UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-KSB



ANNUAL REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003



0-13628

(Commission file number)



ALPHA SPACECOM, INC.

Exact name of small business issuer as specified in its charter)





|COLORADO(State or other jurisdiction of
incorporation or organization) | 13-3183646(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------- | ----------------------------------------------



Room 1305, 13/F Progress Commercial

Building, 7-17 Irving Street, Causeway Bay,

Hong Kong

(Address of principal executive offices) (Zip Code)



(852) 2972-2772

(Issuer's telephone number)



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



SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:



TITLE OF EACH CLASS

COMMON STOCK, $0.001 PAR VALUE

---

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that we was required to file such reports), and (2) has been subject to such filing requirements for past 90 days.



|Yes
X | No
|----- | --

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-SKB.  [X]

State issuers revenue for its most recent fiscal year  $

0

.

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity as sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days (See definition of affiliate in Rule 12b-2 of the Exchange Act.). $3,189,600.

Note.If determining whether a person is an affiliate will involve an unreasonable effort and expense, the issuer may calculate the aggregate market value of the common equity held by non-affiliates on the basis of reasonable assumptions, if the assumptions are stated.



ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PAST FIVE YEARS

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

|Yes | No
|--- | --



APPLICABLE ONLY TO CORPORATE REGISTRANTS

State the number of share outstanding of each of the issuers classes of common equity, as of the latest practicable date.   As of May 17, 2004 there were 119,286,000 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):

|Yes | No
X
|--- | ----



---

ALPHA SPACECOM, INC.

FORM 10-KSB

INDEX



PART I

Item 1.

DESCRIPTION OF BUSINESS

Item 2

PROPERTIES

Item 3.

LEGAL PROCEEDINGS

Item 4.

SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS

PART II

Item 5.

MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Item 6.

MANAGEMENTS DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS

Item 7.

FINANCIAL STATEMENTS

PART III

Item 8.

CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Item 8A

CONTROLS AND PROCEDURES

Item 9.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Item 10.

EXECUTIVE COMPENSATION

Item 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK MATTERS

Item 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item 13.

EXHIBITS, LIST AND REPORTS ON FORM 8-K

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES



---

PART I

ITEM 1.

DESCRIPTION OF BUSINESS.

This Annual Report on Form 10-KSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.  These statements relate to future events or the Companys future financial performance.  The Company has attempted to identify forward-looking statements by terminology including anticipates, believes, expects, can, continue, could, estimates, expects, intends, may, plans, potential, predict, should or will or the negative of these terms or other comparable terminology.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements.  The Company expectations are as of the date this Form 10-KSB is filed, and the Company does not intend to update any of the forward-looking statements after the date this Annual Report on Form 10-KSB is filed to confirm these statements to actual results, unless required by law.



CORPORATE HISTORY

Alpha Spacecom, Inc. formerly, Tridon Enterprises, Inc. (the Company or Alpha) was  incorporated in the State of Colorado in 1986 under the name Hammer Computer Systems, Inc., a Colorado corporation.  Prior to the acquisition described below we were seeking strategic partnerships with companies in the satellite business.  However, due to the difficulty in raising working capital to execute our business plans, we ceased operations in April 2001.

On December 10, 2001, pursuant to a share exchange agreement, we acquired (the Acquisition) from Alpha Sky Investment Limited (ASI) all of the equity interests in both Accuhigh Investments Limited, a British Virgin Islands company, and Tidy Sum Investments Limited, a British Virgin Islands company, in exchange for 10,000,000 shares of our convertible preferred stock which shares of convertible preferred stock are convertible into 900,000,000 shares of our common stock.  At present, Accuhigh Investments Limited and Tidy Sum Investments Limited hold 100% equity interest in Alpha Spacecom Company Limited (ASC). For accounting purposes, this acquisition will be treated as a recapitalization of ASI with ASI as the acquirer.

On December 10, 2001, Xuedong Hu, Fung Sien and Wai Man Yu were appointed as members of the board of directors. Brian Brick resigned from the position of Chief Executive Officer. The directors then elected Xuedong Hu as the Chairman of the Board and Chief Executive Officer and appointed Mr. Brick as the Chief Operating Officer and member of board of directors.

On April 1, 2003, Wai Man Yu resigned from the Board and Jian Wang replaced the vacancy effective from May 26, 2003.





Overview



[facsimile of organization graphic]



___________________________



Alpha Spacecom Inc.

(incorporated in Colorado, US)

___________________________

100%

100%

______________________________

_________________________

Accuhigh Investments Limited

Tidy Sum Investment Limited

(incorporated in BVI)

(incorporated in BVI)

______________________________

_________________________

99%

1%

______________________________



Alpha Spacecom Company Limited

(incorporated in Hong Kong)

______________________________



______________________________



Beijing Representative Office

______________________________

Alpha directly holds 100% equity interest in Accuhigh Investments Limited and Tidy Sum Investments Limited.   On the other hands, Accuhigh Investments Limited and Tidy Sum Investments Limited hold 100% equity interest in Alpha Spacecom Company Limited.  Alpha Sky Investment Limited is not the intermediate holding company and should not be included in the organization chart.

Alpha is a development stage company and we have very limited operations.  Our objective is to develop a Ka band communication satellite system (Alphacom System) that will provide broadband telecommunications services to China and its neighboring Asia Pacific countries. If and when completed, the Alphacom System will provide a wide bandwidth, high data throughput, low cost, and high efficiency broadcast and communications SPPV platform.  We plan to achieve this objective by negotiating agreements with providers of satellites and through our in-house research and development.



Technology

The term "Ka-band" refers to the range of frequency at which a satellite communicates. There are three bands which are commonly used in geosynchronous satellite telecommunications: Ku-band, C-band, and Ka-band. FSS Ku-band covers the range between 12.25 and 12.75 GHz downlink and is typically used for television broadcast and telecommunications with a beam coverage of a subcontinent. The relatively high power of Ku-band satellite enables the receiver dish to be significantly smaller than the one required by C-band. In contrast, C-band satellites, which use the frequency range between 3.7 and 4.2 GHz downlink, are able to reach relatively larger coverage areas but require a receiver dish much larger in diameter.

Ka-band operates in the range of 20 to 30 GHz. It is used by broadband multimedia companies because it has sufficient bandwidth to support the demands of broadband multimedia applications. The wide frequency bandwidth allows data to be transmitted at a relatively higher data rate and allows for interactive broadband services. NASA's ACTS satellite system is capable of gigabit-per-second communication. According to the Vision group, the commercial use of these systems are capable of transmitting 1.5 Megabytes per second which is 150 times as fast as data can be transmitted over phone lines.

Ka-band, for example, can be used with any of the orbits. Ka-band is preferred because it offers 4-7 times the spectrum of other bands, thus allowing it to deliver higher bandwidth. The bandwidth is necessary due to the types of services that may run on the network. These services include:



·

Voice Telephony o Interactive Data

·

Videotelephony o Multimedia Business Access

·

Medical and Technical Imaging

·

CAD/CAM

·

TV and Audio Broadcast Transmission

·

Interactive TV and video on demand



Other possible services include:



·

Point-to-Point Broadcast Feeds

·

Satellite News Gathering

·

Aeronautical and Maritime Mobile Telecommunications

Market Overview

China has approximately 300 million television viewers.  Viewing habits and viewing interest vary from region to region in China as education levels, demographics, nationalities, culture, dialects, languages, and traditions vary in different parts of the country.  Such variation has led to a segmented market that the traditional methods of television broadcast fail to adequately address. An interactive and video on demand type system would address many of the needs of this segmented market.  A platform that can provide high bandwidth, high data rate, low cost, and interactivity is a necessity.  If and ever developed, the Alphacom System will provide a broadband Satellite-Pay-Per-View ("SPPV") platform to enable interactivity and video on demand.

We have been in discussions with Chinese broadcasting authorities for the past two years to develop a broadband SPPV platform.

With China's entry into the World Trade Organization, it is projected that China's media market will gradually be liberalized resulting in non-Chinese media companies being able to access the Chinese market.  These media companies require a low cost and high capacity platform to bring their television programs to the Chinese viewers.

