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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10−Q

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2010

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________to _____________

Commission File Number: 000-53432

TEC TECHNOLOGY, INC.(Exact Name of Registrant as Specified in Its Charter)

|Delaware                        | 13-4013027                          
|------------------------------- | ------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization)  |                                     

Xinqiao Industrial ParkJingde County, Anhui
Province Shenzhen 242600 Peoples Republic of China(Address of
principal executive offices, Zip Code)

(+86) 755 8323-2722(Registrants telephone number,
including area code)

_______________________________________________________________________(Former
name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 [X]       No
[  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes [  ]       No
[  ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [  ]                                                   | Accelerated filer [  ]       
|------------------------------------------------------------------------------ | -----------------------------
|Non-accelerated filer [  ] (Do not check if a
      smaller reporting company) | Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]       No [X]

The number of shares outstanding of each of the issuers
classes of common stock, as of November 15, 2010 is as follows:

|Class of Securities            | Shares Outstanding
|------------------------------ | ------------------
|Common Stock, $0.001 par value | 30,181,552        

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TABLE OF CONTENTS

|PART I                                                                                               | 1 
|---------------------------------------------------------------------------------------------------- | --
|FINANCIAL INFORMATION                                                                                | 1 
|ITEM 1. FINANCIAL
      STATEMENTS.                                                                  | 1 
|CONSOLIDATED BALANCE SHEETS                                                                          | 2 
|ITEM 2. MANAGEMENTS DISCUSSION
      AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 25
|ITEM 3. QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK.                            | 35
|ITEM 4. CONTROLS AND
      PROCEDURES.                                                               | 35
|PART II                                                                                              | 36
|OTHER INFORMATION                                                                                    | 36
|ITEM 1. LEGAL PROCEEDINGS.                                                                           | 36
|ITEM 1A. RISK FACTORS.                                                                               | 36
|ITEM 2. UNREGISTERED SALES OF EQUITY
      SECURITIES AND USE OF PROCEEDS.                           | 36
|ITEM 3. DEFAULTS UPON
      SENIOR SECURITIES.                                                       | 36
|ITEM 4. (REMOVED AND RESERVED).                                                                      | 36
|ITEM 5. OTHER
      INFORMATION.                                                                     | 36
|ITEM 6. EXHIBITS.                                                                                    | 36

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

TEC TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED
QUARTERLY FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 2010 AND
2009

INDEX TO FINANCIAL STATEMENTS

|                                                 | Page(s)
|------------------------------------------------ | -------
|Financial Statements                             |        
|Consolidated Balance Sheets                      | 2      
|Consolidated Statements of Operations            | 3      
|Consolidated Statements of Cash Flows            | 4      
|Notes to Consolidated Financial
      Statements | 5-24   

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TEC TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                                |   | September 30, 2010 |  |   | December 31, 2009 | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
|                                                                                                                                                                                |   | (Unaudited)        |  |   | (audited)         | 
|ASSETS                                                                                                                                                                          |   |                    |  |   |                   | 
|Current assets                                                                                                                                                                  |   |                    |  |   |                   | 
|Cash and cash equivalents                                                                                                                                                       | $ | 233,365            |  | $ | 164,927           | 
|Accounts receivable, net of allowance for doubtful
      accounts                                                                                                               |   | 16,414,916         |  |   | 8,791,842         | 
|Inventory                                                                                                                                                                       |   | 8,025,464          |  |   | 7,066,787         | 
|Deposits and prepaid expenses                                                                                                                                                   |   | 1,244,275          |  |   | 2,716,237         | 
|Other receivables                                                                                                                                                               |   | 3,742,625          |  |   | 3,802,358         | 
|Taxes recoverable                                                                                                                                                               |   | 11,225             |  |   | 4,889             | 
|Total current assets                                                                                                                                                            |   | 29,671,870         |  |   | 22,547,040        | 
|Property and equipment                                                                                                                                                          |   |                    |  |   |                   | 
|Property and equipment, net of
      accumulated depreciation                                                                                                                   |   | 3,781,980          |  |   | 3,353,841         | 
|Other assets                                                                                                                                                                    |   |                    |  |   |                   | 
|Land use rights, net of accumulated
      amortization                                                                                                                          |   | 2,061,456          |  |   | 2,051,837         | 
|Construction in progress                                                                                                                                                        |   | 36,959             |  |   | -                 | 
|Long term accounts receivable, net
      of allowance for doubtful accounts                                                                                                     |   | 55,697             |  |   | -                 | 
|                                                                                                                                                                                |   | 2,154,112          |  |   | 2,051,837         | 
|Total assets                                                                                                                                                                    | $ | 35,607,962         |  | $ | 27,952,718        | 
|                                                                                                                                                                                |   |                    |  |   |                   | 
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                            |   |                    |  |   |                   | 
|Current liabilities                                                                                                                                                             |   |                    |  |   |                   | 
|Accounts payable                                                                                                                                                                | $ | 9,372,472          |  | $ | 5,012,224         | 
|Other payables and accrued expenses                                                                                                                                             |   | 5,207,080          |  |   | 3,251,687         | 
|Taxes payable                                                                                                                                                                   |   | 444,383            |  |   | 1,306,915         | 
|Customer deposits                                                                                                                                                               |   | 32,588             |  |   | 113,867           | 
|Short term borrowings                                                                                                                                                           |   | 11,609,235         |  |   | 12,733,709        | 
|                                                                                                                                                                                |   | 26,665,758         |  |   | 22,418,402        | 
|Commitments and contingencies                                                                                                                                                   |   | -                  |  |   | -                 | 
|Stockholders' equity                                                                                                                                                            |   |                    |  |   |                   | 
|Preferred "B" stock:
      10,000,000 authorized, none issued and outstanding $0.001 par value                                                                                  |   |                    |  |  
|Common stock: 300,000,000 authorized $0.001 par value
      30,181,552 and 19,194,421 shares issued and outstanding September 30, 2010
      and December 31, 2009 respectively | $ | 30,182             |  | $ | 19,195            | 
|Additional paid in capital                                                                                                                                                      |   | 1,009,926          |  |   | 951,605           | 
|Retained earnings                                                                                                                                                               |   | 7,521,814          |  |   | 4,235,616         | 
|Accumulated other
      comprehensive income                                                                                                                                    |   | 380,282            |  |   | 327,900           | 
|Total stockholders' equity                                                                                                                                                      |   | 8,942,204          |  |   | 5,534,316         | 
|Total liabilities and
      stockholders' equity                                                                                                                                | $ | 35,607,962         |  | $ | 27,952,718        | 

2

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TEC TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

|                                                   |   | Three months       |   |   | Three months       |   |   | Nine months        |   |   | Nine months        |  
|-------------------------------------------------- | - | ------------------ | - | - | ------------------ | - | - | ------------------ | - | - | ------------------ | -
|                                                   |   | ended              |   |   | ended              |   |   | ended              |   |   | ended              |  
|                                                   |   | September 30, 2010 |   |   | September 30, 2009 |   |   | September 30, 2010 |   |   | September 30, 2009 |  
|                                                   |   | (Unaudited)        |   |   | (Unaudited)        |   |   | (Unaudited)        |   |   | (Unaudited)        |  
|Revenues                                           | $ | 7,285,615          |   | $ | 6,736,629          |   | $ | 21,892,594         |   | $ | 13,144,149         |  
|Cost of goods sold                                 |   | 5,355,307          |   |   | 4,655,139          |   |   | 15,313,202         |   |   | 8,866,788          |  
|Gross profit                                       |   | 1,930,308          |   |   | 2,081,490          |   |   | 6,579,392          |   |   | 4,277,361          |  
|Selling and marketing expenses                     |   | (337,423           | ) |   | (30,860            | ) |   | (1,127,290         | ) |   | (126,089           | )
|General and
      administrative expenses          |   | (293,389           | ) |   | (224,525           | ) |   | (938,337           | ) |   | (581,233           | )
|Net income from operations                         |   | 1,299,496          |   |   | 1,826,105          |   |   | 4,513,765          |   |   | 3,570,039          |  
|Other income
      (expenses)                      |   |                    |   |   |                    |   |   |                    |   |   |                    |  
|Government grant                                   |   | 10,798             |   |   | 43,920             |   |   | 190,215            |   |   | 106,930            |  
|Other income                                       |   | -                  |   |   | 12,631             |   |   | 13,695             |   |   | 41,969             |  
|Interest expense                                   |   | (299,865           | ) |   | (137,192           | ) |   | (979,425           | ) |   | (392,644           | )
|Net other income
      (expenses)                  |   | (289,067           | ) |   | (80,641            | ) |   | (775,515           | ) |   | (243,745           | )
|Net income before provision for
      income taxes |   | 1,010,429          |   |   | 1,745,464          |   |   | 3,738,250          |   |   | 3,326,294          |  
|Provision for
      income taxes                   |   | (151,535           | ) |   | (450,585           | ) |   | (538,396           | ) |   | (847,396           | )
|Net income                                         |   | 858,894            |   |   | 1,294,879          |   |   | 3,199,854          |   |   | 2,478,898          |  
|Other comprehensive
      gain                     |   |                    |   |   |                    |   |   |                    |   |   |                    |  
|Foreign currency translation
      gain            |   | 12,462             |   |   | (40,527            | ) |   | (177,290           | ) |   | (57,274            | )
|Comprehensive
      income                         | $ | 871,356            |   | $ | 1,254,352          |   | $ | 3,022,564          |   | $ | 2,421,624          |  
|Weighted average numbers of common
      shares    |   |                    |   |   |                    |   |   |                    |   |   |                    |  
|Basic                                              |   | 25,298,383         |   |   | 19,194,421         |   |   | 25,298,383         |   |   | 19,194,421         |  
|Diluted                                            |   | 25,298,383         |   |   | 19,194,421         |   |   | 25,298,383         |   |   | 19,194,421         |  
|Earnings per
      share                           |   |                    |   |   |                    |   |   |                    |   |   |                    |  
|Basic                                              | $ | 0.03               |   | $ | 0.07               |   | $ | 0.13               |   | $ | 0.13               |  
|Diluted                                            | $ | 0.03               |   | $ | 0.07               |   | $ | 0.13               |   | $ | 0.13               |  

3

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TEC TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                       |   | Nine months        |   |   | Nine months        |  
|-------------------------------------------------------------------------------------- | - | ------------------ | - | - | ------------------ | -
|                                                                                       |   | ended              |   |   | ended              |  
|                                                                                       |   | September 30, 2010 |   |   | September 30, 2009 |  
|                                                                                       |   | (Unaudited)        |   |   | (Unaudited)        |  
|Cash flows from operating activities                                                   |   |                    |   |   |                    |  
|Net income                                                                             | $ | 3,199,854          |   | $ | 2,478,898          |  
|Adjustments to reconcile net income
      to net cash provided by operating activites: |   |                    |   |   |                    |  
|Depreciation                                                                           |   | 207,350            |   |   | 105,510            |  
|Amortization of intangible assets                                                      |   | 31,779             |   |   | 31,665             |  
|Changes in operating assets and liabilities                                            |   |                    |   |   |                    |  
|Increase in inventory                                                                  |   | (958,677           | ) |   | (2,155,676         | )
|Decrease (increase) in deposits and prepaid expenses                                   |   | 1,471,962          |   |   | (1,715,679         | )
|Increase in accounts receivable                                                        |   | (7,678,771         | ) |   | (6,763,709         | )
|Decrease (increase) in other receivables                                               |   | 59,733             |   |   | (1,597,108         | )
|Increase) decrease in taxes
      recoverable                                          |   | (6,336             | ) |   | 92,151             |  
|(Decrease) increase in taxes payable                                                   |   | (862,532           | ) |   | 400,893            |  
|Increase in accounts payable                                                           |   | 4,360,248          |   |   | 4,955,165          |  
|Decrease in customer deposits                                                          |   | (81,279            | ) |   | (342,875           | )
|Increase in other payables and
      accrued expenses                                  |   | 1,955,393          |   |   | (20,126            | )
|Net cash provided by (used in) operating activities                                    |   | 1,698,724          |   |   | (4,530,891         | )
|Cash flows from investing activities                                                   |   |                    |   |   |                    |  
|Purchases of property and equipment                                                    |   | (622,961           | ) |   | (382,679           | )
|Payment for construction in progress                                                   |   | (36,959            | ) |   | -                  |  
|Purchases of land use rights                                                           |   | -                  |   |   | (1,643,546         | )
|Net cash used in investing
      activities                                            |   | (659,920           | ) |   | (2,026,225         | )
|Cash flows from financing activities                                                   |   |                    |   |   |                    |  
|Common stock issued                                                                    |   | 10,987             |   |   | -                  |  
|Provision for income taxes                                                             |   | 58,321             |   |   | 117,909            |  
|Proceeds from short term borrowings                                                    |   | -                  |   |   | 6,007,365          |  
|Repayment of short term borrowings                                                     |   | (1,124,474         | ) |   | -                  |  
|Net cash (used in) provided by
      financing activities                              |   | (1,055,166         | ) |   | 6,125,274          |  
|Effects on exchange rate changes on cash                                               |   | 84,800             |   |   | (144,558           | )
|Increase (decrease) in cash and cash
      equivalents                                 |   | 68,438             |   |   | (576,400           | )
|Cash and cash equivalents, beginning of period                                         |   | 164,927            |   |   | 704,854            |  
|Cash and cash equivalents, end of
      period                                         | $ | 233,365            |   | $ | 128,454            |  
|Supplementary disclosures of cash flow information:                                    |   |                    |   |   |                    |  
|Cash paid for interest                                                                 | $ | 979,425            |   | $ | 392,643            |  
|Cash paid/(refunded) for income taxes                                                  | $ | 1,392,926          |   | $ | (514,573           | )

