quot;Reporting for Advertising Costs&quot;. Advertising
    expenses totaled $353 and $17,468 during the years ended December 31, 2006
    and 2005, respectively.</li>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Comprehensive Income SFAS No. 130, &quot;Reporting Comprehensive Income&quot;,
    establishes standards for reporting and display of comprehensive income, its
    components and accumulated balances. Comprehensive income as defined
    includes all changes in equity during a period from non-owner sources.
    Accumulated comprehensive income, as presented in the accompanying statement
    of changes in stockholders' equity consists of changes in unrealized gains
    and losses on foreign currency translation. This comprehensive income is not
    included in the computation of income tax expense or benefit.</li>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Income Taxes The Company accounts for income tax using SFAS No. 109
    &quot;Accounting for Income Taxes&quot;, which requires the asset and liability
    approach for financial accounting and reporting for income taxes. Under this
    approach, deferred income taxes are provided for the estimated future tax
    effects attributable to temporary differences between financial statement
    carrying amounts of assets and liabilities and their respective tax bases,
    and for the expected future tax benefits from loss carry-forwards and
    provisions, if any. Deferred tax assets and liabilities are measured using
    the enacted tax rates expected in the years of recovery or reversal and the
    effect from a change in tax rates is recognized in the statement of
    operations and comprehensive (loss) income in the period of enactment. A
    valuation allowance is provided to reduce the amount of deferred tax assets
    if it is considered more likely than not that some portion of, or all of the
    deferred tax assets will not be realized.</li>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Net (Loss) Income Per Share The Company calculates net (loss) income per
    share in accordance with SFAS No. 128, &quot;Earnings per Share&quot;. Basic net
    (loss) income per share is computed by dividing the net (loss) income by the
    weighted-average number of common shares outstanding. Diluted net (loss)
    income per share is computed similar to basic net (loss) income per share
    except that the denominator is increased to include the number of additional
    common shares that would have been outstanding if the potential common stock
    equivalents had been issued and if the additional common shares were
    dilutive. The Company did not have any potentially dilutive common share
    equivalents as of December 31, 2006 and 2005.</li>
    <li>
    <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
    Foreign Currencies Translation The functional and reporting currency of the
    Company is the United States dollars (&quot;U.S. dollars&quot;). The accompanying
    consolidated financial statements have been expressed in U.S. dollars.</li>
  </ul>
  </li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The functional currency of the Company's foreign subsidiaries is the Renminbi
Yuan (&quot;RMB&quot;). The balance sheet is translated into United States dollars based
on the rates of exchange ruling at the balance sheet date. The statement of
operations is translated using a weighted average rate for the year. Translation
adjustments are reflected as cumulative translation adjustments in stockholders'
equity.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 7</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
&nbsp;</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Segment Reporting SFAS No. 131 &quot;Disclosures about Segments of an Enterprise
  and Related Information&quot; establishes standards for reporting information about
  operating segments on a basis consistent with the Company's internal
  organization structure as well as information about geographical areas,
  business segments and major customers in financial statements. The Company
  operates in four principal reportable segment, as more fully explained in Note
  15.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Fair Value of Financial Instruments The carrying value of the Company's
  financial instruments, which include cash and cash equivalents, accounts
  receivables, inventories, advances and deposits to suppliers, accounts
  payable, other current liabilities, approximate their fair values due to the
  short-term maturity of these instruments.</li>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Related Parties Parties, which can be a corporation or individual, are
  considered to be related if the Company has the ability, directly or
  indirectly, to control the other party or exercise significant influence over
  the other party in making financial and operating decisions. Companies are
  also considered to be related if they are subject to common control or common
  significant influence.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
All material related party transactions have been disclosed in the note 14 to
consolidated financial statements.</p>
<ul>
  <li>
  <p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
  Recently Issued Accounting Standard In May 2005, the FASB issued SFAS No. 154,
  &quot;Accounting Changes and Error Corrections&quot; (&quot;SFAS 154&quot;), which replaces
  Accounting Principles Board Opinions No. 20, &quot;Accounting Changes&quot; and SFAS No.
  3, &quot;Reporting Accounting changes in Interim Financial Statements--An Amendment
  of APB Opinion No. 28&quot;. SFAS 154 provides guidance on the accounting for and
  reporting of accounting changes. It establishes retrospective application, or
  the latest practicable date, as the required method for reporting a change in
  accounting principle and the reporting of a correction of an error. SFAS 154
  is effective for accounting changes and corrections of errors made in fiscal
  years beginning after December 15, 2005. The adoption of this statement did
  not have a material effect on the Company's financial position or results of
  operations.</li>
</ul>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In September 2005, the FASB's Emerging Issues Task Force (&quot;EITF&quot;) reached a
final consensus on Issue 04-13, &quot;Accounting for Purchases and Sales of Inventory
with the Same Counterparty&quot; (&quot;EITF 04-13&quot;). EITF 04-13 requires that two or more
legally separate exchange transactions with the same counterparty be combined
and considered a single arrangement for purposes of applying APB Opinion No. 29,
&quot;Accounting for Nonmonetary Transactions&quot;, when the transactions are entered
into in contemplation of one another. EITF 04-13 is effective for new
arrangements entered into, or modifications or renewals of existing
arrangements, in interim or annual periods beginning after March 15, 2006. The
Company does not expect that the adoption of this statement would have a
material effect on the Company's financial position or results of operations.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In February 2006, the FASB issued SFAS No. 155, &quot;Accounting for Certain Hybrid
Instruments-an amendment of FASB Statements 133 and 140&quot;, which is effective for
all financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The statement improves
financial reporting by eliminating the exemption from applying SFAS No. 133 to
interests in securitized financial assets so that similar instruments are
accounted for similarly regardless of the form of the instruments. The Statement
also improves financial reporting by allowing a preparer to elect fair value
measurement at acquisition, at issuance, or when a previously recognized have to
bifurcated, if the holder elects to account for the whole
instrument-by-instrument basis, in cases in which a derivative would otherwise<font size="2">
have to bifurcated, &nbsp;if the holder elects to account for the whole instrument on
a fair value &nbsp;basis. &nbsp;The &nbsp;Company &nbsp;does not expect &nbsp;that the &nbsp;adoption &nbsp;of this
statement &nbsp;would have a material effect on the Company's &nbsp;financial &nbsp;position or
results of operations.</font></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 8</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p dir="ltr" style="PADDING-LEFT: 0.75pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="justify">
<font size="2">In July 2006, &nbsp;the FASB issued FIN 48, &nbsp;&quot;Accounting &nbsp;for
&nbsp;Uncertainty &nbsp;in Income Taxes--an &nbsp;Interpretation &nbsp;of FASB &nbsp;Statement &nbsp;No.
