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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-K

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

For the Fiscal Year Ended December 31, 2008

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

For the transition period from ________________ to
________________.

Commission file number 000-52728

NORTHPORT NETWORK SYSTEMS,
INC.(Exact name of registrant as specified in its
charter)

|Washington                                                           | 76-0674579                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation of
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|                                                                     |                                     
|601 Union Street, Suite #4200, Seattle, Washington                   | 98101                               
|(Address of Principal Executive Offices)                             | (Zip Code)                          

(206) 652-3451(Registrants telephone number,
including area code)

Securities registered under Section 12(b) of the Exchange Act:

|Common Stock, $0.001 par value | NASD OTC BB                                      
|------------------------------ | -------------------------------------------------
|(Title of class)               | (Name of each exchange on which
      registered)

Securities registered pursuant to Section 12(g) of the Act.:
None

Indicate by check mark if registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes[ ] No[ x ]

Indicate by check mark if registrant is not required to file
reports pursuant to Rule 13 or Section 15(d) of the Act. Yes[ ] No[ x ]

Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes[ x ] No[ ]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and 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-K or any amendment to this Form 10-K.[ ]

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

|Large accelerated filer [ ] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [ x ]
|--------------------------- | --------------------- | ------------------------- | -------------------------------

Our revenue for the year ended December 31, 2008 was: $608,915.

---

The aggregate market value of the common stock held by
non-affiliates of the issuer, based on the last sale price of $1.20 as reported
on the NASD OTC BB on November 19, 2008 was $22,363,070. ($1.20 times 18,635,892
shares)

The number of shares of our common stock outstanding as of March
31, 2009 was: 32,700,012.

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, No Par Value(Title of class)

Indicate by checkmark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The registrant had 32,700,012 shares of common stock
outstanding as of March 31, 2009.

---

FORWARD LOOKING STATEMENTS

This annual report contains forward-looking statements that
involve risks and uncertainties. Any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
may, will, should, expect, plan, intend, anticipate, believe,
estimate, predict, potential or continue, the negative of such terms or
other comparable terminology. In evaluating these statements, you should
consider various factors, including the assumptions, risks and uncertainties
outlined in this annual report under Risk Factors. These factors or any of
them may cause our actual results to differ materially from any forward-looking
statement made in this annual report. Forward-looking statements in this annual
report include, among others, statements regarding:

- our capital needs;
- business plans; and
- expectations.

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding future events, our actual results will likely vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Some of the risks and assumptions
include:

- our need for additional financing;
- our limited operating history;
- our history of operating losses;
- the competitive environment in which we operate;
- changes in governmental regulation and administrative practices;
- our dependence on key personnel;
- our ability to fully implement our business plan;
- our ability to effectively manage our growth; and
- other regulatory, legislative and judicial developments.

We advise the reader that these cautionary remarks expressly
qualify in their entirety all forward-looking statements attributable to us or
persons acting on our behalf. Important factors that you should also consider,
include, but are not limited to, the factors discussed under Risk Factors in
this annual report.

The forward-looking statements in this annual report are made
as of the date of this annual report and we do not intend or undertake to update
any of the forward-looking statements to conform these statements to actual
results, except as required by applicable law, including the securities laws of
the United States.

AVAILABLE INFORMATION

Northport Network Systems, Inc. files annual, quarterly and
current reports, proxy statements, and other information with the Securities and
Exchange Commission (the SEC). You may read and copy documents referred to in
this Annual Report on Form 10-K that have been filed with the SEC at the SECs
Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You can also obtain copies of our SEC filings by going to the
SECs website at http://www.sec.gov.

REFERENCES

As used in this annual report: (i) the terms we,
  us, our,  Northport Network, Northport
  and the Company mean Northport Network Systems, Inc.; (ii) SEC
  refers to the Securities and Exchange Commission; (iii) Securities Act
  refers to the United States Securities Act of 1933, as amended; (iv)
  Exchange Act refers to the United States Securities Exchange
  Act of 1934, as amended; and (v) all dollar amounts refer to United States
  dollars unless otherwise indicated.