4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|1. | BUSINESS ORGANIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Highland Ridge, Inc. (the Company or HGHN) (formerly
      known as Sea Green, Inc., Americom Networks Corp. and Americom Networks
      International, Inc.) was incorporated on July 22, 1988 in the State of
      Delaware. On June 9, 2010, the Company changed its name from Highland
      Ridge, Inc. to TEC Technology, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On May 4, 2010, the Company entered into a Share Exchange
      Agreement, with TEC Technology Limited (TEC), a private corporation
      under the Companies Laws of the Hong Kong Special Administrative Region of
      the Peoples Republic of China (Hong Kong), and its sole stockholder,
      Mr. Hua Peng Phillip Wong, pursuant to which the Company acquired 10,000
      shares of TEC, representing 100% of the issued and outstanding capital
      stock, in exchange for 19,194,421 shares of the Companys common stock, par value
      $0.001 (the Share Exchange), which constituted 63.6% of the Companys
      issued and outstanding capital stock on a fully-diluted basis as of and
      immediately after the consummation of the transactions contemplated by the
      Share Exchange Agreement. As a result of the Share Exchange, TEC and its
      subsidiaries, Anhui TEC Tower Co., Ltd (ATEC), Zhejiang TEC Tower Co.,
      Limited (ZTEC) and Shuncheng Taida Technology Co., Ltd (Shuncheng
      Taida), became the Companys subsidiaries.                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Share Exchange has been accounted for as a reverse
      acquisition and recapitalization of the Company whereby the Company (the
      legal acquirer) is considered the accounting acquiree and TEC (the legal
      acquiree) is considered the accounting acquirer. As a result of this
      transaction, the Company is deemed to be a continuation of the business of
      TEC. Accordingly, the accompanying interim condensed consolidated
      financial statements are those of TEC, the accounting acquirer. The
      historical stockholders equity of the accounting acquirer prior to the
      share exchange has been retroactively restated as if the Share Exchange
      occurred as of the beginning of the first period presented..                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | TEC was organized on November 24, 2009, and serves as a
      holding company for three operating subsidiaries, ATEC, ZTEC and Shuncheng
      Taida (the Operating Subsidiaries), based in the Peoples Republic of
      China (PRC). The Operating Subsidiaries are (or will be) engaged in the
      design, production and sale of transmission towers for telecommunications
      service providers and electric utilities. On November 24, 2009, Mr. Chun
      Lu, the Companys Chairman and Chief Executive Officer, entered into an
      option agreement with TEC and Mr. Hua Peng Phillip Wong, the Companys
      controlling stockholder, pursuant to which Mr. Lu was granted an option to
      acquire 17,797,372 shares the Companys common stock currently owned by Mr. Wong for
      an aggregate exercise price of $1,000,000. Mr. Lu may exercise this
      option, in whole but not in part, during the period commencing on the 365
      thday following of the date of the option agreement and ending
      on the second anniversary of the date thereof contemplated by the Share
      Exchange Agreement, which effected a reverse acquisition of the TEC.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | ATEC is a private corporation, incorporated under the
      laws of the on July 3, 2007. ATECs principal activities are the
      development and manufacturing of mobile communication steel towers,
      microwave towers, angle steel towers, steel pipe towers and transmission
      cable towers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | ZTEC is a PRC limited company, established on December 7,
      2009, pursuant to an  agreement between ATEC and Ms. Yiping Zhu, a PRC
      individual, wherein ATEC agreed to contribute 90% of the registered
      capital for a 90% equity interest in ZTEC and Ms. Zhu agreed to contribute
      the capital for the remaining 10% equity interest. ZTECs production
      facility is still under construction and it has not yet commenced
      operations. ZTECs main business will include the development and
      manufacturing of mobile communication steel towers, microwave towers, and
      power transmission towers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Shuncheng Taida was established as a wholly-owned TEC
      subsidiary on January 10, 2010, however, its capital has not yet been
      introduced and it has not yet commenced operations. Shuncheng Taidas main
      business will include engineering consultancy and design of mobile
      communication steel towers, microwave towers, and power transmission
      towers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On March 10, 2010, TEC consummated an Equity Ownership
      Transfer Agreement (the Transfer Agreement), dated February 22, 2010,
      with Mr. Chun Lu, the sole shareholder of ATEC at the time, pursuant to
      which TEC acquired 100% of the equity interest in ATEC. This acquisition
      was accounted for as a reverse merger with TEC being the legal acquirer.
      The accounting treatment for this transaction is recapitalization of ATEC
      with TECs common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| |                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys executive offices are located at Xinqiao
      Industrial Park, Jingde Country, Anhui Province, 242600, Peoples Republic
      of China.

5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

| | 2.1 | FISCAL YEAR                                                                             
| | --- | ----------------------------------------------------------------------------------------
| |     |                                                                                         
| |     | The Company has adopted December 31 as its fiscal year end.                             
| |     |                                                                                         
| | 2.2 | REPORTING ENTITIES                                                                      
| |     |                                                                                         
| |     | The accompanying consolidated financial statements include the
      following entities:

| |  | Name of                                 | Place of                   |                    |                   | Date of           | Percentage    |                                                                                                                                                                                                                               
| |  | --------------------------------------- | -------------------------- | ------------------ | ----------------- | ----------------- | ------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | subsidiary                              | incorporation              | Registered capital | Paid - in capital | incorporation     | of interest   | Principal activity                                                                                                                                                                                                            
| |  |                                         |                            |                    |                   |                   |               |                                                                                                                                                                                                                               
| |  | TEC Technology Limited                  | Hong Kong                  | HK$10,000          | HK$10,000         | November 24, 2009 | 100% directly | Investment holding                                                                                                                                                                                                            
| |  | Anhui TEC Tower Co ., Limited           | People's Republic of China | RMB20,000,000      | RMB9,400,000      | July 3, 2007      | 100% directly | Development and manufacturing of mobile
      communication steel towers, microwave towers, angle steel towers, steel
      pipe towers and transmission cable towers                                                         
| |  | Zhejiang TEC Tower Co ., Limited        | People's Republic of China | RMB89,000,000      | RMB30,000,000     | December 7, 2009  | 90% directly  | The company has not commenced
      its business of development and manufacturing of mobile communication
      steel towers, microwave towers, angle steel towers, steel pipe towers and
      transmission cable towers     
| |  | Shuncheng Taida Technology Co., Limited | People's Republic of China | $1,000,000         | $Nil              | January 20, 2010  | 100% directly | The company has not commenced its business of
      engineering consultancy and design of mobile communication steel towers,
      microwave towers, angle steel towers, steel pipe towers and transmission
      cable towers

6

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------
|   |                                                       

| | 2.3 | BASIS OF CONSOLIDATION AND PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The consolidated financial statements are prepared in
      accordance with generally accepted accounting principles in the United
      States of America (US GAAP). In the opinion of management, the
      accompanying balance sheets, and statements of income, and cash flows
      include all adjustments, consisting only of normal recurring items,
      considered necessary to give a fair presentation of operating results for
      the periods presented. All material inter-company transactions and
      balances have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | On February 22, 2010, TEC entered into an Equity
      Ownership Transfer Agreement (the Transfer Agreement) with Mr. Chun Lu,
      the existing sole shareholder of Anhui TEC Tower Co., Ltd (ATEC). On
      March 10, 2010, the TEC acquired 100% of the outstanding shares. This
      acquisition was accounted for as a reverse merger with TEC Technology
      Limited being the legal acquirer. The accounting treatment for this
      transaction is essentially recapitalization of ATEC with TECs common
      stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | On March 10, 2010, TEC completed a reverse acquisition
      transaction through of 100% interest in ATEC, and became the immediate
      parent company of the group. On May 4, 2010, the Company entered into a
      Share Exchange Agreement, with TEC, and its sole stockholder, Mr. Hua Peng
      Phillip Wong, pursuant to which the Company acquired 10,000 shares of TEC,
      representing 100% of the issued and outstanding capital stock, in exchange
      for 19,194,421 shares of the Companys common stock, par value $0.001, which
      constituted 63.6% of the Companys issued and outstanding capital stock on a
      fully-diluted basis as of and immediately after the consummation of the
      transactions contemplated by the Share Exchange Agreement. TEC is a
      holding company for three PRC based operating subsidiaries (ATEC, ZTEC and
      Shuncheng Taida) which are engaged in the design, production and sale of
      transmission towers for telecommunications service providers and electric
      utilities. On the same date, Mr. Chun Lu, Chairman of the Board and Chief
      Executive Officer of HGHN, entered into an option agreement with TEC and
      Mr. Hua Peng Phillip Wong, the Companys controlling shareholder, pursuant to which
      Mr. Lu was granted an option to acquire 17,797,372 shares the Companys common stock
      currently owned by Mr. Wong for an aggregate exercise price of $1,000,000.
      Mr. Lu may exercise this option, in whole but not in part, during the
      period commencing on the 365 thday following of the date of
      the option agreement and ending on the second anniversary of the date
      thereof contemplated by the Share Exchange Agreement, which effected a
      reverse acquisition of the TEC. The accounting treatment for this
      transaction is essentially recapitalization of TEC with HGHNs common
      stock.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Prior to the acquisition of ATEC by TEC, TEC and HGHN
      were both shell companies. For reporting purposes, the Company has assumed
      that Mr. Lu exercised his option immediately and thus HGHN, TEC and ATEC
      are effectively under same control of Mr. Lu when the Company acquired
      ATEC. The acquisition transactions between (i) HGHN and TEC and (ii)TEC
      and ATEC are accounted for as reverse mergers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | For accounting purposes, the combination of the Company
      and TEC was accounted for as a reverse merger with ATEC as the acquirer
      and HGHN and TEC as the acquired party and the acquisition of ZTEC and
      Shuncheng Taida was accounted for under the acquisition method with TEC as
      the immediate parent corporation of both companies for legal purposes and
      the Company as the ultimate parent corporation. Accordingly the Companys
      financial statements have been prepared on a consolidated basis for the
      periods presented and the consolidated balance sheets, consolidated
      statements of income and other comprehensive income, stockholders equity
      and cash flows were presented as if the recapitalization had occurred at
      the beginning of the earliest period presented and the operations of the
      accounting acquired party from the date of stock exchange transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | HGHN, TEC, ATEC, ZTEC and Shuncheng Taida are hereafter
      referred to as the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Interim results are not necessarily indicative of results
      for a full year. The information included in this interim report should be
      read in conjunction with the information included in the Companys annual
      report on Form 10-K for the fiscal year ended December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

7

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.4  | USE OF ESTIMATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | The preparation of consolidated financial statements
      requires us to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reporting period. Actual
      results may differ from those estimates.                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.5  | ECONOMIC AND POLITICAL RISK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | The Companys business operations are conducted in the
      PRC and are subject to special considerations and risks not typically
      associated with companies in North America and Western Europe. Chinas
      political, economic and legal environments may influence the Companys
      business, financial condition and results of operations, including adverse
      effects by changes in governmental policies in laws and regulations, anti-
      inflationary measures, and rates and methods of taxation.                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.6  | REVENUE RECOGNITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | The Companys revenue recognition policies are in
      compliance with ASC 605. Sales revenue is recognized when all of the
      following have occurred: (i) persuasive evidence of an arrangement exists,
      (ii) delivery has occurred or services have been rendered, (iii) the price
      is fixed or determinable, and (iv) the ability to collect is reasonably
      assured. These criteria are generally satisfied at the time of shipment
      when risk of loss and title passes to the customer.                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | The Company recognizes revenue when the goods are
      delivered and title has passed. Sales revenue represents the invoiced
      value of goods, net of a value-added tax (VAT). All of the Companys
      products that are sold in the PRC are subject to a Chinese value-added tax
      at a rate of 17% of the gross sales price or at a rate approved by the
      Chinese local government. This VAT may be offset by the VAT paid by the
      Company on raw materials and other materials included in the cost of
      producing their finished product.                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.7  | SHIPPING AND HANDLING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Shipping and handling costs related to costs of goods
      sold are included in cost of sales and selling and marketing expenses
      which totaled $282,189 and $40,875 for the three months ended September
      30, 2010 and September 30, 2009. Shipping and handling costs amounted to
      $571,761 and $135,659 for the nine months ended September 30, 2010 and
      September 30, 2009, respectively.                                                                                                                                                                                                                           
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.8  | ADVERTISING                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Advertising costs are expensed as incurred and totaled
      $1,206 and $59 for the three months ended September 30, 2010 and September
      30, 2009. Advertising costs amounted to $3,788 and $2,208 for the nine
      months ended September 30, 2010 and September 30, 2009, respectively.                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.9  | RESEARCH AND DEVELOPMENT COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Research and development costs include costs incurred to
      develop new products and are charged to operations when incurred. These
      costs totaled $nil as incurred for the three months ended September 30,
      2010 and September 30, 2009. Research and development costs amounted to
      $nil for the nine months ended September 30, 2010 and September 30, 2009.
      The costs for development of new products and substantial enhancements to
      existing products are expensed as incurred until technological feasibility
      has been established, at which time any additional costs would be
      capitalized.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | 2.10 | GOVERNMENT GRANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Government grants represent local authority grants to the
      Company for infrastructure development. It is recognized on cash basis
      when the local authority approves the grant to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                      

8

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.11 | CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                     
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                               
| |      | Cash and cash equivalents comprise cash in bank and on
      hand, demand deposits with banks and other financial institutions, and
      short-term, highly liquid investments that are readily convertible into
      known amounts of cash, are subject to an insignificant risk of changes in
      value, and have a short maturity of generally within three months when
      acquired.