&nbsp;109&quot;, &nbsp;which &nbsp;clarifies &nbsp;the accounting for uncertainty in tax positions. &nbsp;This
Interpretation &nbsp;requires that the Company recognizes in its consolidated
&nbsp;financial statements the impact of a tax &nbsp;position if that &nbsp;position is more
&nbsp;likely than not of being &nbsp;sustained &nbsp;on audit, &nbsp;based on the technical merits
of the position. &nbsp;The provisions of FIN 48 are effective for the Company on
January 1, 2007, with the cumulative &nbsp;effect of the change in accounting
principle, if any, recorded as an adjustment to opening retained &nbsp;earnings. &nbsp;The
Company is currently &nbsp;evaluating the impact of adopting FIN 48 on its
consolidated financial statements.</font></p>
<p style="PADDING-LEFT: 0.75pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="justify">
<font size="2">In September &nbsp;2006, &nbsp;the SEC released SAB No. 108, &nbsp;&quot;Considering
&nbsp;the Effects of Prior &nbsp;Year &nbsp;Misstatements &nbsp;when &nbsp;Quantifying &nbsp;&nbsp;Misstatements
&nbsp;in &nbsp;Current &nbsp;Year Financial Statements&quot; (&quot;SAB 108&quot;). SAB 108 provides
interpretive guidance on the SEC's &nbsp;views on how the &nbsp;effects &nbsp;of the &nbsp;carryover
&nbsp;or &nbsp;reversal &nbsp;of prior year misstatements &nbsp;should be considered in quantifying
a current year &nbsp;misstatement. The provision of SAB 108 is effective for the
Company in the current fiscal year ended December 31, 2006. &nbsp;The Company is
currently &nbsp;evaluating the impact of SAB 108 but does not believe that the
&nbsp;application &nbsp;of SAB 108 would have a material effect on its financial position,
cash flows nor results of operations.</font></p>
<p style="COLOR: #000000" align="justify"><font size="2">In September 2006, the
FASB issued SFAS No.157, &quot;Fair Value Measurements&quot; (&quot;SFAS 157&quot;), which defines
fair value, establishes guidelines for measuring fair value and expands
&nbsp;disclosures &nbsp;regarding fair value &nbsp;measurements. &nbsp;SFAS 157 does not require any
new fair value measurements but rather eliminates inconsistencies in guidance
&nbsp;found in various &nbsp;prior &nbsp;accounting &nbsp;pronouncements. &nbsp;SFAS 157 will be
effective &nbsp;for the &nbsp;Company &nbsp;starting &nbsp;January &nbsp;1, &nbsp;2008. &nbsp;Earlier &nbsp;adoption &nbsp;is
permitted, &nbsp;provided &nbsp;the &nbsp;company &nbsp;has not &nbsp;yet &nbsp;issued &nbsp;financial &nbsp;statements,
including for interim &nbsp;periods, &nbsp;for that fiscal year. &nbsp;The Company is currently
evaluating &nbsp;the &nbsp;impact of SFAS 157 on its &nbsp;financial &nbsp;position, &nbsp;cash flows and
results of operations.</font></p>
<p style="PADDING-LEFT: 0.75pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="justify">
<b><font size="2">5. IMPAIRMENT &nbsp;WRITE DOWN RECOGNISED AS A RESULT OF STRATEGIC
&nbsp;REVIEW OF CERTAIN OPERATIONS</font></b></p>
<p style="PADDING-LEFT: 0.75pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="justify">
<font size="2">In 2006, &nbsp;during &nbsp;the &nbsp;course of the &nbsp;Company's &nbsp;strategic
&nbsp;review of the assets involved &nbsp;in the mobile &nbsp;phone sales and &nbsp;information
&nbsp;service &nbsp;operations, &nbsp;the Company determined that the carrying values of these
property and equipment were impaired after &nbsp;recoverability &nbsp;test using future
&nbsp;undiscounted &nbsp;cash flows. The&nbsp; carrying &nbsp;values of these &nbsp;assets were not
&nbsp;recovered &nbsp;sufficiently &nbsp;and so were fully written down to the statement of
operations for the year ended December 31, 2006.</font></p>
<p style="PADDING-LEFT: 0.75pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt; PADDING-TOP: 0pt" align="justify">
<font size="2">Also, the Company reviewed the future economic value of the
deposit for business acquisition, &nbsp;as more fully mentioned in Note 14(h), &nbsp;and
determined that future undiscounted &nbsp;cash flows associated with this deposit
were uncertain and may not be sufficient to recover their carrying &nbsp;values and
so was fully written down to the statement of operations for the year ended
December 31, 2006.</font></p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" height="165" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="29%" height="19">&nbsp;</td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td align="right" width="20%" height="19">&nbsp;</td>
    <td align="right" width="25%" colSpan="2" height="19"><b><font size="2">
    Impairment charge to</font></b></td>
    <td align="right" width="4%" height="19">&nbsp;</td>
    <td align="right" width="21%" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td width="29%" height="19">&nbsp;</td>
    <td align="right" width="26%" colSpan="2" height="19"><b><font size="2">Net
    book value at</font></b></td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td align="right" width="20%" height="19"><b><font size="2">statement of</font></b></td>
    <td align="right" width="28%" colSpan="2" height="19"><b><font size="2">Net
    book value after</font></b></td>
  </tr>
  <tr>
    <td width="29%" height="17"><b><font size="2">Assets</font></b></td>
    <td align="right" width="3%" height="17"></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" height="17">
    <b><font size="2">December 31, 2006</font></b></td>
    <td align="right" width="3%" height="17"></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" height="17">
    <b><font size="2">operations</font></b></td>
    <td align="right" width="4%" height="17"></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="21%" height="17">
    <b><font size="2">the impairment charge</font></b></td>
  </tr>
  <tr>
    <td width="29%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8" height="20">
    &nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8" height="19">
    &nbsp;</td>
    <td align="right" width="4%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="21%" bgColor="#e9f1f8" height="19">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="29%" bgColor="#e9f1f8" height="15"><font size="2">Property and
    equipment</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="15"><font size="2">$</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8" height="15"><font size="2">
    856,457</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="15"><font size="2">$</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8" height="15"><font size="2">
    (856,457)</font></td>
    <td align="right" width="4%" bgColor="#e9f1f8" height="15"><font size="2">$</font></td>
    <td align="right" width="21%" bgColor="#e9f1f8" height="15"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="29%" height="19"><font size="2">Deposit for business acquisition</font></td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td align="right" width="20%" height="19">&nbsp;</td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td align="right" width="20%" height="19">&nbsp;</td>
    <td align="right" width="4%" height="19">&nbsp;</td>
    <td align="right" width="21%" height="19">&nbsp;</td>
  </tr>
  <tr>
    <td width="29%" height="19"><font size="2">acquisition</font></td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" height="19">
    <font size="2">6,257,590</font></td>
    <td align="right" width="3%" height="19">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" height="19">
    <font size="2">(6,257,590)</font></td>
    <td align="right" width="4%" height="19">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="21%" height="19">
    <font size="2">-</font></td>
  </tr>
  <tr>
    <td width="29%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8" height="19">
    &nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8" height="19">
    &nbsp;</td>
    <td align="right" width="4%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="21%" bgColor="#e9f1f8" height="19">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="29%" bgColor="#e9f1f8" height="19">&nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8" height="19">
    <font size="2">7,114,047</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8" height="19"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8" height="19">
    <font size="2">(7,114,047)</font></td>
    <td align="right" width="4%" bgColor="#e9f1f8" height="19"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="21%" bgColor="#e9f1f8" height="19">
    <font size="2">-</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 9</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>6. ACCOUNTS RECEIVABLE, NET</b></p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Accounts receivable</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">10,631</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">844,977</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Less: allowance for doubtful accounts</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(10,631)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Accounts receivable, net</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">844,977</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>7. ADVANCES AND DEPOSITS TO SUPPLIERS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In December 2006, the Company via TCH began to engage in other activities in the
energy saving and recycling industry, including purchasing certain equipments,
devices, hardware and software for the construction and installation of top gas
recovery turbine system (&quot;TRT&quot;) and other renewable energy products. As of
December 31, 2006, TCH paid an amount of $755,635 as a deposit to purchase