3

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TABLE OFCONTENTS

PART 1

|ITEM
      1  | DESCRIPTION
      OF BUSINESS                                                                                            | 6 
|------------- | ------------------------------------------------------------------------------------------------------------------------ | --
|ITEM
      1A | RISK
      FACTORS                                                                                                       | 14
|ITEM
      1B | UNRESOLVED
      STAFF COMMENTS                                                                                          | 24
|ITEM
      2  | PROPERTIES                                                                                                               | 24
|ITEM
      3  | LEGAL
      PROCEDINGS                                                                                                   | 25
|ITEM
      4  | SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                | 25
|ITEM
      5  | MARKET
      FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES | 26
|ITEM
      6  | SELECTED
      FINANCIAL DATA                                                                                            | 27
|ITEM
      7  | MANAGEMENTS
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                              | 27
|ITEM
      7A | QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         | 39
|ITEM
      8  | FINANCIAL
      STATEMENTS                                                                                               | 39
|ITEM
      9  | CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE                         | 39
|ITEM
      9A | CONTROLS
      AND PROCEDURES                                                                                            | 39
|ITEM
      9B | OTHER
      INFORMATION                                                                                                  | 41
|ITEM
      10 | DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                             | 41
|ITEM
      11 | EXECUTIVE
      COMPENSATION                                                                                             | 43
|ITEM
      12 | SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS               | 43
|ITEM
      13 | CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                           | 44
|ITEM
      14 | PRINCIPAL
      ACCOUNTING FEES AND SERVICES                                                                             | 44
|ITEM
      15 | EXHIBITS
      AND REPORTS ON FORM 8-K                                                                                   | 45

4

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NOTEREGARDINGFORWARDLOOKINGSTATEMENTS

This annual report contains
forward-looking statements as that term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. In some cases, you can identify forward-looking
statements by terminology such as may, should, expect, plan,
anticipate, believe, estimate, predict, potential, continue,
intend, and other variations of these words or comparable words. In addition,
any statements that refer to expectations, projections or other
characterizations of events, circumstances or trends and that do not relate to
historical matters are forward-looking statements. These forward-looking
statements are based largely on our expectations or forecasts of future events,
can be affected by inaccurate assumptions, and are subject to various business
risks and known and unknown uncertainties, a number of which are beyond our
control. Therefore, actual results could differ materially from the
forward-looking statements contained in this document, and you are cautioned not
to place undue reliance on such forward-looking statements. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled Risk Factors, that may
cause our or our industrys actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements.

Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Except as required
by law, we do not undertake to update or revise any of the forward-looking
statements to conform these statements to actual results, whether as a result of
new information, future events or otherwise.

As used in this annual report,
  Northport Network Systems Inc., Northport, the Company,
  we, us, or our refer to Northport Network
  Systems, Inc., unless otherwise indicated.



5

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Our Business

We conduct business in North America under the name of
Northport Network Systems, Inc. We own a Chinese company, Dalian Beigang
Information Industry Development Company Limited (Dalian Beigang), that
operates three separate businesses- (1) TENET (or Tenet), a tax filing and
preparation service for federal commercial taxpayers in Dalian, Liaoning
Province in the Peoples Republic of China (PRC). Tenet, developed and
designed by Dalian Beigang, and further engineered through collaboration with
the Dalian National Tax Bureau beginning in January of 1999, is geared only
towards Chinese commercial business owners and not individual tax filers; and
(2) the Company has developed a digital photo processing kiosk technology, which
operates under the trade name Colorstar, and which business is now ready to be
fully commercialized in China. The technology has been developed on a platform
basis and this initial application is presented in a kiosk format. This
application is presented as a stand-alone, digital photo processing kiosk,
allowing users to select and print standard size photos for a fee. Other
applications are currently being developed.; and (3) Dalian Beigang owns a 51%
equity interest in Shenyang Ling Xiao Aviation Service Company Limited,
(Ling Xiao), which operates online and call center travel booking
operations in the Chinese cities of Dalian and Shenyang and which will use a
terminal version of the Colorstar platform in their travel booking
locations.

The Company maintains its primary office in North America at
#4200, 601 Union Street, Seattle, Washington, 98101. The telephone numbers used
at the location are 206-508-3689, 206-652-3451 and the facsimile number is
206-652-3205.

The Companys Dalian Colorstar and Tenet business operates from
an office facility located at Suite #512, A. No. 1 Huoju Road Qixianlinq
Industrial Base  High-Tech Zone in Dalian, China. The Ling Xiao business in
Dalian operates from leased office space in the central area of Dalian at Rooms
2704, 2705, 2706, and 1101 in the Yue Xiu Building, No.82 Xin Kai Road, Xi Gang
District, Dalian, China

Ling Xiao in Shenyang operates from office and dormitory
facilities located at No. 109- 6-1 Nanjing North Street, Peace District,
Shenyang, China.

Corporate History

We were originally incorporated in Colorado as
dotcom.netmgmt.com Inc. on July 25, 2000. The authorized number of common shares
was set at 25,000,000 at a par value of $0.001 with no preferred shares
authorized.

The original planned business was an Internet website designed
to assist small business owners. From formation until 2004, we engaged in no
significant operations other than organizational activities. We received no
revenues during this period.