| |                        |   | September 30, 2010 |  |   | December 31, 2009 | 
| | ---------------------- | - | ------------------ |  | - | ----------------- | 
| | Cash and bank balances | $ | 233,365            |  | $ | 164,927           | 

| | **2.12** | FOREIGN CURRENCY TRANSLATION AND OTHER COMPREHENSIVE INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |          | The reporting currency of the Company is the U.S.
      dollars. The functional currency of the Company is the Chinese Renminbi
      (RMB).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |          | For those entities whose functional currency is other
      than the U.S. dollars, all assets and liabilities are translated into U.S.
      dollars at the exchange rate on the balance sheet date; shareholders
      equity is translated at historical rates and items in the statements of
      income and of cash flows are translated at the average rate for the
      period. Because cash flows are translated based on the average translation
      rate, amounts related to assets and liabilities reported in the statement
      of cash flows will not necessarily agree with changes in the corresponding
      balances in the balance sheet. Translation adjustments resulting from this
      process are included in accumulated other comprehensive income in the
      statement of shareholders equity. Transaction gains and losses that arise
      from exchange rate fluctuations on transactions denominated in a currency
      other than the functional currency are included in the results of
      operations as incurred.                                                                                                                                                                                                                                                                                                                   
| |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |          | Foreign currency translation gain included in accumulated
      other comprehensive income amounted to $380,282 as of September 30, 2010
      and $327,900 as of December 31, 2009. The balance sheet amounts with the
      exception of equity at September 30, 2010 and December 31, 2009 were
      translated at RMB6.68 to $1.00 and RMB6.82 to $1.00, respectively. The
      average translation rates applied to the statements of income and of cash
      flows for the three and nine months ended September 30, 2010 and September
      30, 2009 were RMB6.80 to $1.00 and RMB6.85 to $1.00.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 2.13     | BUSINESS COMBINATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |          | The Company adopted the accounting pronouncements
      relating to business combinations (primarily contained in ASC Topic 805
      Business Combinations), including assets acquired and liabilities
      assumed arising from contingencies. These pronouncements established
      principles and requirements for how the acquirer of a business recognizes
      and measures in its financial statements the identifiable assets acquired,
      the liabilities assumed, and any non-controlling interest in the acquire
      as well as provides guidance for recognizing and measuring the goodwill
      acquired in the business combination and determines what information to
      disclose to enable users of the financial statements to evaluate the
      nature and financial effects of the business combination. In addition,
      these pronouncements eliminate the distinction between contractual and
      non- contractual contingencies, including the initial recognition and
      measurement criteria and require an acquirer to develop a systematic and
      rational basis for subsequently measuring and accounting for acquired
      contingencies depending on their nature. The Companys adoption of these
      pronouncements will have an impact on the manner in which the Company accounts for
      any future acquisitions.

9

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.14 | NON-CONTROLLING INTEREST IN CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | The Company adopted the accounting pronouncement on
      non-controlling interests in consolidated financial statements, which
      establishes accounting and reporting standards for the non-controlling
      interest in a subsidiary and for the deconsolidation of a subsidiary. This
      guidance is primarily contained in ASC Topic Consolidation. The adoption
      of this standard has not had material impact on the Companys consolidated financial
      statements.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 2.15 | PROPERTY AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | Property and equipment are stated at cost less
      accumulated depreciation and any accumulated impairment losses.                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      | Depreciation is calculated on a straight-line basis over
      the estimated useful life of the assets.                                                                                                                                                                                                                                                                                                                                                                                    

| | Assets Classifications                         | Estimated useful life
| | ---------------------------------------------- | ---------------------
| |                                                |                      
| | Buildings                                      | 50 years             
| | Plant and machinery                            | 5 years              
| | Furniture, fixtures and office
      equipment | 5 years              
| | Motor vehicles                                 | 5 years              

Any gain or loss arising on the sale
or disposal of the asset is included in the income statement in the period the
item is sold or otherwise disposed. Maintenance and repairs of property and
equipment are charged to operations when incurred.

| |                                                |   | September 30, 2010 |   |   | December 31, 2009 |  
| | ---------------------------------------------- | - | ------------------ | - | - | ----------------- | -
| |                                                |   |                    |   |   |                   |  
| | Buildings                                      | $ | 2,520,130          |   | $ | 2,425,451         |  
| | Plant and machinery                            |   | 1,385,166          |   |   | 1,062,185         |  
| | Furniture, fixtures and office
      equipment |   | 64,673             |   |   | 61,455            |  
| | Motor vehicles                                 |   | 289,340            |   |   | 87,257            |  
| |                                                |   | 4,259,309          |   |   | 3,636,348         |  
| | Less: Accumulated depreciation                 |   | (477,329           | ) |   | (282,507          | )
| | Net book value                                 | $ | 3,781,980          |   | $ | 3,353,841         |  

Depreciation expense was $77,164 and
$41,965 for the three months ended September 30, 2010 and September 30, 2009,
respectively. Depreciation expense was $207,350 and $105,510 for the nine months
ended September 30, 2010 and September 30, 2009, respectively.

Expenditures for maintenance and
repairs are charged to expense as incurred, whereas major betterments are
capitalized as additions to property and equipment. The Company reviews its
property and equipment whenever events or changes in circumstances indicate that
the carrying value of certain assets might not be recoverable. In these
instances, the Company recognizes an impairment loss when it is probable that
the estimated cash flows are less than the carrying value of the asset. To date,
no such impairment losses have been recorded.

10

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.16 | LAND USE RIGHTS                                                                                                                                                                                                                                                                                                                             
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                             
| |      | Private ownership of land is not permitted in the PRC.
      Instead, ATEC has leased three lots of land at Xinqiao Industrial Park,
      Jingde Country, Anhui Province. The total aggregate cost of ATECs first,
      second and third land use rights was $2,112,867 and the lease expires in
      2056, 2058 and 2058, respectively.
| |      |                                                                                                                                                                                                                                                                                                                                             
| |      | The Company mortgaged 4.4 hectares of land use rights
      and certain property rights for $1.4 million in loans from the Industrial
      and Commercial Bank of China. The Company has also mortgaged 13.3 hectares
      of land use rights for $2.99 million in loans from the Huishang Bank.                                          
| |      |                                                                                                                                                                                                                                                                                                                                             
| |      | Land use rights are amortized on a straight line basis
      over their respective lease periods. The lease period of land use rights
      located in an industrial park zone is 50 years.                                                                                                                                                 

| |                                |   | September 30, 2010 |   |   | December 31, 2009 |  
| | ------------------------------ | - | ------------------ | - | - | ----------------- | -
| |                                |   |                    |   |   |                   |  
| | Cost                           | $ | 2,156,075          |   | $ | 2,112,867         |  
| | Less: Accumulated amortization |   | (94,619            | ) |   | (61,030           | )
| | Net book value                 | $ | 2,061,456          |   | $ | 2,051,837         |  

| |      | Amortization expense was $10,593 and $10,555 for the
      three months ended September 30, 2010 and September 30, 2009,
      respectively. Amortization expense was $31,779 and $31,665 for the nine
      months ended September 30, 2010 and September 30, 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 2.17 | CONSTRUCTION IN PROGRESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | Construction in progress represents direct costs of
      construction as well as acquisition and design fees incurred.
      Capitalization of these costs ceases and the construction in progress is
      transferred to property, plant and equipment when substantially all the
      activities necessary to prepare the assets for their intended use are
      completed. No depreciation is provided until construction is completed and
      the asset is ready for its intended use.                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 2.18 | IMPAIRMENT OF LONG-LIVED ASSETS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | In accordance with ASC Topic 360, Accounting for the
      Impairment or Disposal of Long-Lived Assets, long- lived assets to be
      held and used are analyzed for impairment whenever events or changes in
      circumstances indicate that the related carrying amounts may not be
      recoverable. The Company reviews the carrying amount of its long-lived
      assets, including intangibles, for impairment, each reporting period. An
      asset is considered impaired when estimated future cash flows are less
      than the carrying amount of the asset. In the event the carrying amount of
      such asset is considered not recoverable, the asset is adjusted to its
      fair value. Fair value is generally determined based on discounted future
      cash flow. As of September 30, 2010 and December 31, 2009, the Company
      determined no impairment charges were necessary.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 2.19 | CAPITALIZED INTERNAL-USE SOFTWARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |      | The Company capitalizes certain costs incurred to
      purchase or create internal-use software in accordance with ASC Topic
      350-40, Internal Use Software.To date, such costs have included
      external direct costs of materials and services incurred in the
      implementation of internal-use software and are included within computer
      hardware and software. Once the capitalization criteria have been met,
      such costs are classified as software and are amortized on a straight-line
      basis over five years once the software has been put into use. Subsequent
      additions, modifications, or upgrades to internal-use software are
      capitalized only to the extent that they allow the software to perform a
      task it previously did not perform. Software maintenance and training
      costs are expensed in the period in which they are incurred.      

11

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.20 | INVENTORY                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Inventory consists primarily of raw materials, work in
      progress, and finished goods. Raw materials are stated at cost. Cost
      comprises direct materials and, where applicable, direct labor costs and
      overhead costs that have been incurred in bringing the inventory to its
      present location and condition. Finished goods are stated at the lower of
      cost (determined on first in first out method) or market value.

| |                  |   | September 30, 2010 |  |   | December 31, 2009 | 
| | ---------------- | - | ------------------ |  | - | ----------------- | 
| | Raw materials    | $ | 5,799,803          |  | $ | 3,949,512         | 
| | Work in progress |   | 2,225,661          |  |   | 129,726           | 
| | Finished goods   |   | -                  |  |   | 2,987,549         | 
| |                  | $ | 8,025,464          |  | $ | 7,066,787         | 

| | The Company provides for inventory losses based on
      obsolescence and levels in excess of forecasted demand. In these cases,
      inventory is reduced to estimated realizable value based on historical
      usage and expected demand. Inherent in the Companys estimates of market
      value in determining inventory valuation are estimates related to economic
      trends, future demand for the Companys products, and technical
      obsolescence of products.                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2.21 ALLOWANCE FOR DOUBTFUL ACCOUNTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | The Company reduces gross trade accounts receivable by an
      allowance for doubtful accounts. The allowance for doubtful accounts is
      the Companys best estimate of the amount of probable credit losses in the
      Companys existing accounts receivable. The Company reviews its allowance
      for doubtful accounts on a regular basis and all past due balances are
      reviewed individually for collectability. Account balances are charged off
      against the allowance after all means of collection have been exhausted
      and the potential for recovery is considered remote. Provision for
      doubtful accounts and bad debts written off for the three months ended
      September 30, 2010 and September 30, 2009 and nine months ended September
      30, 2010 and September 30, 2009 are $nil.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Aging of accounts receivable is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                           |   | September 30, 2010 |   |   | December 31, 2009 | 
| | --------------------------------------------------------- | - | ------------------ | - | - | ----------------- | 
| |                                                           |   |                    |   |   |                   | 
| | within 3 months                                           | $ | 11,373,774         |   | $ | 8,398,448         | 
| | over 3 months and within 6 months                         |   | 3,931,291          |   |   | 152,797           | 
| | over 6 months and within 1 year                           |   | 1,109,851          |   |   | 240,597           | 
| | over 1 year                                               |   | 55,697             |   |   | -                 | 
| |                                                           |   | 16,470,613         |   |   | 8,791,842         | 
| |                                                           |   |                    |   |   |                   | 
| | Less: reclassified as long term
      accounts receivable |   | (55,697            | ) |   | -                 | 
| |                                                           | $ | 16,414,916         |   | $ | 8,791,842         | 

Accounts receivable includes the
amounts of $3,134,274 (12.31.2009: $1,333,972) that were factored to the
Industrial and Commercial Bank, PRC for collection.

12

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.22 | DEPOSITS AND PREPAID EXPENSES
| | ---- | -----------------------------

| |                                                         |   | September 30, 2010 |  |   | December 31, 2009 | 
| | ------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
| |                                                         |   |                    |  |   |                   | 
| | Guarantee deposits                                      | $ | 432,648            |  | $ | 1,334,237         | 
| | Advances to suppliers                                   |   | 782,817            |  |   | 1,351,157         | 
| | Prepayment for purchase of property
      and equipment |   | 2,246              |  |   | 13,570            | 
| | Advances to logistic service providers                  |   | 14,566             |  |   | 9,938             | 
| | Utility deposits                                        |   | -                  |  |   | 7,335             | 
| | Prepaid expenses                                        |   | 11,526             |  |   | -                 | 
| | Others                                                  |   | 472                |  |   | -                 | 
| |                                                         | $ | 1,244,275          |  | $ | 2,716,237         | 

| |      | Guarantee deposits are provided to financial institutions in return
      for issuance of a corporate guarantee to financiers. Advances to suppliers
      are down payments or deposits for inventory purchases. The inventory is
      normally delivered within one to two months after the payments have been
      made.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                              
| | 2.23 | OTHER RECEIVABLES                                                                                                                                                                                                                                                                                                            

| |                                                           |   | September 30, 2010 |  |   | December 31, 2009 | 
| | --------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
| |                                                           |   |                    |  |   |                   | 
| | Due from former sole stockholder and
      his affiliates | $ | 2,264,074          |  | $ | 2,948,905         | 
| | Loan due from third parties                               |   | -                  |  |   | 195,111           | 
| | Due from employees                                        |   | 949,242            |  |   | 655,238           | 
| | Due from third parties                                    |   | 529,309            |  |   | -                 | 
| | Others                                                    |   | -                  |  |   | 3,104             | 
| |                                                           | $ | 3,742,625          |  | $ | 3,802,358         | 

Amounts due from the former sole
stockholder and his affiliates and amounts due from third parties are unsecured
advances, interest free and without fixed terms of repayment and are for
specific business purposes. Amounts due from employees are the amounts advanced
for business transactions on behalf of the Company and will be reconciled on the
completion of business transactions.

| | 2.24 | TAXES RECOVERABLE
| | ---- | -----------------
| |      |                  

| |                                   |   | September 30, 2010 |  |   | December 31, 2009 | 
| | --------------------------------- | - | ------------------ |  | - | ----------------- | 
| |                                   |   |                    |  |   |                   | 
| | VAT recoverable                   | $ | 11,225             |  | $ | 2,711             | 
| | Individual income tax recoverable |   | -                  |  |   | 2,178             | 
| | Taxes recoverable                 | $ | 11,225             |  | $ | 4,889             | 