software for the TRT project.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>8. PROPERTY AND EQUIPMENT, NET </b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Property and equipment consist of the following:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Buildings</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">999,997</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">967,507</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Software</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">568,704</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Office and other equipment</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">488,984</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Motor vehicles</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">92,225</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">89,229</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,092,222</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,114,424</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Less: accumulated depreciation</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(235,765)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%"><font size="2">(1,008,668)</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Less: impairment charge to
    the statement of operations</font></td>
    <td width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(856,457)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Property and equipment, net</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">--</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$ </font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,105,756</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Depreciation expenses for the years ended December 31, 2006 and 2005 were
$189,366 and $239,716, respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As of December 31, 2005, in accordance with the &quot;Business and Related Assets
Transfer Agreement&quot; signed by TCH and Sifang Information, the ownership of the
building suite and two motor vehicles, (collectively known as &quot;Assets&quot;) are
recorded on TCH's books of record. The net book value of the pledged assets was
$829,637. The property is pledged as security for a $2.5 million line of credit
held under the credit facility agreement between Sifang Information and the
bank. The line of credit is recorded on Sifang Information's books and has a
balance of $2,478,253 as of December 31, 2005. However, the two parties have
declared that the ownership of the &quot;Assets&quot; should be TCH's as of the balance
sheet date and have signed a legal agreement, as noted above. Sifang Information
is expected to pay off the line of credit balance in April 2008 and at that
point they will transfer the legal title of the property and the motor vehicles
within one week after the pledge is to be released by the bank.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As of December 31, 2006, the Company reviewed its long-lived assets to determine
their carrying values for impairment test and recognized an impairment charge of
$856,457 to fully write down the carrying values of buildings and motor
vehicles. <br>
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 10</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>9. OTHER CURRENT LIABILITIES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Other current liabilities consist of the following:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Other payables</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">448,714</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">118,058</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Employee welfare payable</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">213,870</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">206,462</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Accruals</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">279,823</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">51,440</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">942,407</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">375,960</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>10. GOVERNMENT SUBSIDY</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the year ended 31 December 2006, the Company received a general
government subsidy from the local bureau, which is equivalent to 3.5% of the
taxable income of TCH throughout the period from January 2005 to December 2005.
The subsidy is non-recurring and subject to government approval. The amount of
such government subsidy for the years ended December 31, 2006 and 2005 was
$118,202 and $108,476 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>11. INCOME TAXES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company's PRC subsidiary, TCH, is registered at Pudong District in Shanghai
and subject to a favorable income tax rate of 15% compared to a normal income
tax rate of 33% (30% for the central government and 3% for the local government)
under current PRC tax laws. Sifang Information is registered in the Shanghai
downtown area and has been treated by the Shanghai Municipal Administration of
Labor as an enterprise that provides unemployed and handicapped people with
jobs. Accordingly, Sifang Information is also entitled to a favorable income tax
rate of 15% and qualified for an income tax exemption for three years from
January 1, 2000 to December 31, 2002, and a 50% income tax reduction for three
years from January 1, 2003 to December 31, 2005. The income tax provisions
presented in the Company's financial statements are based on the actual income
tax rates of TCH at 15% for both years ended December 31, 2006 and 2005. The
deferred tax assets are determined based on the income tax rates applicable at
the TCH level.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
There is no income tax for companies domiciled in the Cayman Islands.
Accordingly, the Company's consolidated financial statements do not present any
income tax provisions related to Cayman Islands tax jurisdiction.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 11</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The income tax provision for the years ended December 31, 2006 and 2005 are as
follows:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Current tax expense</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">23,787</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">465,343</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Deferred tax</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
    <td style="BORDER-BOTTOM: medium none" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">16,400</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Income tax expense</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">36,633</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">481,743</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The components of (loss) income before income taxes are as follows:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td style="BORDER-BOTTOM: medium none" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td style="BORDER-TOP: medium none" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Loss subject to Cayman
    Islands</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">&nbsp;(250,995)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">&nbsp;(737,758)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">(Loss) income subject to the PRC</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <font size="2">(10,289,790)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,030,608</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">(Loss) income before income
    taxes</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(10,540,785)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;2,292,850</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Income tax expense</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;36,633</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;481,743</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The reconciliation of income tax rate to the effective income tax rate based on
(loss) income before income taxes stated in the consolidated statement of
operations for the years ended December 31, 2006 and 2005 are as follows:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="12%" colSpan="3">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">Year ended December 31,</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">(Loss) income before income
    taxes</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(10,289,790)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,030,608</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Statutory income tax rate</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">33%</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">33%</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    (3,395,630)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,000,101</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Add: Adjustments</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Income tax holiday</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(21,964)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">(545,509)</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Allowance for doubtful accounts</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">993,508</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">27,151</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Change in deferred tax
    assets</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%" colSpan="2"><font size="2">Impairment on deposit for
    business</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">acquisition and property and</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">equipment</font></td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">2,347,635</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Others</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">100,238</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Income tax expense</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">36,633</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">481,743</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 12</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth the significant components of the aggregate