Management believes that, once developed, the Alphacom System will address this growth need. The Alphacom System is not only limited to the SPPV platform. Management believes that, once developed, the Alphacom System will be able to satisfy this demand in a cost-effective way compared to the terrestrial counterpart. The system will serve to provide extension and backup to the terrestrial means -- fixed and mobile -- as well as the "last mile" connectivity, thanks to its unique capability of reach and the inherent advantage of availability.

Business Partners

Pursuant to the terms of a Memorandum of Understanding, Lockheed Martin Commercial Space Systems is working with ASC to develop a system design and commercial proposal to meet ASC's requirements for the Alphacom System. Under a turnkey contract currently in negotiation, Lockheed will provide design, supply, installation and integration of the ground network and satellite(s), including launch vehicles for implementation of the Alphacom System.





BUSINESS STRATEGY AND MARKET DEVELOPMENT

Our business strategy is to capitalize on the opportunities for growth in our core business through strategic alliances and developing the Ka band communication system.



On July 29, 2003, the China Film Group Corporation (CFG), one of the largest film companies in China, signed a Cooperation Agreement with ASC. Under the Agreement, ASC will form a Joint Venture (JV) with CFG that will:



a.

Reconstruct and upgrade movie theaters to digital projection format, and

b.

Implement a home pay-per-view system in cooperation with cable television operators.



Both digital cinemas and pay-per-view services will receive digitized content via satellite transmission.  The joint capabilities and resources of ASC and CFG will usher the entertainment and broadcasting business in China into a new era of advanced digital and satellite technology.



CFG is a state-owned company operating under the sponsorship of the China State Economic and Trade Commission and the State Administration of Radio, Film, and Television (SARFT) with the authorization from the China State Council.



CFG is a market leader in the China media business: film and TV drama creation and production, foreign film imports, domestic and foreign film distribution, joint film production with foreign entities, film advertisement, film development and copy production.  A vertically integrated media company, CFG has high quality film creation and production personnel as well as state-of-the-art filmmaking facilities.

The Demand Side

Chinas rapid transformation into a market economy and continuing GDP growth rate of 7.5-8% have set on course the creation of the largest national consumer market in the world.  The basic needs of food, clothing and shelter having been met, the demand for high-quality entertainment, media as well as cultural products and services is steadily escalating. The 300 million movie viewers of China still await the availability of a larger range of attractive offerings at the 100,000 cinemas China-wide.



The State has gradually liberalized regulations which had limited the production of media content that could effectively compile against imported media content; the State has increased the volume of imported content, including the number of foreign films to 25 per year, in accordance with WTO requirements.  At the same time, the State has sought effective measures against piracy, which has deterred the creation, distribution, and transfer of media content in China.  In this context, the Alpha-CFG joint venture for digital cinema and Satellite Pay-Per-View (SPPV) can serve as a catalyst for change that will transform Chinas entertainment broadcasting and distribution: state-of-the-art anti-piracy technology and a management system that is conductive to protection for intellectual property.



The Supply Side

The supply side of entertainment media shows an oligopoly structure as in other media markets in the world.  Controlled by the State and regulated by SARFT, a few large state-owned companies dominate media content production and broadcasting.  Among these, CFG is by far the largest vertically integrated filmmaker, distributor and retailer in China.  Provincial and municipal operators make up the second and third tiers in China media industries.  CFGs repertoir of entertainment content exceeds the perhaps better internationally known CCTV Group (China Central Television Group).  CFGs asset includes the followings:



·

10,000+ hours of film content (domestic and imports films).

·

Dominant position as importer and distributors of foreign and domestic films.

·

Retail cinema operation which comprises some 100,000+ cinemas China-wide.



The entertainment and broadcasting business in China, considered one of the strategic industries, requires foreign investors to conduct business with qualified China-based partners.  Where broadcasting is the core business, including digital cinemas, present regulations limit foreign ownership in any joint venture to 49% or less.  Obtaining a license for broadcasting has not been easy even for major multinationals such as CNN, Reuters, and the News Corp.  The opportunity to partner with CFG in a joint venture therefore represents an exceptional way to enter the broadcasting business in China.  The joint venture with CFG possesses the competitive advantages:



·

Early mover advantage: the JV will receive the first license of digital cinema granted in China.

·

Exclusive partnership with CFG provides assured access to the largest and most attractive content entertainment bank in China.

·

CFGs close ties with government assure best compliance with government regulations and also assure a position in the emerging oligopoly that will dominate the fast changing media industry in China.



Equity structure



The JV will be owned 51% by CFG and 49% by ASC.



Capital contribution



CFG is required to contribute a total value of RMB200 million as the capital (RMB140 million in the form of cash, 35 sets of installed digital projection equipments, and digital film management system).



ASC is required to contribute USD30 million ( about RMB250 million) in the form of cash.



Life of the JV



The Agreement will remain valid for thirty (30) years from the date of the formation of the JV.



Business objective



In the first phase, the JV is aimed at converting major cinemas with traditional projection to a digital projection mode.  Digitization will reduce the cost of operations, increase box office receipts by improving the audio and visual effects for attracting higher attendance rates and charging higher ticket prices, and address the piracy issues.  China has more than 100,000 cinemas nationwide.  More than 5,000 are classified as 3-stars or above.  The JV will first digitize 165 from the pool of 5,000 cinemas in the major cities in China.  By mid 2003, CFG has already modernized 35 cinemas in China, though full digital broadcasting via satellite awaits operation of the JV, based on the expertise from Alpha.



JVs business license and rights



The JV will have the following rights and licenses:



a.

The exclusive right for transmitting digitized movies distributed by CFG.

b.

The first license, in all China, for transmitting media programs through satellite grant by SARFT.

c.

The right to operate commercial advertisement at the beginning and break time of the digitized movies.

d.

The right to instruct the cinemas on the ticket price for all digitized movies.

e.

The right to operate value-added programs such as live performances and special events at the digital cinemas.

f.

The right to select cinemas for digitization.



SEASONALITY

Our business is not affected by seasonal fluctuations.



COMPETITION

The telecommunications industry is competitive and there are many larger companies in our segment that have significantly greater resources.  We believe that we have a competitive advantage because we employ skilled personnel who have been trained for and have experience.  Several of our principal competitive factors are our proprietary technology, customer service, technical support, delivery and price.



RESEARCH AND DEVELOPMENT

Our ongoing research and development program involves the design and development of the application software SPPV platform that will serve the needs of the vast TV customers in China.  The cost of research and development, all of which has been charged to operations, amounted to approximately US$50,000 in the last fiscal year.



EMPLOYEES

At December 31, 2003, we had 5 employees.

GOVERNMENTAL REGULATION OF OUR OPERATIONS IN CHINA

All of our subsidiary companies operate from facilities that are located in the People's Republic of China. Accordingly, our subsidiaries' operations must conform to the governmental regulations and rules of China.



The Chinese Legal System

The practical effect of the People's Republic of China legal system on our business operations in China can be viewed from two separate but intertwined considerations. First, as a matter of substantive law, the Foreign Invested Enterprise laws provide significant protection from government interference. In addition, these laws guarantee the full enjoyment of the benefits of corporate Articles and contracts to Foreign Invested Enterprise participants. These laws, however, do impose standards concerning corporate formation and governance, which are not qualitatively different from the General Corporation Laws of the several states. Similarly, the People's Republic of China accounting laws mandate accounting practices that are not consistent with US Generally Accepted Accounting Principles. The China accounting laws require that an annual "statutory audit" be performed in accordance with People's Republic of China accounting standards and that the books of account of Foreign Invested Enterprises are maintained in accordance with Chinese accounting laws. Article 14 of the People's Republic of China Wholly Foreign-Owned Enterprise Law requires a Wholly Foreign-Owned Enterprise to submit certain periodic fiscal reports and statements to designate financial and tax authorities, at the risk of business license revocation.