13

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.25 | OTHER PAYABLES AND ACCRUED EXPENSES
| | ---- | -----------------------------------

| |  |                                                                |   | September 30, 2010 |  |   | December 31, 2009 | 
| |  | -------------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
| |  | Due to former sole stockholder and
      his affiliates        | $ | 4,223,561          |  | $ | -                 | 
| |  | Loans due to third parties and local province
      government |   | 823,350            |  |   | 1,350,146         | 
| |  | Due to potential investors                                     |   | -                  |  |   | 880,200           | 
| |  | Due to employees                                               |   | -                  |  |   | 18,015            | 
| |  | Wages accruals                                                 |   | 109,126            |  |   | -                 | 
| |  | Accruals                                                       |   | 7,675              |  |   | 49,754            | 
| |  | Others                                                         |   | 43,368             |  |   | 953,572           | 
| |  |                                                                | $ | 5,207,080          |  | $ | 3,251,687         | 

Amounts due to former sole stockholder
and his affiliates and amounts due to third parties and local provincial
government are unsecured, short term loans, interest free and without a fixed
term of repayment and are for business purposes.

| | 2.26 | TAXES PAYABLE
| | ---- | -------------
| |      |              

| |                                                  |   | September 30, 2010 |  |   | December 31, 2009 | 
| | ------------------------------------------------ | - | ------------------ |  | - | ----------------- | 
| | Enterprise income tax payable                    | $ | 436,436            |  | $ | 1,290,966         | 
| | City maintenance and construction levies payable |   | -                  |  |   | 7,157             | 
| | Individual income tax payable                    |   | 5,653              |  |   | -                 | 
| | Education levies payable                         |   | 2,294              |  |   | 8,792             | 
| |                                                  | $ | 444,383            |  | $ | 1,306,915         | 

14

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.27 | FAIR VALUE OF FINANCIAL
      INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Company follows paragraph 825-10-50-10 of the FASB
      Accounting Standards Codification for disclosures about fair value of its
      financial instruments and paragraph 820-10-35-37 of the FASB Accounting
      Standards Codification (Paragraph 820-10-35-37) to measure the fair
      value of its financial instruments. Paragraph 820- 10-35-37 establishes a
      framework for measuring fair value in accounting principles generally
      accepted in the United States of America (U.S. GAAP), and expands
      disclosures about fair value measurements. To increase consistency and
      comparability in fair value measurements and related disclosures,
      Paragraph 820-10-35-37 establishes a fair value hierarchy which
      prioritizes the inputs to valuation techniques used to measure fair value
      into three (3) broad levels. The fair value hierarchy gives the highest
      priority to quoted prices (unadjusted) in active markets for identical
      assets or liabilities and the lowest priority to unobservable inputs. The
      three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37
      are described below:
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Level 1 date. Quoted market prices available in active
      markets for identical assets or liabilities as of the reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Level 2 Pricing inputs other than quoted prices in active
      markets included in Level 1, which are either directly or indirectly
      observable as of the reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | Level 3 Pricing inputs that are generally observable
      inputs and not corroborated by market data.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The carrying amounts of the Companys financial assets
      and liabilities, such as cash and accrued expenses, approximate their fair
      values because of the short maturity of these instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Company does not have any assets or liabilities
      measured at fair value on a recurring or a non-recurring basis,
      consequently, the Company did not have any fair value adjustments for
      assets and liabilities measured at fair value at September 30, 2010 or
      December 31, 2009, nor gains or losses are reported in the statement of
      income and other comprehensive income that are attributable to the change
      in unrealized gains or losses relating to those assets and liabilities
      still held at the reporting date for the fiscal period ended September 30,
      2010 or December 31, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 2.28 | STOCK-BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | As of September 30, 2010 and December 31, 2009, the
      Company had no stock-based compensation plans.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 2.29 | RETIREMENT BENEFIT COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | PRC state managed retirement benefit programs are defined
      contribution programs and the payments to these programs are charged as
      expenses when employees have rendered service entitling them to the
      contribution.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | 2.30 | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |      | The Company accounts for income taxes under the
      provisions of ASC740 Accounting for Income Taxes. Under ASC 740,
      deferred tax assets and liabilities are determined based on the difference
      between the financial statement carrying amounts and tax bases of assets
      and liabilities using the tax bases of assets and liabilities using the
      enacted taxes rates in effect in the years in which the differences are
      expected to reverse. Provision for income taxes consist of taxes currently
      due plus deferred taxes. Since the Company had no operations within the
      United States there is no provision for US income taxes and there are no
      deferred tax amounts as of September 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                               

15

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.30 | INCOME TAXES (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | The provision for income tax is based on the results for
      the year as adjusted for items, which are non-assessable or disallowed. It
      is calculated using tax rates that have been enacted or substantively
      enacted at the balance sheet date. Deferred tax is accounted for using the
      balance sheet liability method in respect of temporary differences arising
      from differences between the carrying amount of assets and liabilities in
      the financial statements and the corresponding tax basis used in the
      computation of assessable tax profit. In principle, deferred tax
      liabilities are recognized for all taxable temporary differences, and
      deferred tax assets are recognized to the extent that it is probable that
      taxable profit will be available against which deductible temporary
      differences can be utilized.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | Deferred income taxes are calculated at the tax rates
      that are expected to apply to the period when the asset is realized or the
      liability is settled. Deferred tax is charged or credited in the income
      statement, except when it related to items credited or charged directly to
      equity, in which case the deferred tax is also dealt with in equity.
      Deferred tax assets and liabilities are offset when they relate to income
      taxes levied by the same taxation authority and the Company intends to
      settle its current tax assets and liabilities on a net basis.                                                                                                                                                                                                                                                                                 
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2.31 | PRODUCT WARRANTIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | Substantially all of the Companys products are covered
      by a standard warranty of 1 to 2 years for products. In the event of a
      failure of products covered by this warranty, the Company must repair or
      replace the software or products or, if those remedies are insufficient,
      and at the discretion of the Company, provide a refund. The Company
      provided nil% of sales income for product warranties for the three months
      ended and the nine months ended September 30, 2010 and September 30, 2009
      in the warranty reserve to reflect estimated material and labor costs of
      maintenance for potential or actual product issues but for which the
      Company expects to incur an obligation. The product warranty reserve was
      $nil as of September 30, 2010 and December 31, 2009.                                                  
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2.32 | RELATED PARTIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | Parties are considered to be related to the Company if
      the Company has the ability, directly or indirectly, to control the party,
      or exercise significant influence over the party in making financial and
      operating decisions, or where the Company and the party are subject to
      common control. Related parties may be individuals (being members of key
      management personnel, significant shareholders and/or their close family
      members) or other entities which are under the significant influence of
      related parties of the Company.                                                                                                                                                                                                                                                                                                             
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 2.33 | BUSINESS RISK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |      | The Company's operations are carried out in the PRC.
      Accordingly, the Company's business, financial condition and results of
      operations may be influenced by the political, economic and legal
      environment in the PRC, and by the general state of the PRC economy. The
      Company's operations in the PRC are subject to specific considerations and
      significant risks not typically associated with companies in North America
      and Western Europe. The Company's results may be adversely affected by
      changes in governmental policies with respect to laws and regulations,
      anti-inflationary measures, currency conversion and remittance abroad, and
      rates and methods of taxation, among other things.                                                                                                                                   

16

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.34 | CONCENTRATIONS OF CREDIT RISK                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Cash includes demand deposits in accounts maintained with
      the banks within the Peoples Republic of China. Total cash in these banks
      on September 30, 2010 and December 31, 2009 amounted to $216,375 and
      $138,251, respectively, of which no deposits are covered by insurance. The
      Company has not experienced any losses in such accounts and believes it is
      not exposed to any risks on its cash in bank accounts.
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | Accounts receivable are derived from revenue earned from
      customers located primarily in the Peoples Republic of China. The
      Company performs ongoing credit evaluations of customers and has not experienced any
      material losses to date.                                                                                                                                                                                         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |      | The Company had 5 major customers whose revenue
      individually represented the following percentages of the Companys total
      revenue:                                                                                                                                                                                                                                                                                                      

| |            | Three months ended | Three months ended | Nine months ended  | Nine months ended 
| | ---------- | ------------------ | ------------------ | ------------------ | ------------------
| |            | September 30, 2010 | September 30, 2009 | September 30, 2010 | September 30, 2009
| |            |                    |                    |                    |                   
| | Customer A | 20.23%             | 81.63%             | 31.91%             | 56.84%            
| | Customer B | 45.42%             | -                  | 20.42%             | 26.51%            
| | Customer C | -                  | -                  | 18.11%             | -                 
| | Customer D | -                  | -                  | 6.90%              | -                 
| | Customer E | -                  | -                  | 6.84%              | -                 
| | Customer F | -                  | -                  | -                  | 6.92%             
| | Customer G | -                  | -                  | -                  | 3.52%             
| | Customer H | -                  | -                  | -                  | 2.47%             
| | Customer I | 17.19%             | -                  | -                  | -                 
| | Customer J | 5.26%              | -                  | -                  | -                 
| | Customer K | 4.57%              | -                  | -                  | -                 
| | Customer L | -                  | 12.18%             | -                  | -                 
| | Customer M | -                  | 4.81%              | -                  | -                 
| | Customer N | -                  | 1.38%              | -                  | -                 
| |            | 92.67%             | 100.00%            | 84.18%             | 96.26%            

17

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
|-- | ------------------------------------------------------

| | 2.34 | CONCENTRATIONS OF CREDIT RISK (CONTINUED)                                                                                                                   
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                             
| |      | The company had 5 major customers whose accounts
      receivable balance individually represented the Companys total accounts
      receivable as follows:

| |            |  | September 30, 2010 |  |  | December 31, 2009 | 
| | ---------- |  | ------------------ |  |  | ----------------- | 
| |            |  |                    |  |  |                   | 
| | Customer A |  | 26.72%             |  |  | -                 | 
| | Customer B |  | 26.38%             |  |  | 31.00%            | 
| | Customer C |  | 21.00%             |  |  | 31.71%            | 
| | Customer D |  | 10.09%             |  |  | -                 | 
| | Customer E |  | 3.76%              |  |  | 24.55%            | 
| | Customer F |  | -                  |  |  | 5.83%             | 
| | Customer G |  | -                  |  |  | 4.36%             | 
| |            |  | 87.95%             |  |  | 97.45%            | 

|3. | WEIGHTED AVERAGE NUMBER OF SHARES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On May 4, 2010, the Company entered into a Share Exchange
      Agreement which has been accounted for as a reverse merger since there has
      been a change of control. The Company computes the weighted-average number
      of common shares outstanding in accordance with ASC Topic 805 Business
      Combination which states that in calculating the weighted average shares
      when a reverse merger takes place in the middle of the year, the number of
      common shares outstanding from the beginning of that period to the
      acquisition date shall be computed on the basis of the weighted average
      number of common shares of the legal acquiree (the accounting acquirer)
      outstanding during the period multiplied by the exchange ratio established
      in the merger agreement. The number of common shares outstanding from the
      acquisition date to the end of that period shall be the actual number of
      common shares of the legal acquirer (the accounting acquiree) outstanding
      during that period.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|4. | EARNINGS PER SHARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | As prescribed in ASC Topic 260 Earning per
      Share, Basic Earnings per Share (EPS) is computed by dividing net
      income available to common stockholders by the weighted average number of
      common stock shares outstanding during the year. Diluted EPS is computed
      by dividing net income available to common stockholders by the
      weighted-average number of common stock shares outstanding during the year
      plus potential dilutive instruments such as stock options and warrants.
      The effect of stock options on diluted EPS is determined through the
      application of the treasury stock method, whereby proceeds received by the
      Company based on assumed exercises are hypothetically used to repurchase
      the Companys common stock at the average market price during the period.                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | For the three months ended September 30, 2010 and
      September 30, 2009, basic and diluted earnings per share amount to $0.03
      and $0.07, respectively. For the nine months ended September 30, 2010 and
      September 30, 2009, basic and diluted earnings per share amount to $0.13
      and $0.13, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | ACCUMULATED OTHER COMPREHENSIVE INCOME                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | ASC Topic 220 Comprehensive Incomeestablishes
      standards for reporting and displaying comprehensive income and its
      components in financial statements. Comprehensive income is defined as the
      change in stockholders equity of a business enterprise during a period
      from transactions and other events and circumstances from non-owner
      sources. The comprehensive income for all periods presented includes both
      the reported net income and net change in cumulative translation
      adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