deferred tax assets of the Company as of December 31, 2006 and 2005:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="12%" colSpan="3">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">Year ended December 31,</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid; BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid; BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Deferred tax assets:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">- Allowance for doubtful accounts</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">451,595</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,670</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">- Accrued liabilities</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,176</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Total deferred tax assets</font></td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">451,595</font></td>
    <td align="right" width="12%" colSpan="2">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Less: valuation allowance</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(451,595)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Deferred tax assets</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">12,846</font></td>
  </tr>
</table>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>12. NET (LOSS) INCOME PER SHARE</b></p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Basic net (loss) income per share is computed using the weighted average number
of the ordinary shares outstanding during the year. Diluted net (loss) income
per share is computed using the weighted average number of ordinary shares and
ordinary share equivalents outstanding during the year.</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following table sets forth the computation of basic and diluted net (loss)
income per share for the year indicated:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="36%" colSpan="3">
    <p align="center"><b><font size="2">Year ended December 31,</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">(restated)<br>
    (see Note 2)</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Basic and diluted net
    (loss) income</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">per share calculation:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Numerator:</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Net (loss) income used in
    computing basic net (loss) income per share</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(10,577,418)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">1,811,107</font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Denominator:</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Weighted average ordinary shares outstanding</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,147,268</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">17,054,368</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Basic and diluted net
    (loss) income per share</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">
    <p align="right">(0.62)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">0.11</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>13. CAPITAL TRANSACTIONS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On June 23, 2004, the Company issued 167,895 shares of its common stock to a
consultant for services relating to the reverse merger that was completed in
fiscal 2004. The trading price of the Company's common stock on June 23, 2004
was $3.60 per share, accordingly, the fair value of 167,895 shares was $604,422.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 13</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On June 23, 2004, the Company issued 166,667 shares of its common stock in
exchange for services performed by an existing major shareholder of Boulder
Acquisitions for his consulting services involved with the reverse merge. The
common stock was issued at a price of $1.14 per share in exchange for gross
proceeds of $190,000 based on a stock purchase agreement. The $1.14 per share
price was pre-negotiated between the Company and the shareholder before the
reverse merger had been completed. Pursuant to the stock purchase agreement, the
Company granted the existing shareholder an option which required the Company to
purchase up to the aforementioned 166,667 shares of common stock at a price of
$1.14 per share, such option being exercisable at any time after the date that
is nine months after the Company files a registration statement on Form SB-2
with the SEC, registering the shares purchased by the existing shareholder, up
to and including the earlier of the date that such registration statement is
declared effective by the SEC or the existing shareholder's shares are eligible
for resale under Rule 144 under the Securities Act of 1933. According to Topic
D-98 from the SEC, &quot;Classification and Measurement of Redeemable Securities,&quot;
these shares should be presented outside the permanent equity section. However,
on November 12, 2004, the Company filed a Registration Statement on Form SB-2
with the SEC, for registration of these securities to be sold to the public by
small business issuers. On February 8, 2005, the SEC approved the registration
filing and accordingly, the Company has recorded these shares in stockholders'
equity as the contingency surrounding these shares expired as of February 8,
2005. On June 23, 2004, the trading price of the Company's stock at the end of
the day was $3.60 per share. Due to the relationship between the parties, the
difference between the price of $1.14 per share and the price of $3.60 per share
was recorded as compensation by presenting $410,001 in additional paid-in
capital and in general and administrative expenses.</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
On June 28, 2004, the Company issued, in aggregate, 1,315,789 shares of its
common stock to three investors at a price of $1.14 per share in exchange for
gross proceeds of $1,500,000 based on a stock purchase agreement. The $1.14 per
share price was pre-negotiated between the Company and the investors before the
reverse merger had been completed. Pursuant to the signed stock purchase
agreement, the Company granted to each of the three investors an option which
requires the Company to purchase up to the aforementioned 1,315,789 shares, in
aggregate, of common stock at a price of $1.14 per share, such option being
exercisable at any time after the date that is nine months after the Company
files a Registration Statement on Form SB-2 with the SEC, registering the shares
purchased by the existing shareholder, up to and including the earlier of the
date that such registration statement is declared effective by the SEC or the
existing shareholder's shares are eligible for resale under Rule 144 under the
Securities Act of 1933. As of December 31, 2004, the proceeds of $1.5 million
were held in an escrow account with an agent who is related to a shareholder. As
of December 31, 2004, the Company has treated the proceeds held in escrow as a
current asset as the entire amount was released from escrow in March 2005 and
paid to the Company. According to Topic D-98 from SEC, &quot;Classification and
Measurement of Redeemable Securities,&quot; these shares should be presented outside
the permanent equity section. However, on November 12, 2004, the Company filed a
Registration Statement on Form SB-2 with the SEC, for registration of these
securities to be sold to the public by small business issuers. On February 8,
2005, the SEC declared the registration statement effective. Accordingly, the
Company has recorded these shares in stockholders' equity as the contingency
surrounding these shares expired as of February 8, 2005.</p>
<p dir="ltr" style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In connection with the June 28, 2004 issuance of common stock, the Company
incurred share issue costs of $217,481 and accounted for it as a reduction of
additional paid-in capital.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 14</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
and may not be sufficient to recover their carrying values and so was fully
written down to additional paid-in capital. </p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>14. RELATED PARTY TRANSACTIONS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(a) Related Party Relationships</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The following related parties are related through common ownership with the
major shareholder of the Company:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Shanghai Sifang Information Technology Co. (&quot;Sifang Information&quot;) Shanghai
Tianci Industry Co. Ltd. (&quot;Tianci Industry&quot;) Shanghai Tianci Industry Group Co.
Ltd. (&quot;Tianci Group&quot;) Shanghai Shantian Telecommunication Co. Ltd. (&quot;Shantian&quot;)
Shanghai Sifang Telecommunication Co. Ltd. (&quot;Sifang Telecom&quot;) Shanghai Tianci
Real Estate Co. Ltd. (&quot;Tianci Real Estate&quot;) Shanghai Sifang Media Co., Ltd. (&quot;Sifang
Media&quot;).</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(b) Merchandise Sold to Related Parties</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During the year ended December 31, 2006, TCH sold Samsung GSM mobile phones
valued at $713,524 at a gross profit margin of 4% or $26,531 to Shanghai
Shantian Telecommunication Co. Ltd. (&quot;Shantian&quot;), compared to $10,608,287 at a
gross profit margin of 4% or $382,371 for the year ended December 31, 2005.