Second, while the enforcement of substantive rights may appear less clear than United States procedures, the Foreign Invested Enterprises and Wholly Foreign-Owned Enterprises are Chinese registered companies which enjoy the same status as other Chinese registered companies in business-to-business dispute resolution. Because the terms of the respective Articles of Association provide that all business disputes pertaining to Foreign Invested Enterprises are to be resolved by the Arbitration Institute of the Stockholm Chamber of Commerce in Stockholm, Sweden applying Chinese substantive law, the Chinese minority partner in our joint venture companies will not assume a privileged position regarding such disputes. Any award rendered by this arbitration tribunal is, by the express terms of the respective Articles of Association, enforceable in accordance with the "United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958)." Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure, while different in operation from its United States counterpart, should not present any significant impediment to the operation of Foreign Invested Enterprises.

Economic Reform Issues

Although the majority of productive assets in China are owned by the Chinese government, in the past several years the government has implemented economic reform measures that emphasize decentralization and encourage private economic activity. Because these economic reform measures may be inconsistent or ineffectual, there are no assurances that:



·

We will be able to capitalize on economic reforms;

·

The Chinese government will continue its pursuit of economic reform policies;

·

The economic policies, even if pursued, will be successful;

·

Economic policies will not be significantly altered from time to time; and

·

Business operations in China will not become subject to the risk of nationalization.

Negative impact upon economic reform policies or nationalization could result in a total investment loss in our common stock.

Since 1979, the Chinese government has reformed its economic systems. Because many reforms are unprecedented or experimental, they are expected to be refined and improved. Other political, economic and social factors, such as political changes, changes in the rates of economic growth, unemployment or inflation, or in the disparities in per capita wealth between regions within China, could lead to further readjustment of the reform measures. This refining and readjustment process may negatively affect our operations.

Over the last few years, China's economy has registered a high growth rate. Recently, there have been indications that rates of inflation have increased. In response, the Chinese government recently has taken measures to curb this excessively expansive economy. These measures have included devaluations of the Chinese currency, the Rennin, restrictions on the availability of domestic credit, reducing the purchasing capability of certain of its customers, and limited re-centralization of the approval process for purchases of some foreign products. These austerity measures alone may not succeed in slowing down the economy's excessive expansion or control inflation, and may result in severe dislocations in the Chinese economy. The Chinese government may adopt additional measures to further combat inflation, including the establishment of freezes or restraints on certain projects or markets. These measures may adversely affect our telephone communications manufacturing company's operations.

To date, reforms to China's economic system have not adversely impacted our operations and are not expected to adversely impact operations in the foreseeable future. However, there can be no assurance that the reforms to China's economic system will continue or that we will not be adversely affected by changes in China's political, economic, and social conditions and by changes in policies of the Chinese government, such as changes in laws and regulations, measures which may be introduced to control inflation, changes in the rate or method of taxation, imposition of additional restrictions on currency conversion and remittance abroad, and reduction in tariff protection and other import restrictions.

Chinas Accession into the WTO

On November 11, 2001, China signed an agreement to become a member of the World Trade Organization sometimes referred to as the WTO, the international body that sets most trade rules, further integrating China into the global economy and significantly reducing the barriers to international commerce. China's membership in the WTO was effective on December 11, 2001.   China has agreed upon its accession to the WTO to reduce tariffs and non-tariff barriers, remove investment restrictions, provide trading and distribution rights for foreign firms, and open various service sectors to foreign competition. China's accession to the WTO may favorably affect our business in that reduced market barriers and a more transparent investment environment will facilitate increased investment opportunities in China, while tariff rate reductions and other enhancements will enable us to develop better investment strategies and attract investment capital.  In addition, the WTO's dispute settlement mechanism provides a credible and effective tool to enforce members' commercial rights.  Also, with Chinas entry into the WTO, it is believed that the relevant laws on foreign investment in China will be amplified and will follow common practices.

ITEM 2.

PROPERTIES.

We lease headquarters in Hong Kong at Room 1305, 13/F Progress Commercial Building, 7-17 Irving Street, Causeway Bay, Hong Kong, and conduct our operations at facilities located in 11B11, Han Wei Plaza, No. 7 Guang Hua Road, Chao Yang District, Beijing, China.  We believe that our facilities are in good condition and provide adequate capacity to meet our needs for the foreseeable future.

The following table sets forth certain information relating to our principal facilities:



|Location                | Principal Uses            | Approx Sq. Ft.
|----------------------- | ------------------------- | --------------
|Causeway Bay, Hong Kong | Operations and Management | 400           
|Beijing, China          | Operations and Management | 3,300         



ITEM 3.

LEGAL PROCEEDINGS.

We are not a party to any pending or to the best of our knowledge, any threatened legal proceedings.  No director, officer or affiliate of the Company, or owner of record or of more than five percent (5%) of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to us or has a material interest adverse to us in reference to pending litigation.





ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no matters submitted to our shareholders for the quarter ended December 31, 2003.



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PART II

ITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock trades on the Over-The-Counter Bulletin Board under the symbol ASPC.  The following table sets forth the high and low sales prices for the shares of common stock as reported on the Over-The-Counter Bulletin Board for each quarterly period of the last two fiscal years.  The bid prices listed below represent prices, adjusted for stock splits, between dealers without adjustments for retail markups, breakdowns or commissions and may not represent actual transactions.



|2003         | High   | Low    
|------------ | ------ | -------
|March 31     | $0.024 | $0.0085
|June 30      | $0.034 | $0.0085
|September 30 | $0.050 | $0.0125
|December 31  | $0.035 | $0.023 



|2002         | High  | Low  
|------------ | ----- | -----
|March 31     | $0.12 | $0.05
|June 30      | $0.07 | $0.03
|September 30 | $0.07 | $0.03
|December 31  | $0.03 | $0.01



(b)

Shareholders

At December 31, 2003 we had approximately 3,100 holders of record.  The transfer agent and registrar for our common stock is Computer Share, Inc. located in Denver, Colorado.

(c)

Dividends

We have not declared any cash dividends on our common stock since inception.  Declaration of dividends with respect to the common stock is at the discretion of the Board of Directors.  Any future determination to pay dividends will depend upon the financial condition, capital requirements, results of operations and other factors deemed relevant by the Board of Directors.

(d)

Penny Stock

Until the Companys shares qualify for inclusion in the NASDAQ system, the public trading, if any, of the Companys common stock will be on the OTC Bulletin Board.  As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the common stock offered.  The Companys common stock is subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the Exchange Act), commonly referred to as the penny stock rule.  Section 15(g) sets forth certain requirements for transactions in penny stocks, and Rule 15g-9(d) incorporates the definition of penny stock that is found in Rule 3a51-1 of the Exchange Act.  The SEC generally defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.  If the Companys common stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors.  Accredited investors are persons with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse.  For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchasers written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document, prepared by the SEC, relating to the penny stock market.  A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities.  Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information on the limited market in penny stocks.  Consequently, these rules may restrict the ability of a broker-dealer to trade and/or maintain a market in the Companys common stock and may affect the ability of the Companys shareholders to sell their shares.

(e)

Recent Sales of Unregistered Securities

The Company had no sales of unregistered securities during the fourth quarter ending December 31, 2003.



ITEM 6.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS.

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto appearing elsewhere in this Form 10-KSB.  Certain statements contained herein that are not related to historical results, including, without limitation, statements regarding our business strategy and objectives, future financial position, expectations about pending litigation and estimated cost savings, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the Securities Exchange Act) and involve risks and uncertainties.  Although we believe that the assumptions on which these forward-looking statements are based are reasonable, there can be no assurance that such assumptions will prove to be accurate and actual results could differ materially from those discussed in the forward-looking statements.  Factors that could cause or contribute to such differences include, but are not limited to, regulatory policies, competition from other similar businesses, and market and general policies, competition from other similar businesses, and market and general economic factors.  All forward-looking statements contained in this Form 10-KSB are qualified in their entity by this statement.

Overview

On December 10, 2001, pursuant to a Share Exchange Agreement, we acquired from Alpha Sky Investment Limited all of Alpha Skys equity interests in both Accuhigh Investments Limited, a British Virgin Islands company, and Tidy Sum Investments Limited, a British Virgin Islands company, in exchange for 10,000,000 shares of our convertible preferred stock which shares of convertible preferred stock are convertible into 900,000,000 shares of our common stock.