18

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|6. | RECENT ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In June 2009, the FASB approved the FASB Accounting
      Standards Codification (the Codification) as the single source of
      authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009.
      The Codification does not change current U.S. GAAP, but is intended to
      simplify user access to all authoritative U.S. GAAP by providing all the
      authoritative literature related to a particular topic in one place. All
      existing accounting standard documents will be superseded and all other
      accounting literature not included in the Codification will be considered
      non-authoritative. The Codification is effective for interim and annual
      periods ending after September 15, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In August 2009, the FASB issued the FASB Accounting
      Standards Update No. 2009-04 Accounting for Redeemable Equity Instruments
      - Amendment to Section 480-10-S99 which represents an update to section
      480-10-S99, distinguishing liabilities from equity, per EITF Topic D-98,
      Classification and Measurement of Redeemable Securities. The Company does
      not expect the adoption of this update to have a material impact on its
      consolidated financial position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In August 2009, the FASB issued the FASB Accounting
      Standards Update No. 2009-05 Fair Value Measurement and Disclosures Topic
      820  Measuring Liabilities at Fair Value , which provides amendments to
      subtopic 820-10, Fair Value Measurements and Disclosures  Overall, for
      the fair value measurement of liabilities. This update provides
      clarification that in circumstances in which a quoted price in an active
      market for the identical liability is not available, a reporting entity is
      required to measure fair value using one or more of the following
      techniques: 1. A valuation technique that uses: a. The quoted price of the
      identical liability when traded as an asset b. Quoted prices for similar
      liabilities or similar liabilities when traded as assets. 2. Another
      valuation technique that is consistent with the principles of topic 820;
      two examples would be an income approach, such as a present value
      technique, or a market approach, such as a technique that is based on the
      amount at the measurement date that the reporting entity would pay to
      transfer the identical liability or would receive to enter into the
      identical liability. The amendments in this update also clarify that when
      estimating the fair value of a liability, a reporting entity is not
      required to include a separate input or adjustment to other inputs
      relating to the existence of a restriction that prevents the transfer of
      the liability. The amendments in this update also clarify that both a
      quoted price in an active market for the identical liability when traded
      as an asset in an active market when no adjustments to the quoted price of
      the asset are required are Level 1 fair value measurements. The Company
      does not expect the adoption of this update to have a material impact on
      its consolidated financial position, results of operations or cash flows
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In September 2009, the FASB issued the FASB Accounting
      Standards Update No. 2009-08 Earnings Per Share  Amendments to Section
      260-10-S99, which represents technical corrections to topic 260-10-S99,
      Earnings per share, based on EITF Topic D-53, Computation of Earnings Per
      Share for a Period that includes a Redemption or an Induced Conversion of
      a Portion of a Class of Preferred Stock and EITF Topic D-42, The Effect of
      the Calculation of Earnings per Share for the Redemption or Induced
      Conversion of Preferred Stock . The Company does not expect the adoption
      of this update to have a material impact on its consolidated financial
      position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | In September 2009, the FASB issued the FASB Accounting
      Standards Update No. 2009-09 Accounting for Investments -Equity Method
      and Joint Ventures and Accounting for Equity-Based Payments to
      Non-Employees. This update represents a correction to Section
      323-10-S99-4, Accounting by an Investor for Stock-Based Compensation
      Granted to Employees of an Equity Method Investee. Additionally, it adds
      observer comment, Accounting Recognition for Certain Transactions
      Involving Equity Instruments Granted to Other Than Employees to the
      Codification. The Company does not expect the adoption to have a material
      impact on its consolidated financial position, results of operations or
      cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

19

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|6. | RECENT ACCOUNTING PRONOUNCEMENTS
  (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In September 2009, the FASB issued the FASB Accounting
      Standards Update No. 2009-12 Fair Value Measurements and Disclosures
      Topic 820  Investment in Certain Entities That Calculate Net Assets Value
      Per Share (or Its Equivalent), which provides amendments to Subtopic
      820-10, Fair Value Measurements and Disclosures- Overall, for the fair
      value measurement of investments in certain entities that calculate net
      asset value per share (or its equivalent). The amendments in this update
      permit a reporting entity, as a practical expedient, to measure the fair
      value of an investment that is within the scope of the amendments in this
      update on the basis of the net asset value per share of the investment (or
      its equivalent) if the net asset value of the investment (or its
      equivalent) is calculated in a manner consistent with the measurement
      principles of Topic 946 as of the reporting entitys measurement date,
      including measurement of all or substantially all of the underlying
      investments of the investee in accordance with Topic 820. The amendments
      in this update also require disclosures by major category of investment
      about the attributes of investments within the scope of the amendments in
      this update, such as the nature of any restrictions on the investors
      ability to redeem its investments a the measurement date, any unfunded
      commitments (for example, a contractual commitment by the investor to
      invest a specified amount of additional capital at a future date to fund
      investments that will be make by the investee), and the investment
      strategies of the investees. The major category of investment is required
      to be determined on the basis of the nature and risks of the investment in
      a manner consistent with the guidance for major security types in U.S.
      GAAP on investments in debt and equity securities in paragraph
      320-10-50-1B. The disclosures are required for all investments within the
      scope of the amendments in this update regardless of whether the fair
      value of the investment is measured using the practical expedient. The
      Company does not expect the adoption to have a material impact on its
      consolidated financial position, results of operations or cash
    flows.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In October 2009, the Financial Accounting Standards Board
      issued an Accounting Standards Update (ASU) regarding accounting for
      own-share lending arrangements in contemplation of convertible debt
      issuance or other financing. This ASU requires that at the date of
      issuance of the shares in a share-lending arrangement entered into in
      contemplation of a convertible debt offering or other financing, the
      shares issued shall be measured at fair value and be recognized as an
      issuance cost, with an offset to additional paid-in capital. Further,
      loaned shares are excluded from basic and diluted earnings per share
      unless default of the share-lending arrangement occurs, at which time the
      loaned shares would be included in the basic and diluted
      earnings-per-share calculation. This ASU is effective for fiscal years
      beginning on or after December 15, 2009, and interim periods within those
      fiscal years for arrangements outstanding as of the beginning of those
      fiscal years. The Company is currently assessing the impact of this ASU on
      its consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In December 2009, FASB issued ASU No. 2009-16, Accounting
      for Transfers of Financial Assets. This Accounting Standards Update amends
      the FASB Accounting Standards Codification for the issuance of FASB
      Statement No. 166,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | Accounting for Transfers of Financial Assetsan
      amendment of FASB Statement No. 140.The amendments in this Accounting
      Standards Update improve financial reporting by eliminating the exceptions
      for qualifying special- purpose entities from the consolidation guidance
      and the exception that permitted sale accounting for certain mortgage
      securitizations when a transferor has not surrendered control over the
      transferred financial assets. In addition, the amendments require enhanced
      disclosures about the risks that a transferor continues to be exposed to
      because of its continuing involvement in transferred financial assets.
      Comparability and consistency in accounting for transferred financial
      assets will also be improved through clarifications of the requirements
      for isolation and limitations on portions of financial assets that are
      eligible for sale accounting. The Company does not expect the adoption of
      this ASU to have a material impact on its consolidated financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

20

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|6. | RECENT ACCOUNTING PRONOUNCEMENTS
  (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In January 2010, FASB issued ASU No. 2010-01, Accounting
      for Distributions to Shareholders with Components of Stock and Cash. The
      amendments in this Update clarify that the stock portion of a distribution
      to shareholders that allows them to elect to receive cash or stock with a
      potential limitation on the total amount of cash that all shareholders can
      elect to receive in the aggregate is considered a share issuance that is
      reflected in EPS prospectively and is not a stock dividend for purposes of
      applying Topics 505 and 260 (Equity and Earnings Per Share). The
      amendments in this Update are effective for interim and annual periods
      ending on or after December 15, 2009, and should be applied on a
      retrospective basis. The Company adopted this standard and has determined
      the standard does not have material effect on the Companys consolidated
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In January 2010, FASB issued ASU No. 2010-02 regarding
      accounting and reporting for decreases in ownership of a subsidiary. Under
      this guidance, an entity is required to deconsolidate a subsidiary when
      the entity ceases to have a controlling financial interest in the
      subsidiary. Upon deconsolidation of a subsidiary, and entity recognizes a
      gain or loss on the transaction and measures any retained investment in
      the subsidiary at fair value. In contrast, an entity is required to
      account for a decrease in its ownership interest of a subsidiary that does
      not result in a change of control of the subsidiary as an equity
      transaction. This ASU clarifies the scope of the decrease in ownership
      provisions, and expands the disclosures about the deconsolidation of a
      subsidiary or de-recognition of a group of assets. This ASU is effective
      for beginning in the first interim or annual reporting period ending on or
      after December 31, 2009. The Company does not expect the adoption of this
      ASU to have a material impact on its consolidated financial statements In
      January 2010, FASB issued ASU No. 2010-02  Accounting and Reporting for
      Decreases in Ownership of a Subsidiary  a Scope Clarification. The
      amendments in this Update affect accounting and reporting by an entity
      that experiences a decrease in ownership in a subsidiary that is a
      business or nonprofit activity. The amendments also affect accounting and
      reporting by an entity that exchanges a group of assets that constitutes a
      business or nonprofit activity for an equity interest in another entity.
      The amendments in this Update are effective beginning in the period that
      an entity adopts SFAS No. 160, Non-controlling Interests in Consolidated
      Financial Statements  An Amendment of ARB No. 51. If an entity has
      previously adopted SFAS No. 160 as of the date the amendments in this
      update are included in the Accounting Standards Codification, the
      amendments in this update are effective beginning in the first interim or
      annual reporting period ending on or after December 15, 2009. The
      amendments in this update should be applied retrospectively to the first
      period that an entity adopted SFAS No. 160. The Company adopted this
      standard and has determined it does not have material effect on the
      Companys consolidated financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   | In January 2010, FASB issued ASU No. 2010-06  Improving
      Disclosures about Fair Value Measurements. This Update provides
      amendments to Subtopic 820-10 that requires new disclosure as follows: 1)
      Transfers in and out of Levels 1 and 2. A reporting entity should disclose
      separately the amounts of significant transfers in and out of Level 1 and
      Level 2 fair value measurements and describe the reasons for the
      transfers. 2) Activity in Level 3 fair value measurements. In the
      reconciliation for fair value measurements using significant unobservable
      inputs (Level 3), a reporting entity should present separately information
      about purchases, sales, issuances, and settlements (that is, on a gross
      basis rather than as one net number). This Update provides amendments to
      Subtopic 820-10 that clarify existing disclosures as follows: 1) Level of
      disaggregation. A reporting entity should provide fair value measurement
      disclosures for each class of assets and liabilities. A class is often a
      subset of assets or liabilities within a line item in the statement of
      financial position. A reporting entity needs to use judgment in
      determining the appropriate classes of assets and liabilities. 2)
      Disclosures about inputs and valuation techniques. A reporting entity
      should provide disclosures about the valuation techniques and inputs used
      to measure fair value for both recurring and nonrecurring fair value
      measurements. Those disclosures are required for fair value measurements
      that fall in either Level 2 or Level 3. The new disclosures and
      clarifications of existing disclosures are effective for interim and
      annual reporting periods beginning after December 15, 2009, except for the
      disclosures about purchases, sales, issuances, and settlements in the roll
      forward of activity in Level 3 fair value measurements. Those disclosures
      are effective for fiscal years beginning after December 15, 2010, and for
      interim periods within those fiscal years. The Company is currently
      evaluating the impact of this ASU, however, the Company does not expect
      the adoption of this ASU to have a material impact on its consolidated
      financial statements.                                                                                                                                                                                    

21

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|6. | RECENT ACCOUNTING PRONOUNCEMENTS
  (CONTINUED)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In February 2010, the FASB issued Accounting Standards
      Update 2010-09, Subsequent Events (Topic 855): Amendments to Certain
      Recognition and Disclosure Requirements, or ASU 2010-09. ASU 2010-09
      primarily rescinds the requirement that, for listed companies, financial
      statements clearly disclose the date through which subsequent events have
      been evaluated. Subsequent events must still be evaluated through the date
      of financial statement issuance, however, the disclosure requirement has
      been removed to avoid conflicts with other SEC guidelines. ASU 2010-09 was
      effective immediately upon issuance and was adopted in February
    2010.                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In April 2010, the FASB issued Accounting Standards
      Update 2010-13, CompensationStock Compensation (Topic 718): Effect of
      Denominating the Exercise Price of a Share-Based Payment Award in the
      Currency of the Market in Which the Underlying Equity Security Trades, or
      ASU 2010-13. ASU 2010-13 provides amendments to Topic 718 to clarify that
      an employee share-based payment award with an exercise price denominated
      in currency of a market in which a substantial porting of the entitys
      equity securities trades should not be considered to contain a condition
      that is not a market, performance, or service condition. Therefore, an
      entity would not classify such an award as a liability if it otherwise
      qualifies as equity. The amendments in this Update are effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2010. The Company does not expect the adoption of
      ASU 2010-17 to have a significant impact on its consolidated financial
      statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | In April 2010, the FASB issued Accounting Standard Update
      2010-17, Revenue RecognitionMilestone Method (Topic 605): Milestone
      Method of Revenue Recognition or ASU 2010-17.This Update provides
      guidance on the recognition of revenue under the milestone method, which
      allows a vendor to adopt an accounting policy to recognize all of the
      arrangement consideration that is contingent on the achievement of a
      substantive milestone (milestone consideration) in the period the
      milestone is achieved. The pronouncement is effective on a prospective
      basis for milestones achieved in fiscal years and interim periods within
      those years, beginning on or after June 15, 2010. The adoption of ASU
      2010-17 does not have any significant impacts on the consolidated
      financial statements.                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|7. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | No Hong Kong corporate income tax has been provided in
      the financial statements, as TEC did not have any assessable profits for
      the nine months ended September 30, 2010 and September 30, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Beginning January 1, 2008, the new Enterprise Income Tax
      (EIT) law replaced the existing laws for Domestic Enterprises (DEs)
      and Foreign Invested Enterprises (FIEs). The new standard EIT rate of
      25% replaced the 33% rate currently applicable to both DEs and FIEs. The
      Company is currently evaluating the impact that the new EIT will have on
      its financial condition. Beginning January 1, 2008, China unified the
      corporate income tax rule on foreign invested enterprises and domestic
      enterprises. The unified corporate income tax rate is 25%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | Provision for income tax of the Companys subsidiary ATEC
      is made at the unified EIT rate of 25% for the nine months ended September
      30, 2010 but ATEC is entitled to a refund of 10% according to local
      preferential tax policy for manufacture of high technology products for
      the three years from January 1, 2010 to December 31, 2013. Therefore, the
      provision for income tax of the Companys subsidiary ATEC is made at the
      local preferential EIT rate of 15% for the nine months ended September 30,
      2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The Companys subsidiaries ZTEC and Shuncheng Taida have
      not yet commenced operations, therefore no provision for income taxes has
      been made for the three months ended and nine months ended September 30,
      2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The following table reconciles the U.S statutory rates to
      the Companys effective tax rate for the three months ended and nine
      months ended September 30, 2010:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