There was no accounts receivable due from Shantian as of December 31, 2006 and
2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(c) Advertising Services Rendered to Related Party</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="36%" colSpan="3">
    <p align="center"><font size="2"><b>Year ended December 31,</b></font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%"><b>
    <font size="2">2006</font></b></td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%"><b>
    <font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Tianci Real Estate</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">1,879,965</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In January 2005, Sifang Media and TCH entered into the &quot;Bank Digital TV's
Cooperation Agreement&quot;, where TCH will assist in the promotion of TV ads for
various customers, including Tianci Real Estate. TCH received a net fee of $nil
and $1,879,965 from Tianci Real Estate for providing the service during the
years ended December 31, 2006 and 2005 respectively. The Advertisement Agency
Contract between Tianci Real Estate and Sifang Media was terminated in November
2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
TCH, through Sifang Media, entered into certain agreements with customers, where
TCH will assist in the promotion of TV ads for these customers. TCH received a
net fee of $334,844 and $881,633 for providing the service via Sifang Media
during the fiscal year of 2006 and 2005 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(d) Service Provided by Related Party</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="36%" colSpan="3">
    <p align="center"><font size="2"><b>Year ended December 31,</b></font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%"><b>
    <font size="2">2006</font></b></td>
    <td align="right" width="12%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%"><b>
    <font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Sifang Information</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">473,534</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: #000000 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">426,009</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Pursuant to the service agreements between TCH and Sifang Information, TCH was
allowed to use Sifang Information's facility (which may not be owned by foreign
investors at the present time) to transmit the reformatted information and
Sifang Information also provided other management support and marketing services
to TCH.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 15</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(e) Leasing From Related Parties</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Sifang Information signed a leasing agreement with the Tianci Real Estate for
leasing its apartment for office use. During the years ended December 31, 2006
and 2005, TCH paid rental expense of $50,378 and $49,565 respectively to Tianci
Real Estate.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(f) Amount Due From Related Parties</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="380">&nbsp;</td>
    <td align="middle" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="12%" colSpan="3">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">As of December 31,</font></b></td>
  </tr>
  <tr>
    <td width="380">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="380">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="380" bgColor="#e9f1f8"><font size="2">Sifang Information</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,446,275</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;2,165,624</font></td>
  </tr>
  <tr>
    <td width="380"><font size="2">Sifang Media</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">929,345</font></td>
  </tr>
  <tr>
    <td width="380" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="380">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">6,446,275</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">3,094,969</font></td>
  </tr>
  <tr>
    <td width="380" bgColor="#e9f1f8"><font size="2">Less: Amount written-off</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <font size="2">(3,000,000)</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="380">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="380">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;3,446,275</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">&nbsp;3,094,969</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The amount due from Sifang Information and Sifang Media as of December 31, 2005
are trade related and relating to the mobile phone distribution business.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
During January 2006, the Company entered into an agreement with Sifang
Information for the establishment of a new joint venture entity with a third
party. The purpose of the joint venture entity is to act as a sole advertising
agent of TCH. The Company advanced a total of $2,499,969 to Sifang Information
to contribute to the joint venture. This, together with the trade receivables
related to the mobile phone distribution business, made up a total balance of
$6,446,275 receivable from Sifang Information as of December 31, 2006. As of
December 31, 2006, Sifang Information was informed of the non-continuous of the
formation of the joint venture by the third party and it was determined that the
amount is not to be recovered in the foreseeable future. As a result, the
Companyprovided a provision of $3,000,000 for 1) the full amount advance to the
joint venture and 2) the long outstanding portion of the receivable from Sifang
Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(g) Amount Due To Related Parties</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%" colSpan="3">
    <font size="2">
    <p style="MARGIN-RIGHT: 4px" align="center"><b>As of December 31,</b></font></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2006</font></b></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><b><font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="52%">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8"><font size="2">Tianci Real Estate</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">123,467</font></td>
  </tr>
  <tr>
    <td width="52%"><font size="2">Shantian</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="12%">
    <p style="MARGIN-RIGHT: 4px"><font size="2">99,932</font></td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px">&nbsp;</td>
  </tr>
  <tr>
    <td width="52%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">-</font></td>
    <td align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">$</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="12%" bgColor="#e9f1f8">
    <p style="MARGIN-RIGHT: 4px"><font size="2">223,399</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The balance owed to Tianci Real Estate represented the expenses paid by Tianci
Real Estate on behalf of the Company during the year ended December 31, 2005.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 16</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The balance owed to Shantian represents the advances received from Shantian for
mobile phone sales. All of the above amounts due to related parties are
unsecured, non-interest bearing and due on demand.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(h) Deposit for Business Acquisition</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
In December 2005, TCH entered into a series of agreements to purchase (i) 95% of
the equity interests of Shanghai Kena Energy Saving Electric Co Ltd (&quot;Kena&quot;) for
an aggregate purchase price of RMB 28,500,000 (approximately $3,532,000); (ii) a
related patent from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000); and (iii) related rights to make a patent
application from one of the shareholders of Kena for RMB 11,000,000
(approximately $1,363,000). The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February 10, 2006, these agreements were amended to impose an additional
condition on Mr. Zhang Naiyao, the transferor of the patent and holder of the
right to make the patent application, that if he fails to provide the necessary
technical assistance services to enable TCH to use the patented technology in
producing products on a large scale that meet the standards set by the Company
within one year, TCH shall have the right to demand the return of the relevant
payment received by him in full and to terminate the agreement for the
assignment of the patent and the right to apply for registration of the patent.
The amendments also set forth the arrangement for payment of the purchase price
between TCH and Sifang Information. The purchase price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for registration of the patent shall be paid by Sifang Information on
behalf of TCH. According to the amended agreements, the amount of the purchase
consideration paid by Sifang Information on behalf of TCH will be applied to
offset the trade and other receivables owed to TCH by Sifang Information.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Kena was established on April 26, 2005 and it specializes in the research,
development and manufacture of energy-saving products, as well as illumination
projects in China. The patent and patent application mentioned above relate to a
&quot;three phase transformer&quot; which is used in connection with a power supply system
and utilizes technology that allows manufacturers to produce transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As Mr. Zhang Naiyao failed to meet the condition mentioned-above within the
period prescribed, the Company decided not to pursue the above-mentioned
acquisition of Kena. All the agreements in connection with the Kena acquisition
were terminated by TCH and Kena. Consequently, the Company reviewed the future
economic value of the deposit for the anticipated business acquisition of Kena
and determined that future undiscounted cash flows associated with this deposit
were uncertain and may not be sufficient to recover their carrying values and so
was fully written down as of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>15. SEGMENT INFORMATION</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company currently operates in four principal business segments: (i)
advertising service, (ii) sales of mobile phones, (iii) mobile phone services,
and (iv) beep pagers service. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies (see
Note 4). The Company had no inter-segment sales for the years ended December 31,
2006 and 2005. The Company's reportable segments are strategic business units
that offer different products and services. The Company evaluates the
performance of its operating segments based on income from operations, before
income taxes, accounting changes, non-recurring items and interest income and
expense.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 17</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Summarized financial information concerning the Company's reportable segments is