Since the Acquisition, we have been engaged in the business of developing a Ka and communication satellite system that will provide broadband telecommunications services to China.  For accounting purposes, the Acquisition was treated as a recapitalization of ASI with ASI as the acquirer.  As such, the financial statements contained herein are those of ASI.



Results of Operations For the Period Ended December 31, 2003 Compared to December 31, 2002

Revenues.We are in our development stage and we have not generated any revenues since we began our operations.

Net Loss.Net operating loss decreased to $462,137 for the fiscal year ended December 31, 2003 compared to $468,862 for the fiscal year ended December 31, 2002 due to general administrative expenses, expenses related to being a public company and research and development expenses related to the build out of the Alphacom System.

Financial Condition, Liquidity, Capital Resources

Net cash used in operations during the fiscal year ended 2003 was $244,358, which was a $135,481 decrease or 36% from the fiscal year ended 2002.  The decrease is due to decrease in project development expenses. Net cash received from financing activities was $238,539, which was $143,147 less than that received during the same period in 2002.

We will continue to rely upon external financing sources to meet the cash requirements of our ongoing operations.  Management is currently seeking to raise additional funding in the form of equity or debt, or a combination thereof.  However, there is no guarantee that we will raise sufficient capital to execute our business plan.  To the extent that we are unable to raise sufficient capital, our business plan will require substantial modification and our operations will be curtailed.

Our auditors have issued their report, which contains an explanatory paragraph as to our ability to continue as a going concern. We are currently addressing our liquidity requirements by the following actions:

·

We are considering a smaller facility in Beijing.  We currently lease a 3,300 square foot space and we may be able to conduct our operations in a smaller facility.

·

We will continue to accept advances from management.

·

We are considering allowing our employees to tele-commute to reduce cost.

·

We will continue seeking investment capital through the issuance of both debt and equity securities in private placement to qualified investors.

·

We are considering short term funding through bank borrowing and other means of debt financing.



The Companys capital requirements to sustain its operations for the next 12 months will approximate $300,000.  The Company plans on meeting this capital requirement through either debt or equity financing.  However, there can be no assurance the Company will be successful in its efforts.

Additionally, the Company is required to contribute $30 million by July 2004 into the CFG Joint Venture as noted elsewhere in this filing.  The company plans on raising the necessary capital related to the CFG Joint Venture through debt or equity financing.  However, there can be assurance that the Company will be successful in this effort.  In the event the Company is unable to raise the necessary capital and extend or renegotiate the agreement, the agreement will terminate.

ITEM 7.

FINANCIAL STATEMENTS.

(a)

Financial Statements

The following financial statements are set forth at the end hereof.

Reports of Independent Auditors

Consolidated Balance Sheet as of December 31, 2003

Consolidated Statements of Operations for the fiscal years ended December 31, 2003 and December 31, 2002

Consolidated Statement of  Shareholders' Deficit through December 31, 2003

Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2003 and December 31, 2002

Notes to Consolidated Financial Statements

---



PART III

ITEM 8.

CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Effective May 10, 2004, Alpha Spacecom, Inc. (the Company), dismissed Spear, Safer, Harmon & Co. (SSHC), as the Companys independent accountants.  Effective May 10, 2004, the Company engaged De Joya & Company, as the Companys new independent accountants.  The dismissal of SSHC and the engagement of De Joya were approved by the Companys Board of Directors.

Prior to the engagement of De Joya, neither the Company nor anyone on its behalf consulted with such firm regarding the application of accounting principles to a specified transaction, either completed or uncompleted, or type of audit opinion that might be rendered on the Companys financial statements.

SSHC audited the Companys financial statements for the period from April 10, 2001 to December 31, 2002.  SSHCs report for this period did not contain an adverse opinion or a disclaimer of opinion, however, the report was modified as to certainty relative to the ability of the Company to continue as a going concern.

During the period from April 10, 2001 to May 10, 2004 there were no disagreements with SSHC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of SSHC, would have caused such firm to make reference to the subject matter of the disagreements in connection with its report on the Companys financial statements.  In addition, there were no such events as described under Item 304(a)(1)(IV)(B) of Regulation S-B during the period from April 10, 2001 to May 10, 2002.

ITEM 8A.

CONTROLS AND PROCEDURES.

Based on their evaluation of the Company's disclosure controls and procedures as of December 31, 2003, the Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect such controls subsequent to the date of their evaluation.

ITEM 9.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

The following table and text sets forth the names and ages of all directors and executive officers of the Company and the key management personnel as of March 31, 2004.  The Board of Directors of the Company is comprised of only one class.  All of the directors will serve until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal.  Executive officers serve at the discretion of the Board of Directors, and are appointed to serve until the first Board of Directors meeting following the annual meeting of stockholders.  Also provided is a brief description of the business experience of each director and executive officer and the key management personnel during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.



|Name        | Age | Position                         
|----------- | --- | ---------------------------------
|Xuedong Hu  | 40  | Chief Executive Officer, Director
|Jian Wang   | 35  | Director                         
|Fung Sien   | 42  | Director                         
|Brian Brick | 30  | Chief Operating Officer, Director



XUEDONG HU

Mr. Hu is the Chief Executive Offer and Director of Alpha Spacecom and the founder of the Company. He began his professional career in the technology business in China and Singapore in the mid 1990s. In 1997, he explored the feasibility of a Ka regional system for Asia Pacific.

In his current capacity as Managing Director of Alpha Spacecom, Mr. Hu is instrumental in gaining market access, forming strategic partnerships, and investment for the Alpha Spacecom regional Ka satellite project, and bringing it from concept to reality.

FUNG SIEN

Mr. Sien is responsible for the business development and external affairs of the company.  He has over 15 years of experience in information technology.  He worked for PricewaterhouseCoopers Hong Kong as a Senior Manager from January 1997 to February 2000.  He joined Wai Kee Holdings Limited as the Chief Information Officer from February 2000 to August 2002.

JIAN WANG



Mr. Wang is responsible for the development of the Digital Cinema and Satellite-Pay-Per-View projects in China.  He has excellent business development knowledge in the area of video and broadcasting systems.



BRIAN T. BRICK

Brian Brick has worked in the securities industry for the last six years as an account executive and an investment banker.  Prior to joining Alpha Spacecom, Inc., Mr. Brick held the position of Vice President of Investments with a regional Los Angeles securities firm.  There he managed accounts, raised capital and conducted business seminars and investor meetings.  In April 2002, Mr. Brick was appointed President, CEO and Director of Alpha Spacecom, Inc. with the assignment to locate and qualify a merger partner for the Company.  In December 2002 after he negotiated and completed the merger between Alpha Spacecom, Inc. and Alpha Spacecom Company, Ltd (HK) Mr. Brick became the COO and a Director of the combined companies.  Mr. Brick obtained his Bachelors degree in Political Science from Buffalo State University, New York, USA.

(a)

Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or charged by the Company to become directors or executive officers.

(b)

Involvement in Legal Proceedings

To the best of the Company's knowledge, during the past five years, none of the following occurred with respect to a present or former director or executive officer of the Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

(c)

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Companys executive officers and directors and persons who own more than 10% of a registered class of the Companys equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other equity securities of the Company, on Forms 3, 4 and 5, respectively. Executive officers, directors and greater than 10% shareholders are required by Commission regulations to furnish the Company with copies of all Section 16(a) reports they file. To the best of the Companys knowledge (based solely upon a review of the Forms 3, 4 and 5 filed), no officer, director or 10% beneficial shareholder failed to file on a timely basis any reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended.

(d)

Committees and Corporate Governance



At this time, we do not have any committees.  Because we are in our development stage the Board of Directors has determined that having committees is not necessary at this time.  During the first quarter of 2004, the Board of Directors adopted a Code of Conduct which is applicable to all officers and directors.

ITEM 10.

EXECUTIVE COMPENSATION.

The following Summary Compensation Table sets forth the compensation earned by our Chief Executive Officer.  There was no other executive officer whose total compensation for the fiscal year ended 2003 exceeded $100,000.

|SUMMARY COMPENSATION TABLE       
|---------------------------------
|Name and
Principal Position
(a)  
|Salary
($)
(c)                   
|Restricted Stock Award(s)
($)
(f)
|Xuedong Hu, CEO                  
|Xuedong Hu, CEO                  
|Xuedong Hu, CEO                  



We do not have any employee benefit plans or stock option plans.