22

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|7. | INCOME TAXES
(CONTINUED)
|-- | ------------------------



| |                                                             |  | Nine months ended  |   
| | ----------------------------------------------------------- |  | ------------------ | --
| |                                                             |  | September 30, 2010 |   
| |                                                             |  |                    |   
| | U.S. Statutory rates                                        |  | 34%                |   
| | Foreign income not recognized in USA                        |  | (34                | )%
| | China Enterprise income taxe rate for high
      technology |  | 15%                |   
| | Total provision for income taxes                            |  | 15%                |   

Provision for income taxes is as
follows:

| |                             |   | Three months ended |  |   | Three months ended |  |   | Nine months ended  |  |   | Nine months ended  | 
| | --------------------------- | - | ------------------ |  | - | ------------------ |  | - | ------------------ |  | - | ------------------ | 
| |                             |   | September 30, 2010 |  |   | September 30, 2009 |  |   | September 30, 2010 |  |   | September 30, 2009 | 
| |                             |   |                    |  |   |                    |  |   |                    |  |   |                    | 
| | Income tax                  |   |                    |  |   |                    |  |   |                    |  |   |                    | 
| | TEC - Hong Kong profits tax | $ | -                  |  | $ | -                  |  | $ | -                  |  | $ | -                  | 
| | ATEC - China EIT            |   | 151,535            |  |   | 450,585            |  |   | 538,396            |  |   | 847,396            | 
| | ZTEC and STD - China EIT    |   | -                  |  |   | -                  |  |   | -                  |  |   | -                  | 
| | Deferred tax                |   | -                  |  |   | -                  |  |   | -                  |  |   | -                  | 
| |                             | $ | 151,535            |  | $ | 450,585            |  | $ | 538,396            |  | $ | 847,396            | 



|8. | SHORT TERM BORROWINGS                                                                                                                                                                                                                                                                                                                                   
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                         
|   | There are no provisions in the Companys bank borrowings
      that would accelerate repayment of debt as a result of a change in credit
      rating or a material adverse change in the Companys business. Under
      certain agreements, the Company has the option to retire debt prior to
      maturity, either at par or at a premium over
par.



| |                                                                                                                                                             |   | September 30, 2010 |  |   | December 31, 2009 | 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ |  | - | ----------------- | 
| |                                                                                                                                                             |   |                    |  |   |                   | 
| | Loan from Industrial and Commercial Bank,
      Jingde Country Branch, PRC                                                                                  | $ | 4,124,235          |  | $ | 4,041,585         | 
| | Interest
      rate 7.47% per annum with personal guarantees of Messr. ChunLu and YiPing Zhu                                                                |   |                    |  |   |                   | 
| | Huishang Bank, Hefei branch, PRC                                                                                                                            |   | -                  |  |   | 2,200,500         | 
| | China Merchant Bank, Heifei branch, PRC                                                                                                                     |   | -                  |  |   | 1,173,600         | 
| | China Everbright Bank, Heifei branch, PRC                                                                                                                   |   | 4,491,000          |  |   | 4,401,000         | 
| | Interest
      rate 5.31% per annum with corporate and personal guarantees
      of Zhongrung
      Trust Investment Co Ltd and Messr. ChunLu andYiPing Zhu |   |                    |  |   |                   | 
| | Huishang Bank, Xuancheng branch, PRC                                                                                                                        |   | 2,994,000          |  |   | 682,304           | 
| | The Economic Standing Committee of Jinde Country, PRC                                                                                                       |   | -                  |  |   | 234,720           | 
| |                                                                                                                                                             | $ | 11,609,235         |  | $ | 12,733,709        | 

23

---

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|9.  | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company has authorized Preferred B stock of
      10,000,000 shares with a par value of $0.001. As of September 30, 2010 and
      December 31, 2009, the Company has no shares of preferred stock issued and
      outstanding. The Company has authorized common stock of 300,000,000 shares
      with a par value of $0.001. As of September 30, 2010, the Company has
      30,181,552  shares of common stock issued and outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10. | COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Total lease expenses for the three months ended September
      30, 2010 and September 30, 2009 were $16,966 and $nil, respectively. Total
      lease expenses for the nine months ended September 30, 2010 and September
      30, 2009 were $22,309 and $nil, respectively. Future minimum lease
      payments as of September 30, 2010 and December 31, 2009 were
  $nil.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | From time to time and in the ordinary course of business,
      the Company may be subject to various claims, charges, and litigation. As
      of September 30, 2010 and December 31, 2009, the Company did not have any
      pending claims, charges, or litigation that it expects would have a
      material adverse effect on its consolidated balance sheets, consolidated
      statements of income or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|11. | PRODUCT LINE INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The Company sells towers, which are used by customers in
      various industries. The production process, class of customer, selling
      practice and distribution process are the same for all towers. The
      Companys chief operating decision-makers (i.e. chief executive officer
      and his direct reports) review financial information presented on a
      consolidated basis, accompanied by disaggregated information about
      revenues by product lines for purposes of allocating resources and
      evaluating financial performance. There are no segment managers who are
      held accountable for operations, operating results and plans for levels or
      components below the consolidated unit level. The Company considers itself
      to be operating within one reportable segment. The Company does not have
      long-lived assets located in foreign countries. The Company's net revenue
      from external customers by main product lines is as
  follows:



| |                           |   | Three months ended |  |   | Three months
    ended |  |   | Nine months ended  |  |   | Nine months ended  | 
| | ------------------------- | - | ------------------ |  | - | ---------------------- |  | - | ------------------ |  | - | ------------------ | 
| |                           |   | September 30, 2010 |  |   | September 30, 2009     |  |   | September 30, 2010 |  |   | September 30, 2009 | 
| |                           |   |                    |  |   |                        |  |   |                    |  |   |                    | 
| | Domestic sales            |   |                    |  |   |                        |  |   |                    |  |   |                    | 
| | Communication towers      | $ | 1,550,889          |  | $ | 5,576,419              |  | $ | 8,628,648          |  | $ | 7,888,561          | 
| | Electricity supply towers |   | 4,882,728          |  |   | 360,203                |  |   | 11,808,089         |  |   | 4,315,236          | 
| | Export sales              |   |                    |  |   |                        |  |   |                    |  |   |                    | 
| | Communication towers      |   | 814,393            |  |   | 30,766                 |  |   | 1,050,491          |  |   | 30,766             | 
| | Electricity supply towers |   | 37,605             |  |   | 769,241                |  |   | 405,366            |  |   | 909,586            | 
| |                           | $ | 7,285,615          |  | $ | 6,736,629              |  | $ | 21,892,594         |  | $ | 13,144,149         | 



|12. | RELATED PARTIES TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | For the three months ended September 30, 2010 and
      September 30, 2009, there was cash and non-cash compensation of $13,239
      and $330, respectively awarded to, earned by, or paid to any of the
      Companys executive officers or directors. For the nine months ended
      September 30, 2010 and September 30, 2009, there was cash and non-cash
      compensation of $17,698 and $990, respectively awarded to, earned by, or
      paid to any of the Companys executive officers or directors.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | In addition to the transactions and balances as disclosed
      elsewhere in these consolidated financial statements, during the period,
      the Company had no other significant related party transactions.                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|13. | SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | As required by ASC Topic 855 Subsequent Events,the Company has evaluated subsequent events that have occurred through
      November 15, 2010, the date the consolidated financial statements were
      issued.                                                                                                                                                                                                                                                                                                  

24

---

|        |                                                                                             
|------- | --------------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
      FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, statements contained
herein include forward-looking statements within the meaning of such term in
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. These risks and uncertainties include, but are not
limited to, the factors described in the section captioned Risk Factors in our
Current Report on Form 8-K, filed with the SEC on May 10, 2010. In some cases,
you can identify forward-looking statements by terms such as anticipate,
believe, could, estimate, expect, intend, may, plan, potential,
predict, project, should, will, would and similar expressions intended
to identify forward-looking statements. Forward-looking statements reflect our
current views with respect to future events and are based on assumptions and
subject to risks and uncertainties. Given these uncertainties, you should not
place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and
assumptions only as of the date hereof. Except as required by law, we assume no
obligation to update any forward-looking statements publicly, or to update the
reasons actual results could differ materially from those anticipated in any
forward-looking statements, even if new information becomes available in the
future.

Use of Terms

Except as otherwise indicated by the context and for the
purposes of this report only, references in this report to:

- we, us, our, our Company, or the Company are to the combined
  business of TEC Technology, Inc. (formerly Highland Ridge, Inc.), a Delaware
  corporation, and its consolidated subsidiaries  TEC, TEC Tower, Shuncheng and
  ZTEC;
- TEC are to our subsidiary TEC Technology Limited, a Hong Kong limited
  company;
- TEC Tower are to our subsidiary Anhui TEC Tower Co., Ltd., a PRC limited
  company;
- Shuncheng are to our subsidiary Shuncheng Taida Technology Co., Ltd., a
  PRC limited company;
- ZTEC are to our subsidiary Zhejiang TEC Tower Co., Ltd., a PRC limited
  company;
- Hong Kong are to the Hong Kong Special Administrative Region of the
  Peoples Republic of China;
- PRC, China, and Chinese, are to the Peoples Republic of China;
- Renminbi and RMB are to the legal currency of China;
- U.S. dollars, dollars and $ are to the legal currency of the United
  States;
- SEC are to the Securities and Exchange Commission;
- Securities Act are to the Securities Act of 1933, as amended; and
- Exchange Act are to the Securities Exchange Act of 1934, as amended.

Overview of our Business

Through our indirect Chinese subsidiary, TEC Tower, we are
primarily engaged in the design, production and sale of transmission towers and
related products used in high voltage electric power transmission and wireless
communications. We sell our tower products to prime contractors on large
transmission projects for electric utility companies or telecommunications
service providers, who are developing and constructing projects for end
customers. Our electric transmission towers currently support 35kv, 110kv,
220kv, and 500kv transmission lines and we plan to build towers that support
Ultra High Voltage (UHV) tower lines of 750+kv DC or 1000+kv AC transmission
lines. Our wireless communication towers include single-tube towers, 4-strut
towers and roof top towers for the 2G, 3G, and microwave market. We plan to
expand our business in the near future to enter the communication base station
system integration market and to offer tower installation and maintenance
services. Our towers are primarily made of steel, but some contain aluminum or
other alloy materials.

25

---

Our revenues currently are, and historically have been,
generated from the sale of our tower products. In the future, we expect to offer
installation and maintenance services that we believe will generate an
additional revenue stream, however, to date we have generated no material
revenues from such services.

Our headquarters are located in Anhui Province in southeastern
China and our international sales network is operated from our branch office in
the Shenzhen Special Economic Zone.

Overview of Quarterly Results

The following summarizes certain key financial information for
the third quarter.

- Revenue: Revenue was $7.29 million for the three months
  ended September 30, 2010, an increase of $0.55 million, or 8.1%, from $6.74
  million for the same period last year.
- Gross Profit and Margin: Gross
  profit was $1.93 million for the three months ended September 30, 2010, a
  decrease of $0.15 million, or 7.3%, from $2.08 million for the same period
  last year. Gross margin was 26.5% for the three months ended September 30,
  2010 as compared to 30.9% for the same period last year, a 4.4% drop.
- Net Income:Net income was $0.86 million for the three
  months ended September 30, 2010, a decrease of $0.43 million, or approximately
  33.7%, from $1.29 million for the same period of last year.
- Fully diluted net income per share: Fully diluted net income
  per share for the three months ended September 30, 2010 was approximately
  $0.03, based on 25,298,383 weighted average number of common shares
  outstanding, as compared to approximately $0.07 for the same period last year,
  based on 19,194,421 weighted average number of common shares outstanding.

Results of Operations

Comparison of Three Months Ended September 30, 2010 and
September 30, 2009

The following table shows key components of our results of
operations during the three months ended September 30, 2010 and 2009, in both
dollars and as a percentage of our total sales.

|                                             |   | Three Months Ended             |   |  | Three Months Ended             |  
|-------------------------------------------- | - | ------------------------------ | - |  | ------------------------------ | -
|                                             |   | September 30, 2010 (unaudited) |   |  | September 30, 2009 (unaudited) |  
|                                             |   | Dollars                        |   |  | Percent of                     |  
|                                             |   | (in millions)                  |   |  | Revenues                       |  
|                                             |   |                                |   |  |                                |  
|Revenues                                     | $ | 7.29                           |   |  | 100.0%                         |  
|Cost of goods sold                           |   | 5.36                           |   |  | 73.5%                          |  
|Gross profit                                 |   | 1.93                           |   |  | 26.5%                          |  
|Selling and marketing expenses               |   | (0.34                          | ) |  | (4.6%                          | )
|General and administrative expenses          |   | (0.29                          | ) |  | (4.0%                          | )
|Net income from operations                   |   | 1.30                           |   |  | 17.8%                          |  
|Other income (expenses)                      |   |                                |   |  |                                |  
|Government grant                             |   | 0.01                           |   |  | 0.1%                           |  
|Other income                                 |   | 0.00                           |   |  | 0.0%                           |  
|Interest expense                             |   | (0.30                          | ) |  | (4.1%                          | )
|Net other income (expenses)                  |   | (0.29                          | ) |  | (4.0%                          | )
|Net income before provision for income taxes |   | 1.01                           |   |  | 13.9%                          |  
|Provision for income taxes                   |   | (0.15                          | ) |  | (2.1%                          | )
|Net income                                   |   | 0.86                           |   |  | 11.8%                          |  
|Foreign currency translation adjustment      |   | 0.01                           |   |  | 0.2%                           |  

|Comprehensive income | $ | 0.87 |  |  | 12.0% |  | $ | 1.25 |  |  | 18.6% | 
|-------------------- | - | ---- |  |  | ----- |  | - | ---- |  |  | ----- | 

26

---

Revenues. Our revenues are mainly generated from
sales of our tower products.. Our revenues increased $0.55 million, or 8.1%, to
$7.29 million for the three months ended September 30, 2010 from $6.74 million
during the same period in 2009. For the three month period ended September 30,
2010, 68% of revenue came from sales to customers in the energy industry, and
32% from sales to communications industry customers. The year-over-year increase
in revenue resulted mainly from an increase by 498% in sales revenue generated
by sales of energy
transmission towers compared to the same period in 2009, which offset a decrease
of 61% in sales revenue generated by sales of communications towers as well as a
modest decrease in our per unit pricing.