shown in the following table for the years ended December 31, 2006 and 2005:</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td width="19%">&nbsp;</td>
    <td align="right" width="15%" colSpan="2"><b><font size="2">Advertising</font></b></td>
    <td align="right" width="14%" colSpan="2"><b><font size="2">Sales of</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">Mobile</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><b><font size="2">Beep</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><b><font size="2">Total</font></b></td>
  </tr>
  <tr>
    <td width="19%">&nbsp;</td>
    <td align="right" width="15%" colSpan="2"><b><font size="2">service</font></b></td>
    <td align="right" width="14%" colSpan="2"><b><font size="2">mobile</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">phone</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><b><font size="2">pagers</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="17%" colSpan="2"><b><font size="2">(restated)</font></b></td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="19%"><b><font size="2">2006</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="15%" colSpan="2">
    <b><font size="2">revenue</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="14%" colSpan="2">
    <b><font size="2">phones</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%"><b>
    <font size="2">service</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">service</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">Corporate</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">(see Note 2)</font></b></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: 1px solid" width="19%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Revenue, net</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">334,844</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">&nbsp;1,269,485</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">&nbsp;736,742</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">&nbsp;548,365</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">2,889,436</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Cost of revenue</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">110,876</font></td>
    <td align="right" width="14%" colSpan="2"><font size="2">1,191,340</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">815,364</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">188,822</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">2,306,402</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Gross profit (loss)</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">223,968</font></td>
    <td align="right" width="14%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    78,145</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">(78,622)</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">359,543</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">583,034</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Depreciation</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">110,924</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">78,442</font></td>
    <td align="right" width="17%" colSpan="2"><font size="2">189,366</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Interest expense</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">--</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Net income (loss)</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">224,746</font></td>
    <td align="right" width="14%" colSpan="2"><font size="2">(250,082)</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">(385,372)</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">121,202</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">(10,287,912)</font></td>
    <td align="right" width="17%" colSpan="2"><font size="2">(10,577,418)</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Total assets</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">4,464,612</font></td>
    <td align="right" width="17%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    4,464,612</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Expenditure for</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">long-lived assets</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">&nbsp;-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">- </font>
    </td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="19%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%">&nbsp;</td>
    <td align="right" width="15%" colSpan="2"><b><font size="2">Advertising</font></b></td>
    <td align="right" width="14%" colSpan="2"><b><font size="2">Sales of</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">Mobile</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><b><font size="2">Beep</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%">&nbsp;</td>
    <td align="right" width="15%" colSpan="2"><b><font size="2">service</font></b></td>
    <td align="right" width="9%" colSpan="2"><b><font size="2">mobile</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><b><font size="2">phone</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><b><font size="2">pagers</font></b></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="19%"><b><font size="2">2005</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="15%" colSpan="2">
    <b><font size="2">revenue</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="9%" colSpan="2">
    <b><font size="2">phones</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="10%"><b>
    <font size="2">service</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">service</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">Corporate</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="11%"><b>
    <font size="2">Total</font></b></td>
  </tr>
  <tr>
    <td style="BORDER-TOP: 1px solid" width="19%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="10%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="3%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Revenue, net</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">2,761,598</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">16,383,356</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">&nbsp;634,728</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">639,340</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">20,419,022</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Cost of revenue</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">141,554</font></td>
    <td align="right" width="14%" colSpan="2"><font size="2">16,024,959</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">410,898</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">270,726</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">16,848,137</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Gross profit</font></td>
    <td align="right" width="15%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    2,620,044</font></td>
    <td align="right" width="14%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    358,397</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">223,830</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">368,614</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">3,570,885</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Depreciation</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">191,773</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">-</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">47,943</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">239,716</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Interest expense</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">9,093</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">9,093</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Net income (loss)</font></td>
    <td align="right" width="15%" colSpan="2"><font size="2">1,940,596</font></td>
    <td align="right" width="14%" colSpan="2"><font size="2">154,136</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%"><font size="2">47,843</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">162,207</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">(493,675)</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%"><font size="2">1,811,107</font></td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">Total assets</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="14%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    913,957</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">139,055</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8">&nbsp;</td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">13,923,849</font></td>
    <td align="right" width="17%" bgColor="#e9f1f8" colSpan="2"><font size="2">
    14,976,861</font></td>
  </tr>
  <tr>
    <td width="19%"><font size="2">Expenditure for</font></td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="10%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
    <td align="right" width="3%">&nbsp;</td>
    <td align="right" width="11%">&nbsp;</td>
  </tr>
  <tr>
    <td width="19%" bgColor="#e9f1f8"><font size="2">long-lived assets</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="10%" bgColor="#e9f1f8"><font size="2">&nbsp;71,542</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">353,983</font></td>
    <td align="right" width="3%" bgColor="#e9f1f8"><font size="2">$</font></td>
    <td align="right" width="11%" bgColor="#e9f1f8"><font size="2">425,525</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<b>16. CHINA CONTRIBUTION PLAN</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The PRC has been undergoing significant reforms with regard to its employee
welfare and fringe benefits administration. Any enterprise operating in the PRC
is subject to government-mandated employee welfare and retirement benefit
contributions. In accordance with PRC laws and regulations, TCH participates in
a multi-employer defined contribution plan pursuant to which TCH is required to
provide employees with certain retirement, medical and other fringe benefits.
PRC regulations require TCH to pay the local labor administration bureau a
monthly contribution at a stated contribution rate based on the monthly basic
compensation of qualified employees. The local labor administration bureau,
which manages various investment funds, will take care of employee retirement,
medical and other fringe benefits. TCH has no further commitments beyond its
monthly contribution. TCH contributed a total of $45,122 and $54,430 for the
years ended December 31, 2006 and 2005 respectively.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>17. STATUTORY RESERVES</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company's PRC subsidiary, TCH, is required to make appropriations to three
reserve funds, comprised of the statutory surplus fund, the staff bonus and
welfare fund, and the company expansion fund, based on after-tax net income
determined in accordance with generally accepted accounting principles of the
People's Republic of China (the &quot;PRC GAAP&quot;). Appropriation to the statutory