ITEM 11.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth the number of shares of common stock beneficially owned as of December 31, 2003 by (i) those persons or groups known to us who will beneficially own more than 5% of our common stock; (ii) each director and director nominee; (iii) each executive officer whose compensation exceeded $100,000 in the fiscal year ended December 31, 2002; and, (iv) all directors and executive officers as a group.  The information is determined in accordance with Rule 13(d)-3 promulgated under the Exchange Act based upon information furnished by persons listed or contained in filings made by them with the Securities and Exchange Commission by information provided by such persons directly to us.  Except as indicated below, the stockholders listed possess sole voting and investment power with respect to their shares.



|Name of Beneficial Owner                          | No. of
Shares | Percentage of
Ownership
|------------------------------------------------- | ------------- | -----------------------
|Xuedong Hu (1)                                    |              |                       
|Officers and Directors as a Group (4 persons) (1) |              |                       
|5% or More Beneficial Ownership                   |               |                        
|                                                  |               |                        
|The Anklor Antebi Insurance Trust of 1995         | 15,000,000    | 12.57%                 
|Tridon Trust                                      | 14,732,000    | 12.35%                 



(1) Based on 119,286,000 shares outstanding.  Common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of December 31, 2003 are deemed to be outstanding and to be beneficially owned by the holder thereof for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.  In connection with the closing under the Share Exchange Agreement Mr. Hu as the beneficial owner of ASI, acquired 9,124,445 shares of Series B Convertible Preferred Stock, which are convertible into 821,200,000 shares of common stock of the Company. Upon conversion, the 821,200,000 will be owned indirectly through Mr. Hu's controlling interest in the following entities:  (i) 511,200,000 through Alpha Sky Investment Limited, (ii) 10,000,000 through Project Connect Limited (iii) 20,000,000 through Sino Advantage Limited, (iv) 40,000,000 through Sparkle Success Limited, (v) 50,000,000 through Choice Rich Investments Limited, (vi) 90,000,000 through Glory Asset Investments Limited, and (vii) 100,000,000 through Success Day Investments Limited.

ITEM 12.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Parties are considered to be related if one party has the liability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions.  Parties are also considered to be related if they are subject to common control or common significant influence.  The particulars of significant related party transactions are summarized below::



| | 2002 | 2003
| | ---- | ----
| | US$  | US$ 



|Advances from related parties:       |           |          
|------------------------------------ | --------- | ---------
|Directors                            | 997,596   | 1,226,135
|Shareholder of Alpha                 | 119,673   | 119,673  
|Vertex Marketing                     | 39,400    | -        
|                                     |           |          
|                                     | 1,156,669 | 1,345,808
|                                     |           |          
|Advances from a shareholder of Alpha | 176,729   | 176,729  
|                                     |           |          



All balances with related parties are unsecured, interest free and payable on demand, except for advances from a shareholder of Alpha which are unsecured and bear interest at 9.5% per annum



ITEM 13.

EXHIBITS, LIST AND REPORTS ON FORM 8-K.



(a)Exhibits



Exhibit

Number

Description



2.1

Share Exchange Agreement dated as of December 10, 2002. Incorporated herein by reference from our filing on Form 8-K filed on December 21, 2002.



3.1

Certificate of Incorporation as filed with the Colorado Secretary of State, as amended.  Incorporated by reference to Exhibit 2.1 to Company.



3.2

Bylaws.  Incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-18, filed on August 14, 1980.



21.1

Subsidiaries of the Company.



31.1

Certification of Chief Executive Officer pursuant to to Section 302 of the Sarbanes-Oxley Act of 2002.*



31.2

Certification of Chief Financial Officer pursuant to to Section 302 of the Sarbanes-Oxley Act of 2002.*



32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350.*



99.1

Alpha Spacecom, Inc. Code of Conduct and Ethics

*Filed herewith

(b)Reports on Form 8-K

A current Report on Form 8-K dated May 10, 2004 and filed May 18, 2004, reported under Item 4, Changes in Registrants Certifying Accountant, the dismissal of the former accountants and appointment of De Joya & Company as Registrants certifying accountant for year ended December 31, 2003.





ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.



General.   De Joya & Company is the Company's principal auditing firm and billed no audit fees for 2002.



Audit Fees.  The audit fees billed for 2003 by De Joya & Company was $20,000. The aggregate fees billed for each of the last two fiscal years by the predecessor auditing firm of Spear, Safer, Harmon & Co. for the audit of the Company's annual financial statements and review of interim financial statements, including the Company's Form 10-QSB reports, were $16,000 and $25,000 for the years 2003 and 2002, respectively.  Additionally, a previous predecessor auditing firm, Hurley & Company performed the review of interim financial statements, including the Company's Form 10-QSB report in 2003 for a fee of $8,000.



Audit-Related Fees. The Company was billed $ 0 in 2003 for audit-related fees.



Tax Fees. The Company was billed $0 in the year 2003 for tax consultation services.



Other Fees. There were no other aggregate fees billed in either of the last two fiscal years for products and services provided by Spear, Safer, Harmon & Co., or Hurley & Company other than the services reported above.



The Company has an audit committee; however, the Company had no pre-approval policies and procedures in effect for the auditors' engagement for the fiscal years 2003 and 2002.

---

SIGNATURES

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



|                  |  | ALPHA SPACECOM, INC.                            
|----------------- |  | ------------------------------------------------
|Date
May 18, 2004 |  | By: /s/ Xuedong Hu                              
|                  |  | Name: Xuedong Hu
Title:  Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.



|                  |  |                                                            
|----------------- |  | -----------------------------------------------------------
|Date
May 18, 2004 |  | By: /s/ Brian Brick                                        
|                  |  | Name: Brian Brick
Title:  Director, Chief Operating Officer





|                  |  |                                  
|----------------- |  | ---------------------------------
|Date
May 18, 2004 |  | By: /s/ Fung Sien                
|                  |  | Name:  Fung Sien
Title:  Director





|                  |  |                                 
|----------------- |  | --------------------------------
|Date
May 18, 2004 |  | By: /s/ Jian Wang               
|                  |  | Name: Jian Wang
Title:  Director



---







INDEPENDENT AUDITORS REPORT



To the Board of Directors and Shareholders

Alpha Spacecom Incorporated and Subsidiaries

Hong Kong



We have audited the accompanying consolidated balance sheet of Alpha Spacecom Incorporated and Subsidiaries (the Company), as of December 31, 2003, and the related consolidated statements of operations, shareholders deficit and cash flows for the year then ended and cumulative during development stage. These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alpha Spacecom Incorporated and Subsidiaries, as of December 31, 2003 and the results of their operations and their cash flows for the year then ended, and cumulative during development stage in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern as discussed in Note 1. The Company has been in the development stage since its inception of December 9, 1998. However, the Company has sustained substantial operating losses during development stage.  In addition, the Companys total liabilities exceed total assets by $1,696,138.  The Company also has a commitment to provide $30,000,000 (Note 8) in connection with a Cooperation Agreement with the China Film Group Corporation (Note 1).  In view of these matters, the Companys continued existence is dependent upon the Companys ability to meet its future financing requirements, the success of future operations and the ability to raise money to meet its capital commitment.  These factors raise substantial doubt about the Companys ability to continue as a going concern.  Managements plans in regards to those matters also are described in Note 2 to the consolidated financial statements.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ De Joya & Company

De Joya & Company

Las Vegas, Nevada

May 17, 2004

---

INDEPENDENT AUDITORS REPORT



To the Board of Directors and Shareholders

Alpha Spacecom Incorporated and Subsidiaries

Hong Kong



We have audited the accompanying consolidated balance sheets of Alpha Spacecom Incorporated and Subsidiaries (the Company), as of December 31, 2002 and 2001, and the related consolidated statements of operations, shareholders deficiency and cash flows for the years then ended and cumulative during development stage. These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alpha Spacecom Incorporated and Subsidiaries, as of December 31, 2002 and 2001 and the results of their operations and their cash flows for the years then ended, and cumulative during development stage in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Notes 1 and 2, the Company has been in the development stage since its inception of December 9, 1998. However, the Company has sustained substantial operating losses during development stage.  In addition, the Companys total liabilities exceed total assets by $1,611,272.  In view of these matters, realization of a major portion of the assets is dependent upon the Companys ability to meet its future financing requirements and the success of future operations.  These factors raise substantial doubt about the Companys ability to continue as a going concern.  Managements plans in regards to those matters also are described in Note 2 to the consolidated financial statements.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.