On April 28, 2004, we held a special shareholders meeting at
which our authorized capital was increased from 25,000,000 common shares, $0.001
par value to 100,000,000 common shares, $0.001 par value. At the same meeting
the two original directors and officers resigned and Zhao Yan, Zhong Bo Jia and
James Wang were elected as new directors. Zhao Yan was appointed president and
James Wang appointed as secretary/treasurer. At the same meeting the issued
common shares of 6,250,000 were split on a four to one basis resulting in a new
total of 25,000,000 issued common shares and retained the same par value of
$.001. At the same meeting our name was changed from dotcom-netmgmt.com Inc to
Northport Capital Inc.

We entered into an agreement dated June 23, 2005, to acquire
100% of Dalian Beigang, an existing Chinese tax software and data processing
business. The June 23, 2005 agreement required Company shareholder approval as
well as PRC government approval by way of the issuance of a business license for
the revised corporate structure, which would be a Wholly Owned Foreign
Enterprise (WOFE). Pursuant to Chinese laws, within one year after approval of
a business license for a WOFE by the Chinese government, the Purchaser must pay
the full purchase price to the Sellers.

The Chinese government approved the business license for the
  WOFE on May 17, 2006, at which time the acquisition closed. A total of 1,500,000
  treasury shares of the Company were issued as the purchase price for the

6

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acquisition. Subsequently on January 10, 2008, 1,000,000
restricted, common shares were authorized to be issued to Xiao Jun, an employee
of the Company and the original developer of the Companys Colorstar digital
photo technology, as an employment incentive. We registered certain of our
shares by way of a Form SB2 filing which was declared effective by the
Securities and Exchange Commission (the SEC) on July 13, 2007. Our common
shares began trading on the OTCBB on January 16, 2008 under the symbol NPCA.

On October 9, 2008 at our annual shareholders meeting held in
Dalian, China, our shareholders approved the election of our existing three
directors and also approved:

-a plan of merger for the reincorporation of the Company from
the State of Colorado to the State of Washington and the change of the name of
the Company to Northport Network Systems, Inc.; 
- the authorization of
100,000,000 shares of preferred stock with a par value of $.001 to be adopted in
the Articles of Incorporation, governed by the Washington Business Corporation
Act in connection with the reincorporation merger;
- the requirement that not
less than 25% of all the votes entitled to be cast on an issue will have the
right to call a special meeting of the shareholders by submitting a written
demand to the Company; 
-the Companys proposed 2008 Stock Option Plan
authorizing the amount of 2,750,000 shares of common stock; and 
-ratified the
appointment of Jimmy C.H. Cheung & Co as the Companys independent
registered public accountants for the fiscal year ending December 31, 2008.

Approval of these issues was disclosed on Form 8K filed on
November 17, 2008. Our original trading symbol was revised to NNWS upon approval
of our corporate name change in Washington State to Northport Network Systems,
Inc. in November 2008.

Our authorized capital stock now consists of 100,000,000 shares
of common stock, $0.001 par value per share, of which 32,700,012 shares have
been issued and outstanding, fully paid and non-assessable as of December 31,
2008. We also have 100,000,000 preferred shares authorized at a par value of
$.001 of which none are currently issued.There are no outstanding options,
warrants or calls pursuant to which any person has the right to purchase any of
our authorized and unissued common or other securities.

Throughout this Form 10K report, we have used an exchange rate
of $1.00 US = 6.96 Rmb (Chinese yuan) for all conversions except those taken
directly from our audited financial statements which may vary marginally from
this rate. The value of RMB against US$ and other currencies may fluctuate and
is affected by, among other things, changes in Chinas political and economic
conditions, and significant revaluation of RMB may materially affect the
Companys financial condition in terms of US$ reporting.

Dalian Beigang is duly organized, validly existing and in good
standing under the laws of the Peoples Republic of China. The original business
enterprise was incorporated in the PRC on June 20, 1997. The original business
license issued to Dalian Beigang ended on June 19, 2007 and has been renewed
until June 8, 2026.

In accordance with the Chinese Articles of Association, the
registered capital of Dalian Beigang at the date of incorporation of June 20,
1997, was $144,928 (RMB 1,200,000) which was fully paid on June 19, 1997, in
cash by the stockholders. On October 24, 2007, the registered capital of Dalian
Beigang was increased from $144,928 (Rmb1.2 million) to $30,144,928 (Rmb220
million) to allow for new investment of foreign capital either in the form of
equity or debt. According to the amended Articles of Association, and as at
December 31, 2007, Dalian Beigang was required to fulfill a total registered
capital contribution of $30 million of which $10 million was payable on or
before April 16, 2008 subject to extension allowances. The remaining balance is
payable on or before January 16, 2010. The Company was unable to fully pay the
increased capital portion during 2008 and as a result, the registered capital of
Dalian Beigang remains the actual capital contribution to date of $144,928.