surplus fund should be at least 10% of the after tax net income determined in
accordance with the PRC GAAP. Appropriations to the company expansion fund and
the staff bonus and welfare fund are made at the discretion of the Board of
Directors. The company expansion fund is established for the purpose of
providing employee facilities and other collective benefits to the employees and
is non-distributable other than in liquidation. Appropriation to the statutory
surplus fund is suspended when the accumulated balances of the fund reached 50%
of the registered capital of TCH.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 18</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
For the years ended December 31, 2006 and 2005, TCH appropriated $20,200 and
$554,466 respectively, to the reserves based on its net income under PRC GAAP.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>18. CONCENTRATION OF RISK</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(a) Major Customers and Vendors</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
For the years ended December 31, 2006 and 2005, 100% of the Company's assets
were located in the PRC and 100% of the Company's revenues and purchases were
derived from customers and vendors located in the PRC.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
For the years ended December 31, 2006 and 2005, customers and vendors who
account for 10% or more of revenues and purchases are presented as follows:</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
<br>
&nbsp;</p>
<table style="BORDER-COLLAPSE: collapse" borderColor="#111111" cellSpacing="0" cellPadding="0" width="100%" border="0">
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="20%"><b><font size="2">Customers</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="middle" width="40%" colSpan="2">
    <b><font size="2">Revenues</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="40%" colSpan="2">
    <font size="2">
    <p align="center"><b>Accounts receivable</b></font></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2006</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2005</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2006</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8"><font size="2">Customer A</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">25%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">52%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="20%"><font size="2">Customer B</font></td>
    <td align="right" width="20%"><font size="2">17%</font></td>
    <td align="right" width="20%"><font size="2">3%</font></td>
    <td align="right" width="20%"><font size="2">-</font></td>
    <td align="right" width="20%"><font size="2">27%</font></td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8"><font size="2">Customer C</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">3%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="20%"><font size="2">Customer D</font></td>
    <td align="right" width="20%"><font size="2">-</font></td>
    <td align="right" width="20%"><font size="2">12%</font></td>
    <td align="right" width="20%"><font size="2">-</font></td>
    <td align="right" width="20%"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8"><font size="2">Customer E</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">2%</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">64%</font></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%">
    <font size="2">42%</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%">
    <font size="2">72%</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%">
    <font size="2">91%</font></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td align="right" width="20%">&nbsp;</td>
    <td align="right" width="20%">&nbsp;</td>
    <td align="right" width="40%" colSpan="2">&nbsp;</td>
  </tr>
  <tr>
    <td style="BORDER-BOTTOM: 1px solid" width="20%"><b><font size="2">Vendors</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">Purchases</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="40%" colSpan="2">
    <b><font size="2">Accounts payable</font></b></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2006</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2005</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2006</font></b></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%"><b>
    <font size="2">2005</font></b></td>
  </tr>
  <tr>
    <td width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%">&nbsp;</td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8"><font size="2">Vendor A</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">23%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">34%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
  </tr>
  <tr>
    <td width="20%"><font size="2">Vendor B</font></td>
    <td align="right" width="20%"><font size="2">14%</font></td>
    <td align="right" width="20%"><font size="2">8%</font></td>
    <td align="right" width="20%"><font size="2">-</font></td>
    <td align="right" width="20%"><font size="2">12%</font></td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8"><font size="2">Vendor C</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">9%</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">-</font></td>
    <td align="right" width="20%" bgColor="#e9f1f8"><font size="2">87%</font></td>
  </tr>
  <tr>
    <td width="20%"><font size="2">Vendor D</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%">
    <font size="2">31%</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 1px solid" align="right" width="20%">
    <font size="2">-</font></td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    &nbsp;</td>
    <td style="BORDER-TOP: 1px solid" align="right" width="20%" bgColor="#e9f1f8">
    &nbsp;</td>
  </tr>
  <tr>
    <td width="20%" bgColor="#e9f1f8">&nbsp;</td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">37%</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">82%</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">-</font></td>
    <td style="BORDER-BOTTOM: 3px double" align="right" width="20%" bgColor="#e9f1f8">
    <font size="2">99%</font></td>
  </tr>
</table>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
(b) Credit Risk</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support such receivables. </p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 19</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>19. COMMITMENTS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
As of December 31, 2005, the Company has entered into commitments for consulting
services amounting to a total of $450,000 to be rendered in 2005 and 2006. As of
December 31, 2005, the Company has paid $200,000 and, therefore, has outstanding
commitments of $250,000 for consulting services in 2006. Subsequently, the
consultancy services was cancelled and the Company made no payment during the
year ended December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
The Company did not have any commitment as of December 31, 2006.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
<b>20. SUBSEQUENT EVENTS</b></p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(a) On January 24, 2007, a group of individuals (&quot;Purchasers&quot;) entered a share
purchase agreement with a group of shareholders of the Company to purchase
12,911,835 shares of the Company's common stocks with $0.001 par value for an
aggregate consideration of $490,000. Purchasers are Guohua Ku, Hanqiao Zheng,
Ping Sun, Qianping Huang, Xiaohong Zhang and Lixia Zhang. Among them, Guohua Ku
and Hanqiao Zheng acquired 9,073,700 shares and 2,406,365 shares respectively.
As a result, they became the beneficial owners of the majority voting shares of
the Company and gained control of the Company.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(b) On March 8, 2007, the name of the Company was changed to &quot;China Recycling
Energy Corporation&quot; and engages in recycling energy business, providing energy
saving and recycling products and services.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
(c) On April 8, 2007, the Company's Board of Directors approves and makes
effective a TRT Project Joint-Operation Agreement (&quot;Joint-Operation Agreement&quot;)
which is conditionally entered on February 1, 2007 between Shanghai TCH Data
Technology Co., Ltd. (&quot;TCH&quot;) and Xi'an Yingfeng Science and Technology Co.,
Ltd.(&quot;Yingfeng&quot;). Yingfeng is a Chinese company that is located in Xi'an,
Shaanxi Province, China, and is engaging in the business of designing, selling,
installing, and operating TRT systems and other renewable energy products.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Under the Joint-Operation Agreement, TCH and Yingfeng will jointly pursue a top
gas recovery turbine project (&quot;Project&quot;) which is to design, construct, install
and operate a TRT system in Xingtai Iron and Steel Company, Ltd. (&quot;Xingtai&quot;).
This project was originally initiated by a Contract to Design and Construct TRT
System (&quot;Project Contract&quot;) entered by Yingfeng and Xingtai on September 26,
2006. TCH provides various forms of investments and properties into the Project
including cash, hardware, software, equipments, major components and devices. In
return, TCH becomes entitled to all the rights, titles, benefits and interests
that Yingfeng originally had under the Project Contract, including but not
limited to the cash payment made by Xingtai on regular basis and other property
rights and interests.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Yingfeng remains liable for providing all the manpower, expertise and skills to
design, construct, install, maintain and operate the TRT system under the terms
of the Project Contract and also takes responsibility to manage the properties
that TCH possesses in this Project. As for consideration, TCH will make monthly
payment of RMB30,000 (approximately $3,900) to Yingfeng as compensation for
their effort in managing TCH's properties.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 20</p>
<hr color="#000000" SIZE="5">
<p style="PAGE-BREAK-BEFORE: always">&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="justify">
Prior to the approval by the Board of the Company, TCH and Yingfeng have taken
several preliminary actions in first quarter of 2007 in preparation for the full
pursuit of the Project, including selecting and purchasing necessary components
and software for TRT system, organizing and training the technician team for the
Project and developing the construction and installation plan for the TRT
system.</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt">
&nbsp;</p>
<p style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; FONT-SIZE: 10pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0pt; COLOR: #000000; TEXT-INDENT: 0pt; PADDING-TOP: 0pt" align="center">
Page 21</p>
<hr color="#000000" size="5">