/s/ Spear, Safer, Harmon & Co.

Spear, Safer, Harmon & Co.



Miami, Florida

May 6, 2003

---





ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Balance Sheets

December 31, 2003







|            |  | 2003
|----------- |  | ----
|A S S E T S |  | US$ 



|Current Assets:                                                                                 |  |             
|----------------------------------------------------------------------------------------------- |  | ------------
|Cash                                                                                            |  | 440         
|Other receivables, deposits and prepayments                                                     |  | 2,071       
|                                                                                                |  |             
|Total Current Assets                                                                            |  | 2,511       
|                                                                                                |  |             
|Property, plant and equipment, net                                                              |  | 962         
|                                                                                                |  |             
|                                                                                                |  | 3,473       
|                                                                                                |  |             
|LIABILITIES AND SHAREHOLDERS DEFICIT                                                           |  |             
|                                                                                                |  |             
|Current Liabilities:                                                                            |  |             
|Accounts payable and accrued expenses                                                           |  | 501,345     
|Advances from related parties                                                                   |  | 1,345,808   
|Advances from shareholder                                                                       |  | 176,729     
|                                                                                                |  |             
|Total Current Liabilities                                                                       |  | 2,023,882   
|                                                                                                |  |             
|Shareholders Deficit:                                                                          |  |             
|Preferred stock:  20,000,000 shares authorized:                                                 |  |             
|Series A 7% cumulative convertible, par value
US $0.001; 23,000 shares issued and outstanding   |  | 23          
|                                                                                                |  |             
|Series B convertible, U.S. $0.001 par value; 9,626,000                                          |  |             
|issued and outstanding                                                                          |  | 9,626       
|                                                                                                |  |             
|Common stock:                                                                                   |  |             
|Par value US $0.001; 2,000,000,000 shares authorized,
119,286,000 shares issued and outstanding |  | 119,286     
|                                                                                                |  |             
|Additional paid in capital                                                                      |  | 33,040      
|                                                                                                |  |             
|Accumulated deficit during development stage                                                    |  | (2,182,384) 
|                                                                                                |  |             
|                                                                                                |  |             
|Total Shareholders Deficit                                                                     |  | (2,020,409
)
|                                                                                                |  |             
|                                                                                                |  | 3,473       
|                                                                                                |  |             
|                                                                                                |  |             



The accompanying notes are an integral part of these consolidated financial statements.



---







ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Consolidated Statements of Operations



Years Ended December 31, 2002 and 2003 and Cumulative During Development Stage





|                                              |  | 2002            | 2003          | Cumulative During Development Stage
|--------------------------------------------- |  | --------------- | ------------- | -----------------------------------
|                                              |  | US$             | US$           | US$                                
|                                              |  |                 |               |                                    
|Income                                        |  | -               | -             | -                                  
|                                              |  |                 |               |                                    
|General and Administrative Expenses           |  | (468,870
)      | (462,137
)    | (1,767,616
)                       
|                                              |  |                 |               |                                    
|Loss from Operations                          |  | (468,870
)      | (462,137
)    | (1,767,616
)                       
|                                              |  |                 |               |                                    
|Other Income (Expenses):                      |  |                 |               |                                    
|Cost of share exchange                        |  | -               | -             | (415,013
)                         
|Other                                         |  | 8               | -             | 116                                
|                                              |  |                 |               |                                    
|                                              |  | 8               | -             | (414,897
)                         
|                                              |  |                 |               |                                    
|Loss Before Income Taxes                      |  | (468,862
)      | (462,137
)    | (2,182,513
)                       
|                                              |  |                 |               |                                    
|Income Taxes                                  |  | -               | -             | -                                  
|                                              |  |                 |               |                                    
|Net Loss                                      |  | (     468,862
) | (   462,137
) | (     2,182,513
)                  
|                                              |  |                 |               |                                    
|                                              |  |                 |               |                                    
|Loss Per Common Share  Basic and diluted     |  | (      .01)     | (        .01) |                                    
|                                              |  |                 |               |                                    
|Weighted Average Common Shares outstanding -- |  |                 |               |                                    
|Basic and diluted                             |  | 98,468,000      | 104,868,000   |                                    
|                                              |  |                 |               |                                    
|                                              |  |                 |               |                                    
|                                              |  |                 |               |                                    
|                                              |  |                 |               |                                    



The accompanying notes are an integral part of these consolidated financial statements.



---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statement of Shareholders Deficit

Years Ended December 31, 2002 and 2003









|                                             | Common Stock | Preferred
Stock | Additional
Paid-In Capital | Accumulated Deficit
During
Development
Stage | Total       
|-------------------------------------------- | ------------ | --------------- | -------------------------- | -------------------------------------------- | ------------
|                                             | US $         | US $            | US $                       | US $                                         | US $        
|                                             |              |                 |                            |                                              |             
|Balance at December 31, 2001                 | 98,468       | 10,036          | -                          | (1,251,514
)                                 | (1,143,010
)
|                                             |              |                 |                            |                                              |             
|Issuance of common stock                     |              |                 |                            |                                              |             
|in connection with:                          |              |                 |                            |                                              |             
|Conversion of preferred stock                | 51           | (2
)            | -                          | (49
)                                        | -           
|Consulting services                          | 600          | -               | -                          | -                                            | 600         
|at par value                                 | -            | (178
)          | -                          | 178                                          | -           
|                                             |              |                 |                            |                                              |             
|Net loss during the year                     | -            | -               | -                          | (468,862
)                                   | (468,862
)  
|                                             |              |                 |                            |                                              |             
|Balance at December 31, 2002                 | 99,119       | 9,856           | -                          | (1,720,247
)                                 | (1,611,272
)
|                                             |              |                 |                            |                                              |             
|Issuance of common stock in
connection with: |              |                 |                            |                                              |             
|Conversion of preferred stock                | 18,400       | (207
)          | (18,193)                   | -                                            | -           
|Issuance of common stock                     | 1,767        | -               | 51,233                     | -                                            | 53,000      
|                                             |              |                 |                            |                                              |             
|Net loss during the year                     | -            | -               | -                          | (462,137
)                                   | (462,137
)  
|                                             |              |                 |                            |                                              |             
|Balance at December 31, 2003                 | 119,286      | 9,649           | 33,040                     | (2,182,384)                                  | (2,020,409) 
|                                             |              |                 |                            |                                              |             



The accompanying notes are an integral part of these consolidated financial statements.