On October 9, 2008, Dalian Beigang entered into a definitive
  agreement with the stockholders of Ling Xiao to acquire a 51% equity interest
  of Ling Xiao for 2,700,000 shares of treasury stock of the Company at a fair
  value of $3,240,000 based on the closing price of the Companys common
  stock as quoted on the Over-the-Counter Bulletin Board as of the date of the
  closing of the transaction. The stockholders of Ling Xiao do not have any prior
  affiliation with the Company. According to the terms of the definitive agreement,
  the consideration amount is determined on the basis of a formula of 51% of 5
  times the planned Ling Xiao net earnings for the year ending March 31, 2009.
  After completion of the review of the Ling Xiaos operation and the audited
  financial statements for the year ending March 31, 2009, additional treasury
  shares of the Company will be issued if the net earning is in excess of the
  net earning as projected in the formula estimate of 2,700,000 shares. Additional
  purchase consideration, if any, will be recorded as goodwill.

7

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Principal Products

(A.) Tenet tax filing
software

The State Administration of Taxation governs the national tax
bureaus in different Chinese provincial capital cities, which are responsible
for the national tax bureau offices as well as local tax bureaus in different
cities in their province. With the upgrade of these offices complete, the shift
now moves to getting its users, the commercial taxpayers, filing and paying
taxes online with software systems that are compatible with the Federal system.
National tax bureaus handle all aspects of federal taxes as compared to local
taxes payable to, and collected by, local city tax bureaus. The business of the
National tax bureau covers (product) transaction value added taxes, business
income tax, with the tax collected to be handed to the national treasury
directly, constituting national fiscal income.

The business of the local tax bureaus covers enterprise
business and personal income tax, with the tax collected handed in part to the
national treasury and the rest kept as local fiscal income.

Management of Dalian Beigang was advised that their Tenet tax
reporting and payment system was Chinas first online federal tax reporting/tax
payment system. The Tenet system is an intranet based online tax filing and
payment transfer system, which has been approved by the National Tax Bureau.
Only those business users having an agreement for Tenet use with Dalian Beigang
can access that system. Revenue flows from subscription agreements with
commercial taxpayers.

Following the successful beta test in late 2001 with 2000 of
Dalians commercial taxpayers, the Tenet system was officially launched and
began the sign up of Dalians commercial federal taxpayers. The local city of
Dalian newspaper, the Dalian Daily on Friday, July 13, 2001, contained an
article written by reporter Zhi Bin Dong as follows: Yesterday, the Dalian
National Tax Bureau announced that, starting from August 1, 2001, business tax
payers of Dalian will use the new intranet system to file and to pay their
federal taxes. The new system is designed and developed by Dalian Beigang
Information Industry and Development Co., Ltd. . See, Exhibit 99.5 in our SB-2
filing.

As of December 31, 2008, there were approximately 8243
subscribers in Dalian (of approximately 35,000 available businesses in total)
and an additional 886 subscribers in Yingkou, Liaoning province, which business
is operated under a cooperation agreement between Dalian Beigang and Lenovo
Corporation. Management opted to launch its first city operation of Tenet
outside of Dalian in Yingkou, the nearest large city, and only 200 km from
Dalian. The local partner in Yingkou is Yingkou City Beigang Network Information
Industry Service Co., Ltd., a wholly owned subsidiary of Lenovo Corporation, a
Chinese computer manufacturer and retailer. Lenovo Yingkou is a large computer
dealer and service provider in Yingkou maintaining a good relationship with the
national tax bureau there. The Cooperation Agreement, in its English version,
dated September 18, 2002 is Exhibit 10.1 in our SB-2 filing.

Under the agreement, Dalian Beigang was responsible for
computer hardware configurations, software development and system debugging of
the online tax declaration and payment system server. Dalian Beigang is also
responsible for technical support and troubleshooting of the system, timely
updating of the system and maintaining all aspects of the system on request of
Yingkou National Taxation Bureau; must provide timely reports to Yinkou Lenovo
of the user management software and complete operating mode of the online tax
declaration and payment system, for support in technology and business to
Yingkou Lenovo, and also for training of two persons as management of Yingkou
Lenovo and two lecturers who are responsible for training users of the system in
Yingkou.Dalian Beigang must also provide a full time qualified person to
Yingkou Lenovo for instruction, assistance and guidance.

The Tenet system provides real savings over the present manual
systems, which over time will be realized by the subscriber. Traditional manual
tax payment includes costs to a commercial taxpayer of manual preparation of tax
reporting forms, preparation of accounting designed specifically for such forms,
purchase of tax reporting forms from national tax bureaus, costs of personnel
needed to stand in lines to obtain filing approvals, obtaining cash from
taxpayer bank account to cover the approved tax amount and returning to the tax
office to physically pay the tax amount. Costs of staff and forms are offset by
the online capability features of the Tenet system which allows all taxpayer
tax-related activities to be handled directly from the taxpayers offices. Fees
in other cities are expected to be similar to those in Dalian. Initial
subscribers pay a fee of 1200 Rmb for the initial year and then decreases on an
incremental basis over three years to a base of 600 Rmb per year thereafter.