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</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>creg10sba4ex311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 31.1</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>EXHIBIT 31.1</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO RULE 15d-14(a) (17 CFR 240.15d-14(a))</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(AUTHORIZED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
</p>
<p>I, Hanqiao Zheng, certify that: </p>
<p align="justify">1. I have reviewed this annual report on Form 10-KSB/A of the
Registrant, China Recycling Energy Corporation (&quot;China Digital Wireless, Inc.&quot;
prior to March 8, 2007). </p>
<p align="justify">2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report; </p>
<p align="justify">3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report; </p>
<p align="justify">4. The small business issuer's other certifying officer(s)
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
small business issuer and have: </p>
<p align="justify">a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared; </p>
<p align="justify">b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and </p>
<p align="justify">c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and </p>
<p align="justify">5. The small business issuer's other certifying officer(s)
and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions): </p>
</font><hr color="#000000" size="5"><p Style='page-break-before:always'><font FACE="Times New Roman PSMT" SIZE="2">
<p align="justify">a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and </p>
<p align="justify">b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the small business
issuer's internal control over financial reporting. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/Hanqiao Zheng</u></font></td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Hanqiao Zheng</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">President, Chairman of
      Board of Director</font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

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</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>creg10sba4ex312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 31.2</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>EXHIBIT 31.</b></font><b><font face="Times New Roman PS" size="2">2</font></b><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO RULE 15d-14(a) (17 CFR 240.15d-14(a))</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(AUTHORIZED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
</p>
<p>I, Mingda Rong, certify that: </p>
<p align="justify">1. I have reviewed this annual report on Form 10-KSB/A of the
Registrant, China Recycling Energy Corporation (&quot;China Digital Wireless, Inc.&quot;
prior to March 8, 2007). </p>
<p align="justify">2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report; </p>
<p align="justify">3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report; </p>
<p align="justify">4. The small business issuer's other certifying officer(s)
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
small business issuer and have: </p>
<p align="justify">a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared; </p>
<p align="justify">b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and </p>
<p align="justify">c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and </p>
<p align="justify">5. The small business issuer's other certifying officer(s)
and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions): </p>
</font><hr color="#000000" size="5"><p Style='page-break-before:always'><font FACE="Times New Roman PSMT" SIZE="2">
<p align="justify">a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and </p>
<p align="justify">b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the small business
issuer's internal control over financial reporting. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/</u> Mingda Rong</font></td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Mingda Rong</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font face="Times New Roman PSMT" size="2">Chief Financial Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.3
<SEQUENCE>4
<FILENAME>creg10sba4ex313.htm
<DESCRIPTION>EXHIBIT 31.3
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 31.3</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>EXHIBIT 31.3</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO RULE 15d-14(a) (17 CFR 240.15d-14(a))</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(AUTHORIZED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
</p>
<p>I, Guangyu Wu, certify that: </p>
<p align="justify">1. I have reviewed this annual report on Form 10-KSB/A of the
Registrant, China Recycling Energy Corporation (&quot;China Digital Wireless, Inc.&quot;
prior to March 8, 2007). </p>
<p align="justify">2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
report; </p>
<p align="justify">3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
small business issuer as of, and for, the periods presented in this report; </p>
<p align="justify">4. The small business issuer's other certifying officer(s)
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
small business issuer and have: </p>
<p align="justify">a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small business
issuer, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is
being prepared; </p>
<p align="justify">b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and </p>
<p align="justify">c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business issuer's
fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the small business
issuer's internal control over financial reporting; and </p>
<p align="justify">5. The small business issuer's other certifying officer(s)
and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions): </p>
</font><hr color="#000000" size="5"><p Style='page-break-before:always'><font FACE="Times New Roman PSMT" SIZE="2">
<p align="justify">a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and </p>
<p align="justify">b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the small business
issuer's internal control over financial reporting. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/</u> Guangyu Wu</font></td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Guangyu Wu</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font face="Times New Roman PSMT" size="2">Chief Executive Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>creg10sba4ex321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 32.1</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>Exhibit 32.1</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO 18 U.S.C. ss. 1350</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) </p>
<p align="justify">I, Hanqiao Zheng, certify pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, based upon
a review of the Annual Report on Form 10-KSB/A for the period ended December 31,
2006 of the Registrant (the &quot;Report&quot;): </p>
<p align="justify">(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
</p>
<p align="justify">(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Registrant. </p>
<p align="justify">A signed original of this written statement required by
Section 906 has been provided to the Registrant and will be retained by the
Registrant and furnished to the Securities and Exchange Commission or its staff
upon request. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/</u> Hanqiao Zheng</font></td>
    </tr>
    <tr>
      <td><font face="Times New Roman PSMT" size="2">Hanqiao Zheng</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font size="2">President, Chairman of Board of Directors </font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>creg10sba4ex322.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 32.2</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>Exhibit 32.2</b></font></p>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO 18 U.S.C. ss. 1350</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) </p>
<p align="justify">I, Mingda Rong, certify pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, based upon
a review of the Annual Report on Form 10-KSB/A for the period ended December 31,
2006 of the Registrant (the &quot;Report&quot;): </p>
<p align="justify">(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
</p>
<p align="justify">(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Registrant. </p>
<p align="justify">A signed original of this written statement required by
Section 906 has been provided to the Registrant and will be retained by the
Registrant and furnished to the Securities and Exchange Commission or its staff
upon request. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/</u> Mingda Rong</font></td>
    </tr>
    <tr>
      <td><font size="2">Mingda Rong</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font size="2">Chief Financial Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

</body>

</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.3
<SEQUENCE>7
<FILENAME>creg10sba4ex323.htm
<DESCRIPTION>EXHIBIT 32.3
<TEXT>
<html>

<head>

<title>China Recycling Energy Corporation - Exhibit 32.3</title>
</head>

<body>

<div style="border-top-style: solid; border-top-width: 1; padding-top: 1">
  <hr color="#000000" size="5">
</div>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p>Exhibit 32.3</b></font></p>
<font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p align="center">PURSUANT TO 18 U.S.C. ss. 1350</b></font><font FACE="Times New Roman PSMT" SIZE="2">
</p>
<p align="center">(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002) </p>
<p align="justify">I, Guangyu Wu, certify pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, based upon
a review of the Annual Report on Form 10-KSB/A for the period ended December 31,
2006 of the Registrant (the &quot;Report&quot;): </p>
<p align="justify">(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
</p>
<p align="justify">(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of
the Registrant. </p>
<p align="justify">A signed original of this written statement required by
Section 906 has been provided to the Registrant and will be retained by the
Registrant and furnished to the Securities and Exchange Commission or its staff
upon request. </p>
</font><font FACE="Times New Roman PS" SIZE="2"><b>
<p>SIGNATURE</b></font><font FACE="Times New Roman PSMT" SIZE="2"> </p>
</font>
<div align="center">
  <center>
  <table CELLSPACING="0" BORDER="0" WIDTH="50%" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0">
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2">Date: June 12, 2008</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font FACE="Times New Roman PSMT" SIZE="2"><u>/s/</u> Guangyu Wu</font></td>
    </tr>
    <tr>
      <td><font size="2">Guangyu Wu</font></td>
    </tr>
    <tr>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td><font size="2">Chief Executive Officer</font></td>
    </tr>
  </table>
  </center>
</div>
<p>&nbsp;</p>
<hr color="#000000" size="5">

</body>

</html>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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