---



ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)

Consolidated Statements of Cash Flows

Year Ended December 31, 2002 and 2003 and Cumulative During Development Stage



|                                                                            |  | 2002      | 2003       | Cumulative During Development Stage
|--------------------------------------------------------------------------- |  | --------- | ---------- | -----------------------------------
|                                                                            |  | US$       | US$        | US$                                
|Cash Flows  from Operating Activities:                                      |  |           |            |                                    
|Net loss                                                                    |  | (468,862) | (462,137
) | (2,182,384
)                       
|Adjustments to reconcile net loss
to net cash used in operating activities: |  |           |            |                                    
|Cost of share exchange                                                      |  | -         | -          | 107,093                            
|Loss on assets written off                                                  |  | -         | 2,517      | 2,517                              
|Depreciation and amortization                                               |  | 27,400    | 24,065     | 117,270                            
|Allowance for bad debts                                                     |  | -         | -          | 2,777                              
|Common stock issued in connection                                           |  |           |            |                                    
|with consulting services                                                    |  | 600       | -          | 600                                
|Changes in operating assets and
liabilities:                                |  |           |            |                                    
|(Increase) decrease in other receivables,                                   |  |           |            |                                    
|deposits and prepayments                                                    |  | 11,826    | 31,098     | (2,071)                            
|Increase in other accounts payable and                                      |  |           |            |                                    
|accrued expenses                                                            |  | 49,197    | 160,099    | 501,345                            
|                                                                            |  |           |            |                                    
|Net Cash Used in Operating Activities                                       |  | (379,839) | (244,358)  | (1,452,853
)                       
|                                                                            |  |           |            |                                    
|Cash Flows from Investing Activities:                                       |  |           |            |                                    
|Acquisition of property, plant and equipment                                |  | -         | -          | (120,749
)                         
|                                                                            |  |           |            |                                    
|Cash Flows from Financing Activities:                                       |  |           |            |                                    
|Advances from related parties                                               |  | 676,098   | 342,902    | 2,056,967                          
|Advances from shareholder                                                   |  | -         | -          | 176,729                            
|Repayment of advances to related parties                                    |  | (337,412) | (114,363
) | (713,936
)                         
|Deposits received on issuance of                                            |  |           |            |                                    
|common stock                                                                |  | 43,000    | -          | -                                  
|Issuance of common stock                                                    |  | -         | 10,000     | 54,282                             
|                                                                            |  |           |            |                                    
|Net Cash Provided by Financing Activities                                   |  | 381,686   | 238,539    | 1,574,042                          
|                                                                            |  |           |            |                                    
|Net Increase in Cash                                                        |  | 1,847     | (5,819
)   | 440                                
|                                                                            |  |           |            |                                    
|Cash Beginning                                                             |  | 4,412     | 6,259      | -                                  
|                                                                            |  |           |            |                                    
|Cash Ending                                                                |  | 6,259     | 440        | 440                                
|                                                                            |  |           |            |                                    
|Non-cash investing and financing activities:                                |  |           |            |                                    
|Clearing liability to related party                                         |  | -         | 324,271    |                                    
|Common stock issued for conversion
of preferred stock                       |  | 51        | -          |                                    



The accompanying notes are an integral part of these consolidated financial statements.



---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements



Years Ended December 31, 2002 and 2001







NOTE 1  ORGANIZATION AND BUSINESS

Alpha Spacecom, Inc. formerly, Tridon Enterprises, Inc. (the Company or Alpha) was  incorporated in the State of Colorado in 1986 under the name Hammer Computer Systems, Inc., a Colorado corporation.  Prior to the acquisition described below we were seeking strategic partnerships with companies in the satellite business.  However, due to the difficulty in raising working capital to execute our business plans, we ceased operations in April 2001.

On December 10, 2001, pursuant to a share exchange agreement, we acquired (the Acquisition) from Alpha Sky Investment Limited (ASI) all of the equity interests in both Accuhigh Investments Limited, a British Virgin Islands company, and Tidy Sum Investments Limited, a British Virgin Islands company, in exchange for 10,000,000 shares of our convertible preferred stock which shares of convertible preferred stock are convertible into 900,000,000 shares of our common stock.  At present, Accuhigh Investments Limited and Tidy Sum Investments Limited hold 100% equity interest in Alpha Spacecom Company Limited. For accounting purposes, this acquisition will be treated as a recapitalization of ASI with ASI as the acquirer.



The following depicts Alpha and its subsidiaries (collectively the Group) at December 31, 2003:



[facsimile of organization graphic]



___________________________



Alpha Spacecom Inc.

(incorporated in Colorado, US)

___________________________

100%

100%

______________________________

_________________________

Accuhigh Investments Limited

Tidy Sum Investment Limited

(incorporated in BVI)

(incorporated in BVI)

______________________________

_________________________

99%

1%

______________________________



Alpha Spacecom Company Limited

(incorporated in Hong Kong)

______________________________



______________________________



Beijing Representative Office

______________________________







---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)





NOTE 1  ORGANIZATION AND BUSINESS, continued



Alpha Sky Investment Limited (Alpha Sky) was incorporated on August 19, 1998 in the British Virgin Islands with authorized share capital of 50,000 shares of common stock and par value of US $1.00 per share.  As of December 31, 2003 and 2002, 1,000 shares of common stock were issued and outstanding.



Accuhigh Investments Limited (Accuhigh), a British Virgin Island Company, was incorporated on June 12, 2001. It was incorporated with authorized share capital of 50,000 shares of common stock and par value of US $1.00 per share.  As of December 31, 2003 and 2002, one share of common stock was issued and outstanding.



Tidy Sum Investments Limited, a British Virgin Islands Company (Tidy), was incorporated on June 22, 2001 with authorized share capital of 50,000 shares of common stock; par value of US $1.00 per share. As of December 31, 2003and 2002, one share of common stock was issued and outstanding.



Alpha Spacecom Company Limited (ASC, the operating company) was incorporated in Hong Kong on December 9, 1998, with authorized share capital of 10,000 shares of common stock with par value of HK $1.00 per share.  As of December 31, 2002 and 2003, two shares of common stock were issued and outstanding.



Pursuant to a resolution of the Board of Directors dated August 20, 2002, Tridon Enterprises Incorporated changed its name to Alpha Spacecom Incorporated and, in connection therewith, increased the number of shares of common stock authorized from 100,000,000 to 2,000,000,000.



On July 10, 2001, Accuhigh acquired 100% of the shares of ASC, accounted for under the purchase method without any resultant goodwill.  In connection therewith, 1% of the outstanding common shares of ASC was held by Tidy Sum Investment Limited in trust for Accuhigh.



Alpha Sky entered into a Share Exchange Agreement dated December 10, 2001 to effectuate an exchange of shares with Alpha. Pursuant to the terms of the share exchange agreement, Alpha acquired from Alpha Sky all of its equity interest in Accuhigh Investments Limited and Tidy Sum Investments Limited in exchange for 10,000,000 shares of convertible preferred stock convertible into 900,000,000 shares of common stock of Alpha. The transaction resulted in Alpha Sky obtaining a majority voting interest in Alpha and Alpha Spacecom was treated as the acquired entity.  For accounting purposes, the transaction has been treated as an acquisition and re-capitalization of Alpha Spacecom with Alpha assuming approximately US $415,000 of liabilities in excess of net assets acquired which are presented as cost of share exchange in the accompany consolidated statement of operations.  The historical financial statements prior to December 10, 2001 are those of Alpha Sky.

---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)





NOTE 1  ORGANIZATION AND BUSINESS (Continued)



In connection with the share exchange, Xuedong Hu, Fung Sien and Wai Man Yu, officers of Alpha Sky, were appointed as members of the board of directors.  Brian Brick resigned from the position of chief executive officer of Tridon.  The directors then elected Xuedong Hu as the chairman of the board and executive officer and appointed Mr. Brick as the chief operating officer of the Company.



ASC has signed a memorandum of understanding with China Broadcasting Film Television Satellite Company (CBSat), a division of Chinas State Administration of Radio, Film and Television (SARFT) to develop, construct, launch, maintain and operate KA band satellites for distribution of news, sports, entertainment and Satellite Pay Per View (SPPV) services in the PRC. Alpha Spacecom Company Limited has also signed a memorandum of understanding with Lockheed Martin Commercial Space Systems (LMCSS) whereby LMCSS will provide design, supply, installation and integration of the ground network and satellites, referred to as the Alphacom System.



On April 1, 2003, Wai Man Yu resigned from the Board and Jian Wang replaced the vacancy effective from May 26, 2003.



On July 29, 2003, ASC signed a Cooperation Agreement (Agreement) with China Film Group Corporation (CFG) in Beijing whereby Alpha will form a joint venture with CFG (owned 51% by CFG and 49% by Alpha) to reconstruct and upgrade movie theater complexes to digital projection format and implement a home pay-per-view system, both of which will received digitized content via satellite transmission. As further discussed in Note 8, the Company is required to contribute $30,000,000 into the joint venture company by July, 2004.