Although there are security and service problems with many available,
  competitive systems, most are free and have attracted business users. As a result,
  the number of users of the Tenet system has continually declined since its initial
  introduction.

8

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In late 2008, the China State Administration of Taxation
installed a systematic black box on its website, designed to guarantee network
safety for the system. As a result, Dalian Beigang is now unable to upgrade its
TENET tax filing system. We are currently negotiating with representatives of
the Federal Administration of Taxation in the Dalian Office on how to deal with
the problems that have risen as a result. Because we are currently unable to
update the Tenet system for our subscribers, we are not billing for services or
access- thus not currently generating any Tenet revenues. If we are unable to
resolve this issue, we will have no option but to discontinue Tenet operations
in 2009.

(B.) Graphic Printing
Technology

In mid 2005, management of Dalian Beigang was introduced to a
digital photo processing technology being developed by a Beijing engineer. The
project required funding and the Companys management approved a decision to
invest funds to develop the technology to a level where it could be commercially
analyzed. Key aspects of the technology that differentiate it from other kiosk
digital photo systems include silver halide print technology instead of thermal
print processes, reduced print times and lower cost per processed photo- this
allowing for lower price points. A trade name of Colorstar was registered with
the China State Administration for Industry and Commerce in China as well as a
Chinese patent applied for on the technology. Total expenditures on research and
development undertaken by Dalian Beigang on this project were charged to general
and administrative expenses for the years ended December 31, 2007 and 2008, and
such expenditures amounted to $100,822and $162,894, respectively.

The research and development on Colorstar has been undertaken
separate from the original Tenet tax software business of the Company.

The project has involved the development of a digital
platform with an initial application to be a user-operated, stand alone,
digital photo developing and printing network operating system controlled
through a proprietary network server with terminals and self serve digital photo
developing printers- with user interfaces contained in a kiosk format. The
stand-alone devices provide users with print images equivalent to regular
photographic pictures.

Currently the system network and self-serve digital printer
design are at a commercial stage. All intellectual property rights are reserved
in the name of Dalian Beigang.

Over the past two years various test units were developed and
installed in commercial locations in Dalian so as to generate consumer response
and also to measure unit operating characteristics. Twelve units of the latest
test model have been installed in various locations in and around Dalian since
June 2007, including malls, hotels, telephone retail shops, etc and were in
operation as at December 31, 2007. Dalian Beigang entered into an agreement on
March 1, 2008 to supply a total of 542 Colorstar units to various Internet cafe
locations and also retail telephone store locations in Liaoning Province in
China. The agreement partner was China Netcom, a significant Chinese landline
and broadband supplier with annual revenues in excess of $1.0 billion US. The
agreement called for monthly service fees to be paid to China Netcom and
revenues to be divided on an 85-15 percent basis between Dalian Beigang and
China Netcom. A detailed Form 8K was filed on March 6, 2008 which provided
details of the agreement. As at December 31, 2008, only a total of 6 units had
been installed under the agreement. The delays were directly attributed to the
Companys lack of working capital required to manufacture Colorstar kiosks at a
contracted manufacturing facility located in Dalian. To date, a total of only 24
units have been produced. An enhanced version of the kiosk design has been
completed but commercial production awaits availability of funding to cover
manufacturing costs.

Shortly after the original China Netcom contract was signed,
the China Netcom Network system was closed and did not accept any new business
from May 1st to October 30, 2008 for the sake of ensuring the safety of the
Beijing Olympic Games. The network system was opened again in November 2008, but
China Netcom and its planned merger partner China Unicom commenced a
re-structure program, including a name change to China Unicom. The agreement
terminated on February 1, 2009 and we are in negotiations to renew. It is
unlikely that such renewal will occur given the current re-structure focus of
China Unicom. However, management is actively in discussion with other retail
groups in China with respect to similar agreement arrangements.

The design and manufacture of the network and the self-help digital
  photo-developing printer are the most important components of the project, and
  various test machines were developed. The original model, although capable of
  operation, had no promotion value; a second model was unusable because of low
  output speed and long waiting times; and a third model machine realized all
  design functions but because of large volume requirements, high cost and questionable
  intellectual property rights, it was not suitable for commercial development.
  The fourth design has proved successful and is the current commercial model.
  The Company`s website at www.northportnetwork.com includes photos of actual test
  installations in various locations.

9

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The network management server is fully developed and capable of
meeting any and all necessary management and control functions. The Company`s
core expertise of online security systems as developed for Tenet, has been
instrumental in ensuring trouble free development of the Colorstar financial
controls systems.