Cost of goods sold. Our cost of goods sold
includes the direct costs of our raw materials, primarily steel, as well as the
cost of labor and overhead. Our cost of goods sold increased $0.70 million, or
15.0%, to $5.36 million in the three months ended September 30, 2010, from $4.66
million during the same period in 2009. The dollar increase resulted from higher
raw material costs and increased sales volume. As a percentage of revenues, our cost of
goods sold increased approximately 4.4% to 73.5% for the three months ended
September 30, 2010 from 69.1% during the same period in 2009. Our  raw material costs increased during the period outpacing the pricing increases on tower sales.
Since the price of tower products is based on the cost-plus structure, we expect
that the increase in the cost of raw materials will be passed onto customers in
the future.

Gross profit. Our gross profit is equal to the
difference between our revenue and our cost of goods sold. Our gross profit
decreased $0.15 million, or 7.3%, to $1.93 million in the three months ended
September 30, 2010, from $2.08 million during the same period in 2009. Gross
profit as a percentage of revenue was 26.5% and 30.9% for three months ended
September 30, 2010 and 2009, respectively. Gross profit decreased mainly due to
increased cost of goods sold and a decrease in per unit price of our tower
products from the same period last year.

Selling and marketing expenses. Our selling and
marketing expenses consist primarily of compensation and benefits to our sales
and marketing staff, sales commission, cost of advertising, promotion, business
travel, after-sale support, transportation costs and other sales related costs.
In the three months ended September 30, 2010, our selling and marketing expenses
rose to $0.34 million from $0.03 million during the same period in 2009. The
increase in costs was largely attributable to compensation and related start up
costs associated with the establishment and expansion of our sales team in
Shenzhen targeting international emerging markets.

General and administrative expenses. General and
administrative expenses consist primarily of compensation and benefits to our
general management, finance and administrative staff, professional advisor fees,
bad debts reserve and other expenses incurred in connection with general
operations. In the three months ended September 30, 2010, our general and
administration expenses rose to $0.29 million, or 30.7%, from $0.22 million
during the same period in 2009. The increase in costs was attributable to
increased professional fees associated with our public reporting company
status.

Interest expense.Interest expense
increased $0.16 million, to $0.30 million, or 119%, for the three months ended
September 30, 2010, from $0.14 million during the same period in 2009, mainly
because our outstanding borrowings in third quarter of 2010 were higher than in
the same period of 2009. In addition, interest expense during the third quarter
of 2010  also included the costs of loan guarantees given by us for the benefit
of third parties.

Income before Income Taxes. Our income before
income taxes decreased by $0.74 million, or 42.1%, to $1.01 million in the three
months ended September 30, 2010, from $1.75 million during the same period in
2009.

Income Taxes. Our income tax provisions decreased
by $0.30 million, or 66.4%, to $0.15 million in the three months ended September
30, 2010, from $0.45 million during the same period in 2009. Since January 2010,
TEC has qualified as a government recognized high-tech enterprise and has since
been enjoying a tax rate reduction from 25% to 15%.

Net Income. In the three months ended September
30, 2010, our net income was $0.86 million, a decrease of $0.43 million, or
33.7%, from $1.29 million during the same period in 2009. This decrease was
primarily
attributable to a combination of higher  cost of goods sold  and increased expenses from selling and marketing to
international emerging markets.

27

---

Comparison of Nine Months Ended September 30, 2010 and
September 30, 2009

The following table shows key components of our results of
operations during the nine months ended September 30, 2010 and 2009, in both
dollars and as a percentage of our total sales.

|                                             |   | Nine Months Ended                  |   |  | Nine Months Ended              |  
|-------------------------------------------- | - | ---------------------------------- | - |  | ------------------------------ | -
|                                             |   | September 30, 2010
    (unaudited) |   |  | September 30, 2009 (unaudited) |  
|                                             |   | Dollars                            |   |  | Percent of                     |  
|                                             |   | (in millions)                      |   |  | Revenues                       |  
|                                             |   |                                    |   |  |                                |  
|Revenues                                     | $ | 21.89                              |   |  | 100.0%                         |  
|Cost of goods sold                           |   | 15.31                              |   |  | 69.9%                          |  
|Gross profit                                 |   | 6.58                               |   |  | 30.1%                          |  
|Selling and marketing expenses               |   | (1.13                              | ) |  | (5.1%                          | )
|General and administrative expenses          |   | (0.94                              | ) |  | (4.3%                          | )
|Net income from operations                   |   | 4.51                               |   |  | 20.6%                          |  
|Other income (expenses)                      |   |                                    |   |  |                                |  
|Government grant                             |   | 0.19                               |   |  | 0.9%                           |  
|Other income                                 |   | 0.01                               |   |  | 0.1%                           |  
|Interest expense                             |   | (0.98                              | ) |  | (4.5%                          | )
|Net other income (expenses)                  |   | (0.78                              | ) |  | (3.5%                          | )
|Net income before provision for income taxes |   | 3.74                               |   |  | 17.1%                          |  
|Provision for income taxes                   |   | (0.54                              | ) |  | (2.5%                          | )
|Net income                                   |   | 3.20                               |   |  | 14.6%                          |  
|Foreign currency translation adjustment      |   | (0.18                              | ) |  | (0.8%                          | )
|Comprehensive income                         | $ | 3.02                               |   |  | 13.8%                          |  

Revenues. Our revenues increased $8.75 million,
or 66.6%, to $21.89 million for the nine months ended September 30, 2010 from
$13.14 million during the same period in 2009. Our revenue increased primarily
because our sales volume increased. Approximately 56% of our revenue for the
nine month period ended September 30, 2010 was from customers in the power and
energy industries, with 44% generated from sales to customers in the
communications industry. Revenue from power and energy industry customers
increased by 133% from the same period in 2009, communications towers by 21%
largely due to increased sales volume during the 2010 period.

Cost of goods sold. Our cost of goods sold
increased $6.44 million, or 72.7%, to $15.31 million in the nine months ended
September 30, 2010, from $8.87 million during the same period in 2009. As a
percentage of revenue, our cost of goods sold increased from 67.5% in the nine
months ended September 30, 2009, to 69.9% during the same period in 2010. The
increase in cost of goods sold relative to revenue was mainly due to a downward
shift in the per unit price of  products sold to customers in the PRC power
industry in the second quarter, and the inclusion of labor and overhead costs
for undelivered orders at the end of the third quarter.

Gross profit. Our gross profit increased $2.30
million, or 53.8%, to $6.58 million in the nine months ended September 30, 2010,
from $4.28 million during the same period in 2009. Gross profit as a percentage
of revenue was 30.1% and 32.5% for nine months ended September 30, 2010 and
2009, respectively. The increase in the gross profit resulted from increased
sales to both PRC and international customers. The 2.4% reduction in gross
margin resulted from a decrease in the per unit pricing of our products in
domestic market during the second quarter and an increase in raw material costs
and labor and overhead costs for work-in-progress orders in the third quarter of
2010.

Selling and marketing expenses. In the nine
months ended September 30, 2010, our selling and marketing expenses rose to
$1.13 million, or 794%, from $0.13 million during the same period in 2009. The
increase in costs was largely attributable to start up costs and compensation
associated with the establishment and expansion of our sales team in
Shenzhen.

General and administrative expenses. In the nine
months ended September 30, 2010, our general and administration expenses rose to
$0.94 million, or 61.4%, from $0.58 million during the same period in 2009. The
increase in costs was attributable to business expansion and increased
professional fees associated with our public reporting company status during the
2010 period.

28

---

Interest expense.Interest expense
increased $0.59 million, to $0.98 million, or 149.4%, in the nine months ended
September 30, 2010, from $0.39 million during the same period in 2009, due to
higher short-term loan balances for the nine months ended September 30, 2010 as
compared to the same period in 2009.

Income before Income Taxes. Our income before
income taxes increased by $0.41 million, or 12.4%, to $3.74 million in the nine
months ended September 30, 2010, from $3.33 million during the same period in
2009.

Income Taxes. Our income tax provisions decreased
by $0.31 million, or 36.5%, to $0.54 million in the nine months ended September
30, 2010, from $0.85 million during the same period in 2009. Since January 2010,
TEC has qualified as a government recognized high-tech enterprise and has since
been enjoying a tax rate reduction from 25% to 15%.

Net Income. As a result of the factors described
above, we generated a net income of $3.20 million in the nine months ended
September 30, 2010, an increase of $0.72
million, or 29.1%, from $2.48 during the same period in 2009. This increase was
primarily attributable to the reasons described above.

Liquidity and Capital Resources

As of September 30, 2010, we had cash and cash equivalents of
approximately $0.23 million, primarily consisting of cash on hand and demand
deposits. The following table provides a summary of our net cash flows from
operating, investing, and financing activities.

Cash Flow(all amounts in millions U.S.
dollars)

|                                                           |   | Nine Months Ended September 30, |  
|---------------------------------------------------------- | - | ------------------------------- | -
|                                                           |   | 2010                            |  
|                                                           |   |                                 |  
|Net cash provided by (used in) operating
      activities  | $ | 1.70                            |  
|Net cash  used in investing activities                     |   | (0.66                           | )
|Net cash provided by (used in) financing
      activities  |   | (1.06                           | )
|Effects of exchange rate change in cash                    |   | 0.085                           |  
|Net increase (decrease) in cash and cash
      equivalents |   | 0.068                           |  
|Cash and cash equivalents at beginning of the period       |   | 0.16                            |  
|Cash and cash equivalent at end of the
      period        | $ | 0.23                            |  

Operating Activities

Net cash provided by operating activities was $1.70 million for
the nine months ended September 30, 2010, as compared to $4.53 million net cash
used in operating activities for the same period in 2009.

The change in net cash from operating activities from period to
period was primarily attributable to a $3.2 million decrease in deposits and
prepaid expenses, a $1.7 million decrease in other receivables and a $20 million
increase in other payables and accrued expenses for the nine month period ended
September 30, 2010 as compared to the same period in 2009.

Investing Activities

Net cash used in investing activities for the nine months ended
September 30, 2010 was $0.66 million, as compared to $2.03 million net cash used
in investing activities during the same period in 2009. The change in net cash
used in investing activities was mainly attributable to our purchase of $1.64
million in land use rights which occurred in 2009. Our investment in equipment
increased from $0.38 million to $0.62 million for the nine month period ended
September 30, 2010 to further augment our production
capabilities. In addition, we made approximately $0.037 million in capital
improvement to our Jingde plant infrastructure in the third quarter of 2010.

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Financing Activities

Net cash used in financing activities for the nine months ended
September 30, 2010 was $1.06 million, as compared to $6.13 million net cash
provided by financing activities during the same period in 2009. During the
first three quarters of 2009, we borrowed an additional $6.0 million in short
term loans, while during the first three quarters of 2010, our short-term debt
was temporally reduced by $1.12 million, mainly in the third quarter.

As of September 30, 2010, we did not hold any long-term loans.
Our short-term bank loans, totaling $11.6 million, are as follows:

|                                                      |   | Amount        |  |  | Interest |  |  |                   |  |  |           | 
|----------------------------------------------------- | - | ------------- |  |  | -------- |  |  | ----------------- |  |  | --------- | 
|Bank                                                  |   | (in millions) |  |  | Rate     |  |  | Maturity Date     |  |  | Duration  | 
|                                                      |   |               |  |  |          |  |  |                   |  |  |           | 
|China Everbright Bank, Hefei Branch                   | $ | 4.5           |  |  | 5.31%    |  |  | November 25, 2010 |  |  | 12 months | 
|Industrial and Commercial Bank, Longshou Branch       |   | 1.2           |  |  | 4.86%    |  |  | December 2, 2010  |  |  | 6 months  | 
|Industrial and Commercial Bank, Longshou
      Branch |   | 0.3           |  |  | 5.31%    |  |  | December 9, 2010  |  |  | 12 months | 
|Industrial and Commercial Bank, Longshou Branch       |   | 0.3           |  |  | 4.86%    |  |  | January 22, 2011  |  |  | 6 months  | 
|Industrial and Commercial Bank, Longshou
      Branch |   | 1.1           |  |  | 4.86%    |  |  | March 16, 2011    |  |  | 6 months  | 
|Industrial and Commercial Bank, Longshou Branch       |   | 0.3           |  |  | 5.31%    |  |  | March 21, 2011    |  |  | 12 months | 
|Industrial and Commercial Bank, Longshou
      Branch |   | 0.9           |  |  | 5.31%    |  |  | April 1, 2011     |  |  | 12 months | 
|Huishang Bank, Xuancheng Branch                       |   | 3.0           |  |  | 5.84%    |  |  | February 10, 2011 |  |  | 12 months | 
|Total                                                 | $ | 11.6          |  |  |          |  |  |                   |  |  |           | 

We have a RMB 10,000,000 (approximately $1,464,129) revolving
line of credit with the Hefei Sipailou Branch of China Merchants Bank, pursuant
to a credit agreement, dated September 27, 2009. This revolving line of credit
is guaranteed by Anhui Sea-Converge Guarantee Co., Ltd., an unaffiliated
company. The crediting agreement will terminate on September 27, 2010.

We also maintain a RMB 6,300,000 revolving line of credit with
the Longshou Sub-branch of Xuancheng Branch of Industrial and Commercial Bank of
China, pursuant to a Collateral Agreement between TEC Tower and the bank. The
line of credit is secured by TEC Towers land use rights. To date, we have only
utilized RMB 2,000,000 (approximately $292,826) of the line of credit. The line
of credit will terminate on October 7, 2011.