NOTE 2  GOING CONCERN



The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern.  However, the Company has incurred cumulative losses through December 31, 2003 of $2,182,384. The Company expects to continue to incur significant operating losses and to generate negative cash flows from operating activities for at least the next couple of years while it continues to develop a KA Band Communication Satellite System. The Companys ability to eliminate operating losses and to generate positive cash flows from operations in the future will depend upon various factors such as: (1) the cost of developing the system, (2) changes in technology, (3) changes in governmental regulations, (4) the level of demand for broadband telecommunications services, (5) the product offering, pricing strategies and other competitive factors of the Companys competitors, (6) general economic conditions and (7) meeting its $30,000,000 capital commitment as discussed in Note 8.  If the Company is unable to implement its business plan successfully, it may not be able to eliminate operating losses, generate positive cash flow or achieve or sustain profitability which would materially adversely affect its business, operations and financial results as well as its ability to raise capital through either debt or equity offerings.

---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)



.

NOTE 2  GOING CONCERN, continued



Management believes that it has the ability to improve its cash position through financing activities, including possible private or public offerings of stock.  However, the uncertainty of a sustained financing and cash management program and continued losses from operations raise substantial doubt about the ability of the Company to continue as a going concern.



NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation  The consolidated financial statements include the accounts of Alpha Spacecom Incorporated (formerly known as Tridon Enterprises Incorporated) and its wholly owned subsidiaries Accuhigh Investments Limited, Tidy Sum Investments Limited and Alpha Spacecom Company Limited (collectively the Company).  All significant inter-company accounts and transactions have been eliminated in consolidation.



The Company has been in the development stage since formation (December 9, 1998) and primarily through the operations of ASC is engaged in the business of developing a KA band communication satellite system that will provide broadband telecommunications services to the Peoples Republic of China (the PRC) and its neighboring Asia Pacific countries.  Accordingly, the Companys consolidated financial statements are presented as those of a development stage enterprise, as prescribed by Statement of Financial Accounting Standards No. 7, Accounting and Reporting by Development Stage Enterprises.



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



Risk Consideration  As a majority of the Companys operations are conducted in the PRC, the Company is subject to special considerations and significant risks not typically associated with investments in equity securities of North American and Western European companies.  The Companys operations may be adversely affected by significant political, economic and social uncertainties in the PRC.  Although the PRC government has been pursuing economic reform policies for the past several years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRCs political, economic and social life.  There is also no guarantee that the PRC governments pursuit of economic reforms will be consistent or effective.



---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)





NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



The Company expects that in the future substantially all of its revenues will be denominated in Renminbi (RMB).  A portion of such revenues will need to be converted into other currencies to meet foreign currency obligations such as the payment of any dividends declared.  Both the conversion of RMB into foreign currencies and the remittance of foreign currencies abroad require PRC government approval.  No assurance can be given that the operating subsidiaries within the Company will continue to be able to convert sufficient amounts of foreign currencies in the PRCs foreign exchange markets in the future for payment of dividends.



Cash and Cash Equivalents  Cash and cash equivalents include cash on hand and deposits with banks with an original maturity of three months or less.



Property, Plant and Equipment  Property, plant and equipment are stated at cost.



Depreciation is calculated on a straight-line basis to write-off the cost of each asset over its estimated useful life, usually five years.  Leasehold improvements are amortized over their respective lives or the life of the lease, whichever is shorter.



Translation of Foreign Currencies  ASCs assets and liabilities are generally translated into U.S. dollars at current exchange rates, and revenues and expenses are translated at average exchange rates during the year.  Resulting translation adjustments are reflected as a separate component of shareholders equity.  Foreign currency transaction gains and losses are included in consolidated operations.



Income Taxes  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.



Research and Development  Research and Development costs are charged to operations when incurred.



Loss Per Common Share  Basic and Diluted  Loss per common share  basic (EPS) is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period.  Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  For the year ended December 31, 2003, the diluted share base excludes incremental shares relating to convertible preferred stock since their effect was anti-dilutive.



---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)





NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued



Comprehensive Income  The Company adopted SFAS No. 130, Reporting Comprehensive Income, at inception.  SFAS No. 130 establishes standards for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose financial statements.  SFAS No. 130 defines comprehensive income to include all changes in equity except those resulting from investment by owners and distributions to owners.  Among other disclosures SFAS No. 130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in financial statements that is presented with the same prominence as other financial statements.  The Company currently does not have any comprehensive income.



Recently Issued Accounting Pronouncements  In January 2003, the Financial Accounting Standards Board ("FASB") issued SFAS Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"), which changes the criteria by which one company includes another entity in its consolidated financial statements. FIN 46 requires a variable interest entity ("VIE") to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. The consolidation requirements of FIN 46 apply immediately to VIE's created after January 31, 2003, and apply in the first fiscal period beginning after June 15, 2003, for VIE's created prior to February 1, 2003. As the Company does not currently have an interest in a VIE, management does not expect that the adoption of FIN 46 will have a significant immediate impact on the financial condition or results of operations of the Company.



In December 2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for Stock-Based Compensation  Transition and Disclosure  an amendment of FASB Statement No. 123.  SFAS 148 provides alternate methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reporting results.  SFAS 148 is effective for fiscal years beginning after December 15, 2003.  The Company is currently reviewing SFAS 148.



In May 2003, the FASB issued Statement No 150 (SFAS 150), Accounting for Certain Instruments with Characteristics of Both Liabilities an Equity, which establishes standards for how an issuer classifies and measures certain financial instruments.





---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)







NOTE 4  PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment as of December 31, consist of the following:



| |  | 2003
| |  | ----
| |  | US$ 



|At Cost:                      |  |      
|----------------------------- |  | -----
|Leasehold improvements        |  | 853  
|Computer equipment            |  | -    
|Office equipment              |  | 6,262
|Furniture and fixtures        |  | 2,721
|                              |  |      
|                              |  | 9,836
|Less accumulated depreciation |  |      
|and amortization              |  | 8,874
|                              |  |      
|                              |  | 962  
|                              |  |      



Depreciation expense for the year ended December 31, 2003 was $24,065.







NOTE 5  INCOME TAXES



The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.



Under the current laws of the British Virgin Islands (the BVI), dividends and capital gains arising from the Companys investments in the BVI are not subject to income taxes and no withholding tax is imposed on payments of dividends to the Company.



Companies doing business and deriving income in Hong Kong are subject to Hong Kong profits tax at 17.5%.  In the future, the Companys subsidiary, ASC, may be subject to income taxes arising from operations.  The applicable income tax rate in the PRC is 33% (30% income tax and 3% local income tax).



No income taxes have been provided for ASC as it has incurred losses since the date of inception.



---

ALPHA SPACECOM INCORPORATED AND SUBSIDIARIES

(A Development Stage Company)



Notes to Consolidated Financial Statements (Continued)





NOTE 6  RELATED PARTY TRANSACTIONS



The balances with related parties as of December 31, are as follows:



| | 2002 | 2003
| | ---- | ----
| | US$  | US$ 



|Advances from related parties:       |           |          
|------------------------------------ | --------- | ---------
|Directors                            | 997,596   | 1,226,135
|Shareholder of Alpha                 | 119,673   | 119,673  
|Vertex Marketing                     | 39,400    | -        
|                                     |           |          
|                                     | 1,156,669 | 1,345,808
|                                     |           |          
|Advances from a shareholder of Alpha | 176,729   | 176,729  
|                                     |           |          



All balances with related parties are unsecured, interest free and payable on demand, except for advances from a shareholder of Alpha which are unsecured and bear interest at 9.5% per annum







NOTE 7  LEASE COMMITMENTS



The Company leases land and buildings under various non-cancelable contracts through 2003.



Future minimum lease payments are as follows:



|     |  | US $             
|---- |  | -----------------
|     |  |                  
|2004 |  | $           2,692
|     |  |                  



Rental expenses for each of the years ended December 31, 2002 and 2003 were $94,265 and $110,320 respectively.







NOTE 8  CAPITAL COMMITMENT



As discussed in Note 1, the Company had entered into a joint venture agreement with CFG on July 29, 2003.  Pursuant to the Agreement, the Company is required to contribute $US30,000,000 into a joint venture company, not yet formed, within one year of the consummation of the Agreement. If the Company is unable to raise the required capital contribution then this Agreement will terminate.