The Digital Photo Processing Market in Northeast
China

Dalian Beigang retained the services of independent research
companies in northeast China in order to assist management in determining the
present status of the northeast China digital printing market as well as
determination of possible market acceptance and development of the Colorstar
project.

The research was undertaken in Beijing, Shenyang and Dalian and
included sampling from consumers (local citizens, tourists and professionals),
imaging shop proprietors (color film processing shops and photo-printing
collection agencies), as well as convenience stores, lottery shops and
advertising agencies and companies.

Management determined that the Chinese market is in a stage of
rapid increase of sales of digital cameras. Since the end of 2005, increases of
30% to 50% in demand for digital printing have been shown in larger cities  in
fact, higher than for traditional film printing. In addition, there are now a
total of over 550 million cellular telephones in use in China, of which 70% of
these mobile phones come with a camera function. Colorstar units allow for print
operations from Cellular telephones.

Traditional digital color printing shops in the Chinese
domestic market utilize equipment technology of one of four brands including
Kodak, Fuji, Konica and Lucky. Kiosk models in use in China include those
developed by Kodak and Sony, both models that have been introduced in the North
American marketplace as well.

Fuji digital printing machine technology has also been in a
leading position in the China industry, enjoying the capability for producing
stand alone devices and establishing network platforms, as well as providing
customer financing. Doli, a China domestic manufacturer of production-type
digital printing machines, has good quality equipment but has little strength in
providing additional functions and network operating management platforms.

Analysis of data collected showed that both the operational
mode and technological advantages of the Colorstar project were recognized by
the China market. However, the project needed to improve its technological
level, perfect its equipment quality, and also establish and implement detailed
and effective marketing plans, in order for it to be commercially viable. Dalian
Beigang has now completed these.

Colorstar Manufacturing

Currently Dalian Beigang subcontracts manufacture of the
various components of Colorstar units and assembles the finished units at the
Company`s facilities in Dalian. Dedicated circuit board manufacturers are
well-suited to the assembly of circuit boards with the complexity found in the
Colorstar design. Dedicated board manufacturers can spread the extensive capital
equipment costs of circuit board assembly among multiple projects and customers.
Such manufacturers also have the volume to enable the frequent upgrades
necessary for new, state-of-the-art equipment. We have identified multiple
suppliers who meet our quality, cost, and performance criteria. We intend to use
more than one source for circuit board assembly to ensure a reliable supply over
time. Dalian Beigang contracts manufacture and fabrication of Colorstar
components to a number of local Dalian companies as well as approximately 40
separate suppliers located throughout China in cities such as Shanghai,
Shenzhen, Beijing and others.

The Colorstar manufacturing process involves a controlled
process of parts ordering, quality control review of incoming components,
fabrication/assembly of the various key elements such as paper roll container,
paper feeder, water/chemical container, feeder frame, paper dryer, paper outflow
mechanism, electrical components addition and kiosk frame assembly. Upon final
assembly completion, each unit is tested and checked by quality control
personnel again prior to units being readied for shipment.

Colorstar Operations

In China, management has entered into negotiations with a number
  of large organizations that operate retail facilities. Agreement relationships
  are planned to entail Dalian Beigang manufacturing and installing kiosk units
  in partner locations and revenues split on an 85/15 percentage basis between
  the partners. A typical agreement is expected to be initially two years in length
  and renewable if agreed to by both parties. All Colorstar units will remain
  in the ownership of the Company. All unit operations, repairs, maintenance,
  cash handling and accounting functions are handled by Dalian Beigang. The kiosk
  design currently produces only a 4 inch by 6 inch size photo.

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Based on results of test units installed in various retail
locations in Dalian city, average usage has been 35% and each user averages 20
photos per session. Average retail purchase pricing has been set at $.085 per
photo. The current design has an initial processing period for each user order
followed by a much faster production time for the individual photos. Each 20
photo order takes approximately 8 minutes to complete after adding times for
selection, payment and production.

To date, units have had a Company staff person in attendance at
all times to ensure customer familiarity with Colorstar operational features and
to explain questions or issues that users may have. The plan is for these
attendant functions to be handled by the retail partner staff after an initial
operating period, likely 90 days. Since each unit is always connected to the
Colorstar central server, management will always be able to identify
maintenance, usage numbers or repair issues that arise for each individual
unit.

Revenue from the sale of color photo printing services is
derived from our own and affiliate operations, which consist of franchise agency
and licensing program. The Company follows the guidance of Emerging Issues Task
Force (EITF) 99-19, "Recording Revenue Gross as a Principal versus Net as an
Agent", for its presentation of revenue and direct costs. This guidance requires
the Company to assess whether it acts as a principal in the transaction or as an
agent acting on behalf of others. Where the Company is the principal in the
transaction and has the risks and rewards of ownership, the transactions are
recorded gross in the statements of income. Revenue and related costs of
services generated by the franchise agents are included as part of the Company's
consolidated revenue and costs of services, respectively, since the Company has
the direct contractual relationships with the customers, holds title to the
related customer receivables and is the legal employer of the employees.