Capital Expenditures

Our capital expenditures for fixed assets for the nine months
ended September 30, 2010 and 2009 were $0.66 million and $2.03 million,
respectively. Our capital expenditures during the third quarter of 2010
consisted solely of capital expenditures relating to the construction of
additional production lines, as compared the second quarter of 2009, when we
purchased and acquired land use right.

To date, we have financed our operations primarily through cash
flows from operations, augmented by short-term bank loans and equity
contributions by our stockholders. We believe that our cash on hand and cash
flow from operations will meet a portion of our present cash needs and we will
require additional cash resources, including equity investment, to meet our
expected capital expenditures and working capital requirements for the next 12
months. We may, however, in the future, require additional cash resources due to
changed business conditions, implementation of our strategy expand our marketing
efforts and increase brand awareness, or acquisitions we may decide to pursue.
If our own financial resources are insufficient to satisfy our capital
requirements, we may seek to sell additional equity or debt securities or obtain
additional credit facilities. The sale of additional equity securities could
result in dilution to our stockholders. The incurrence of indebtedness would
result in increased debt service obligations and could require us to agree to
operating and financial covenants that would restrict our operations. Financing
may not be available in amounts or on terms acceptable to us, if at all. Any
failure by us to raise additional funds on terms favorable to us, or at all,
could limit our ability to expand our business operations and could harm our
overall business prospects.

Obligations under Material Contracts

In addition to the loan obligations disclosed above, we
entered in to a financial advisory agreement, dated May 4, 2010, with JW Junwei
Financial Group, or Junwei. Pursuant to the agreement, we are obligated to
deliver 500,000 shares of our common stock which is for a five-year term, Junwei is obligated to provide the Company with financial advisory
services over the term of the agreement and we are obligated to issue an
aggregate of 500,000 shares of our common stock to Junwei in five equal 100,000
share portions for no cash consideration, commencing on December 31, 2010 and ending on December 31, 2014. 
The agreement contains an exclusivity provision whereby we have agreed to engage
Junwei as our exclusive financial advisor for two years and also contains a $1 million liquidated damages
provision
for breach of such exclusivity.

CCG Investor Relations Partners LLC, CCG, our
investor relations firm, is entitled to purchase up to 80,000 shares of
fully-paid and non-assessable shares of our common stock, at a price
of $2.00 per share, pursuant to the terms and conditions of a letter agreement,
dated June 20, 2010, between the Company and CCG. CCG's right to exercise its
warrant will vest in four equal portions, with the first portion vesting on June
20, 2010, and the remaining portions vesting on September 30, 2010, December 31,
2010 and March 31, 2011, respectively. The warrant is exercisable on or before
June 16, 2015.

30

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Inflation

Inflation and changing prices have not had a material effect on
our business, and we do not expect that inflation or changing prices will
materially affect our business in the foreseeable future. However, our
management will closely monitor price changes in the Chinese economy and our
industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, sales or expenses, results of
operations, liquidity or capital expenditures, or capital resources that are
material to an investment in our securities.

Seasonality

Our operating results and operating cash flows historically
have been subject to seasonal variations. Our revenues usually increase over
each quarter of the calendar year with the first quarter usually the slowest
quarter because fewer projects are undertaken during and around the Chinese
spring festival.

Critical Accounting Policies

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires our
management to make assumptions, estimates, and judgments that affect the amounts
reported, including the notes thereto, and related disclosures of commitments
and contingencies, if any. We have identified certain accounting policies that
are significant to the preparation of our financial statements. These accounting
policies are important for an understanding of our financial condition and
results of operations. Critical accounting policies are those that are most
important to the portrayal of our financial condition and results of operations
and require managements difficult, subjective, or complex judgment, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain and may change in subsequent periods. Certain accounting
estimates are particularly sensitive because of their significance to financial
statements and because of the possibility that future events affecting the
estimate may differ significantly from managements current judgments. We
believe the following critical accounting policies involve the most significant
estimates and judgments used in the preparation of our financial statements:

Revenue recognition.Our revenue recognition
policies are in compliance with ASC 605. Sales revenue is recognized when all of
the following have occurred: (i) persuasive evidence of an arrangement exists,
(ii) delivery has occurred or services have been rendered, (iii) the price is
fixed or determinable, and (iv) the ability to collect is reasonably assured.
These criteria are generally satisfied at the time of shipment when risk of loss
and title passes to the customer. We recognize revenue when the goods are
delivered and title has passed. Sales revenue represents the invoiced value of
goods, net of a value-added tax, or VAT. All of our products that are sold in
the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross
sales price or at a rate approved by the Chinese local government. This VAT may
be offset by the VAT paid by the Company on raw materials and other materials
included in the cost of producing their finished product.

Non-Controlling Interest in Consolidated Financial
Statements.We adopted the accounting pronouncement on non-controlling
interests in consolidated financial statements, which establishes accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. This guidance is primarily contained in ASC
Topic Consolidation. It clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated financial statements.
The adoption of this standard has not had material impact on our consolidated
financial statements.

Allowance for doubtful accounts.We reduce gross
trade accounts receivable by an allowance for doubtful accounts. The allowance
for doubtful accounts is our best estimate of the amount of probable credit
losses in our existing accounts receivable. We review our allowance for doubtful
accounts on a regular basis and all past due balances are reviewed individually
for collectability. Account balances are charged off against the allowance after
all means of collection have been exhausted and the potential for recovery is
considered remote.

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Impairment of long-lived assets.We review the
carrying amount of its long-lived assets, including intangibles, for impairment,
each reporting period. An asset is considered impaired when estimated future
cash flows are less than the carrying amount of the asset. In the event the
carrying amount of such asset is considered not recoverable, the asset is
adjusted to its fair value. Fair value is generally determined based on
discounted future cash flow.

Property, plant and equipment, net.Property and
equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses. Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets. Any gain or loss arising on the sale or
disposal of the asset is included in the income statement in the period the item
is sold or otherwise disposed. Maintenance and repairs of property and equipment
are charged to operations when incurred. Expenditures for maintenance and
repairs are charged to expense as incurred, whereas major betterments are
capitalized as additions to property and equipment. We review our property and
equipment whenever events or changes in circumstances indicate that the carrying
value of certain assets might not be recoverable. In these instances, we
recognize an impairment loss when it is probable that the estimated cash flows
are less than the carrying value of the asset. To date, no such impairment
losses have been recorded.

Research and development costs.Research and
development costs include costs incurred to develop new products and are charged
to operations when incurred. The costs for development of new products and
substantial enhancements to existing products are expensed as incurred until
technological feasibility has been established, at which time any additional
costs would be capitalized.

Foreign currency translation.Our reporting
currency is U.S. dollars; however our functional currency is RMB. For those
entities whose functional currency is other than the U.S. dollars, all assets
and liabilities are translated into U.S. dollars at the exchange rate on the
balance sheet date; shareholders equity is translated at historical rates and
items in the statements of income and of cash flows are translated at the
average rate for the period. Because cash flows are translated based on the
average translation rate, amounts related to assets and liabilities reported in
the statement of cash flows will not necessarily agree with changes in the
corresponding balances in the balance sheet. Translation adjustments resulting
from this process are included in accumulated other comprehensive income in the
statement of shareholders equity. Transaction gains and losses that arise from
exchange rate fluctuations on transactions denominated in a currency other than
the functional currency are included in the results of operations as
incurred.

Recent Accounting Pronouncements

In January 2010, FASB issued ASU No. 2010-01, Accounting for Distributions to
Shareholders with Components of Stock and Cash. The amendments in this Update
clarify that the stock portion of a distribution to shareholders that allows
them to elect to receive cash or stock with a potential limitation on the total
amount of cash that all shareholders can elect to receive in the aggregate is
considered a share issuance that is reflected in EPS prospectively and is not a
stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings
Per Share). The amendments in this update are effective for interim and annual
periods ending on or after December 15, 2009, and should be applied on a
retrospective basis. The Company adopted this standard and has determined the
standard does not have material effect on our consolidated financial statements.

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In January 2010, FASB issued ASU No. 2010-02 regarding accounting and reporting for decreases in ownership of a subsidiary. Under this guidance, an entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling
financial interest in the subsidiary. Upon deconsolidation of a subsidiary, and entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. In contrast, an entity is required to account
for a decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. This ASU clarifies the scope of the decrease in ownership provisions, and expands the disclosures about
the deconsolidation of a subsidiary or de-recognition of a group of assets. This ASU is effective for beginning in the first interim or annual reporting period ending on or after December 31, 2009. The Company does not expect the adoption of this
ASU to have a material impact on its consolidated financial statements In January 2010, FASB issued ASU No. 2010-02 – Accounting and Reporting for Decreases in Ownership of a Subsidiary – a Scope Clarification. The amendments in this
Update affect accounting and reporting by an entity that experiences a decrease in ownership in a subsidiary that is a business or nonprofit activity. The amendments also affect accounting and reporting by an entity that exchanges a group of assets
that constitutes a business or nonprofit activity for an equity interest in another entity. The amendments in this update are effective beginning in the period that an entity adopts SFAS No. 160, “Non-controlling Interests in Consolidated
Financial Statements – An Amendment of ARB No. 51.” If an entity has previously adopted SFAS No. 160 as of the date the amendments in this update are included in the Accounting Standards Codification, the amendments in this update are
effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. The amendments in this update should be applied retrospectively to the first period that an entity adopted SFAS No. 160. The Company adopted
this standard and has determined the standard does not have material effect on
our consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-06 – Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A
reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. 2) Activity in Level 3 fair value measurements. In the
reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net
number). This update provides amendments to Subtopic 820-10 that clarify existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A
class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities. 2) Disclosures about inputs and
valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value
measurements that fall in either Level 2 or Level 3.The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company
is currently evaluating the impact of this ASU, however, the Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

In February 2010, the FASB issued Accounting Standards Update 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements,” or ASU 2010-09. ASU 2010-09 primarily rescinds the requirement that,
for listed companies, financial statements clearly disclose the date through which subsequent events have been evaluated. Subsequent events must still be evaluated through the date of financial statement issuance; however, the disclosure requirement
has been removed to avoid conflicts with other SEC guidelines. ASU 2010-09 was effective immediately upon issuance and was adopted in February 2010.

In April 2010, the FASB issued Accounting Standards Update 2010-13, “Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades, or ASU 2010-13. ASU
2010-13 provides amendments to Topic 718 to clarify that an employee share-based
payment award with an exercise price denominated in currency of a market in
which a substantial porting of the entitys equity securities trades should not
be considered to contain a condition that is not a market, performance, or
service condition. Therefore, an entity would not classify such an award as a
liability if it otherwise qualifies as equity. The amendments in this Update are
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2010. The Company does not expect the
adoption of ASU 2010-17 to have a significant impact on its consolidated
financial statements.

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In April 2010, the FASB issued Accounting Standard Update
2010-17, Revenue RecognitionMilestone Method (Topic 605): Milestone Method of
Revenue Recognition or ASU 2010-17 . This Update provides guidance on the
recognition of revenue under the milestone method, which allows a vendor to
adopt an accounting policy to recognize all of the arrangement consideration
that is contingent on the achievement of a substantive milestone (milestone
consideration) in the period the milestone is achieved. The pronouncement is
effective on a prospective basis for milestones achieved in fiscal years and
interim periods within those years, beginning on or after June 15, 2010. The
adoption of ASU 2010-17 does not have any significant impacts on the
consolidated financial statements.

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES
      ABOUT MARKET RISK.
|------- | -----------------------------------------------------------------

Not Applicable.

|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Exchange Act) that are designed to ensure that
information that would be required to be disclosed in Exchange Act reports is
recorded, processed, summarized and reported within the time period specified in
the SECs rules and forms, and that such information is accumulated and
communicated to our management, including to our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.

As required by Rule 13a-15 under the Exchange Act, our
management, including our Chief Executive Officer, Mr. Chun Lu, and Chief
Financial Officer, Mr. Yuhua Yang, evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of September 20, 2010.
Based on our assessment, Messrs. Lu and Yang determined that, as of September
20, 2010, and as of the date that the evaluation of the effectiveness of our
disclosure controls and procedures was completed, our disclosure controls and
procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Control over Financial Reporting

During the quarter ended September 20, 2010, there were no
changes in our internal control over financial reporting identified in
connection with the evaluation performed during the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1.        LEGAL
PROCEEDINGS

From time to time, we may become involved in various lawsuits
and legal proceedings, which arise, in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these,
or other matters, may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse affect on our business, financial condition or operating
results.

ITEM 1A.      RISK FACTORS.

Not Applicable.

ITEM 2.       
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.        DEFAULTS
UPON SENIOR SECURITIES.

None.

ITEM 4.        (REMOVED
AND RESERVED).

ITEM 5.        OTHER
INFORMATION.

We have no information to disclose that was required to be in a
report on Form 8-K during the period covered by this report, but was not
reported. There have been no material changes to the procedures by which
security holders may recommend nominees to our board of directors.

ITEM 6.        EXHIBITS.

The following exhibits are filed as part of this report:

|Exhibit No. |  | Description                                                                                                                                                                  
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                                              
|31.1        |  | Certifications of Principal
      Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.                                                   
|31.2        |  | Certifications of Principal Financial Officer
      filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                         
|32.1        |  | Certifications of Principal
      Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2        |  | Certifications of Principal Financial Officer
      furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|Date: November 15, 2010 | TEC TECHNOLOGY, INC.
|----------------------- | --------------------

By: /s/ Chun
Lu     Chun Lu, Chief Executive Officer
(Principal Executive Officer)

By: /s/ Yuhua
Yang     Yuhua Yang, Chief Financial Officer
(Principal Financial Officer and PrincipalAccounting Officer)

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