The franchise agent acts as the Company's agent in a similar
manner as a branch manager in the Company-owned locations. In the franchise
arrangement, the Company has the direct contractual relationships with its
customers and contracts with customers are binding to the Company. The Company
is also obligated for the employee payroll, electricity and related overheads
regardless of customer acceptance of the services. These factors, among others,
designate the Company as principal with respect to its franchise agent
operations. Franchise agents sales were $6,532 and $1,403 for fiscal 2008 and
2007, respectively.

The Company also has a licensing program whereby the licensee
had the direct contractual relationships with the customers, held title to the
related customer receivables and was the legal employer of the employees.
Accordingly, net sales and costs of services generated by the license operation
are included in the Company's consolidated financial statements. Fees are paid
to the Company based on a fixed price for each of the photo printed and such
license fees are recorded by the Company as revenue. Fees received from licensed
offices were $428 and $815 for fiscal 2008 and 2007, respectively.

For sale from its own operation, revenue is recognized after
the photos are printed and delivered to the customers and cash has been
collected.

During December 2007, two completed Colorstar units were
shipped to Vancouver Canada for purposes of analysis to determine what
modifications, if any, will be needed in order to introduce the technology and
Colorstar units into the North American market places. Once that analysis has
been completed, we intend to complete our North American business plan and begin
introduction of the technology in the US and in Canada. We expect that such
analysis will be completed by the end of second quarter 2009.

Sales and Marketing

In China, marketing of Colorstar to date has involved a team of
four people making direct sales calls to major potential joint venture partners
such as China Netcom and others. In addition, there are a number of potential
franchise-type relationships being discussed with individuals in Dalian city
itself. These franchise-type arrangements await completion of formal
documentation and availability of manufacturing financing. Initial test units
have been installed at locations under an informal franchise arrangement.
Agreements with other potential partners await various approvals.

(C.) Ling Xiao Aviation Booking
Operations

Ling Xiao was registered with the Shenyang Industrial and Commercial
  Administration on September 26, 2007 and its business term is approved until
  September 2017. Ling Xiao is principally engaged in the air-ticketing agency
  business. In addition to its operation in the city of Shenyang, Liaoning Province
  in the PRC, Ling Xiao assumed all of the business operations of Dalian Ling
  Xiao Aviation Service Co., Ltd (Dalian Ling Xiao) on October 10,
  2008. Dalian Ling Xiao is owned by the stockholders of Ling Xiao and is principally
  engaged in an air-ticketing agency business in the City of Dalian.

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Since we provide travel-related services through our website,
we are subject to all of the PRC laws and regulations relating to the
telecommunications industry and Internet, and regulated by various government
authorities, including the Ministry of Information Industry and the State
General Administration of Industry and Commerce.

The travel industry in China is subject to the supervision of
the China National Tourism Administration and local tourism administrations. The
principal regulatory regulations governing travel agencies in China include: 
-Administration of Travel Agencies Regulations (1996), as amended;

-Telecommunications Regulations (2000); 
-The Administrative Measures for
Telecommunications Business Operating Licenses (2001)

Under these regulations, a travel agency must obtain a license
from the China National Tourism Administration to conduct cross-border travel
business, and a license from the provincial-level tourism administration to
conduct domestic travel agency business.

In China, the business of air ticket bookings being conducted
online still remain in its early stages. Currently, it is only promoted in the
larger cities and not in medium and smaller cities. Published statistics show
that in 2008, there were some 192 million passenger flights that were booked
online in China, among them 8.22 million in Dalian and 6.80 million in Shenyang.
The quantity of booking air ticket online in Liaoning Province accounted for
7.82% of total China bookings. To start up an online booking service in a
particular city, it is necessary to obtain a business license and a franchise
license (or special permits) issued by the China Air Transportation Association.
Typically the business license is valid for 10 years and the franchise license
is valid for 1 year, after which the enterprise must pass a rigid evaluation and
examination. If successful, a new license will be issued.

Ling Xiao is a leading retailer of air tickets in northeast
China. We aggregate information on flights and enable our customers to make
informed and cost-effective flight bookings. We also sell charter flight
seating. We target our services primarily at business and individual travelers
in our area of focus in northeast China. We act as agent in substantially all of
our transactions . We derive our air-ticketing revenues mainly through
commissions. The business of Ling Xiao is subject to certain risks and
concentrations including dependence on relationships with travel suppliers,
primarily airlines and exposure to risks associated with online commerce
security. Agency commission from one airline alone accounted for 84 % of the
Companys total revenues for the year ended December 31, 2008. As of December
31, 2008, accounts receivable from this airline was $272,678.

We believe that we are the largest air ticket booking facility
in Dalian in terms of the number of air tickets booked and sold and are rapidly
expanding our business in Shenyang. Once established there, we intend to expand
elsewhere in other northeast China urban areas. Our airline ticket suppliers
include all major Chinese airlines and many international airlines that operate
flights originating from China. We are among the few airline ticket booking
entities in China that maintain a centralized reservation system and ticket
fulfillment infrastructure . Our customers can make flight reservations on their
chosen routes and arrange ticket payment and delivery through us directly or
third-party agencies located in northeast China.

We offer our services to customers through an advanced
transaction and service platform consisting of our centralized toll-free, 24
hour customer service center and website. In 2008, transactions effected through
our customer service center accounted for over 90% of our transaction volume.

We sell air tickets for all major domestic Chinese airlines,
including Air China, China Eastern Airlines, China Southern Airlines, Hainan
Airlines and Shanghai Airlines and a number of international airlines operating
flights that originate from cities in China.

In air-ticketing transactions, a customer generally pays the
ticket delivery agent upon delivery of the ticket. The customer has the option
of picking up a ticket at a Ling Xiao ticketing office or obtaining an
electronic ticket. In 2008, China mandated full scale use of electronic
ticketing, or E-ticketing, systems for all air travel. We believe that
E-ticketing allows us to execute air-ticketing transactions more efficiently.
E-ticketing also makes our business expansion into other northeastern China
cities easier and more efficient. The airline industry, including airline ticket
pricing, is regulated. Therefore, we have no discretion in offering discounts on
the air tickets we sell. Our commission rate per ticket usually increases as the
total number of tickets we sell for an airline increases.

Other products and services accounted for a small portion of
our total revenue in 2008.

Transaction and Service Platform

Our customers can reach us for their travel-related needs through
  either our toll-free customer service center or our website.

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Our centralized toll-free customer service center is located in
Dalian, China and is operated 24 hours a day and seven days a week. Customers
can call our toll free number to consult with customer service representatives,
receive flight information and make travel bookings. As of December 31, 2008, we
employed approximately 90 customer service representatives, all of whom
participated in formal training programs before commencing work.

We have a Chinese-language website located at
www.lingxiao.net.

When we acquired a 51% equity interest in Ling Xiao, on October
9, 2008, our purchase price and preliminary allocation of net assets was
determined as follows:

Cash and cash equivalents
    $
    26,583Other receivables and deposits
    
    42,337Due by stockholders
    
    190,851Due from related companies
    
    3,400Total current assets
    
    263,171Property and equipment, net
    
    2,536Goodwill
    
    3,114,938Total assets
    
    3,380,645Less: Accrued liabilities
    
    (2,205
    )Other taxes
      payable
    
    (18,283
    )Minority interest
    
    (120,157
    )Total purchase price
    $
    3,240,000


Environmental Impact

None of the Company's activities utilize any hazardous
materials or results in any discharge of pollutants into the environment. The
Company believes it complies fully with all environmental laws and
regulations.

Intellectual Property

Our ability to compete effectively will depend on our success
in protecting our proprietary technology, both in China, in the United States
and elsewhere. We have filed for patent protection in China and certain other
countries to cover proprietary design aspects of our Colorstar products.

These patent applications are under review by the Chinese
Patent Office and, to date, we have not been issued any patent approvals in
China or elsewhere. No assurance can be given that any patents relating to our
existing technology will be issued from any patent offices; that we will receive
any patent approvals in the future based on our continued development of our
technology; or that any patent protection, once approved, will be sufficient to
deter others, legally or otherwise, from developing or marketing competitive
products utilizing our technologies.

In addition to seeking patent protection, we rely on trade
secrets, know-how and continuing technological advancement to seek to achieve
and thereafter maintain a competitive advantage. Although we have entered into
or intend to enter into confidentiality and invention agreements with our
employees, consultants and advisors, no assurance can be given that such
agreements will be honored or that we will be able to effectively protect our
rights to our unpatented trade secrets and know-how. Moreover, no assurance can
be given that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to our trade
secrets and know-how.

In addition to the patent filing, we have registered the trade
names Colorstar and Tenet in China.

Employees and Staffing

We had 152 full-time employees as of December 31, 2008. Our
employees are not covered by any collective bargaining agreement and we have
never experienced a work stoppage. We believe that our relations with our
employees are good. The Company currently operates with a staff of 54 in Dalian
and 2 in Yingkou. The Ling Xiao subsidiary operates with 80 staff in Dalian and
15 in Shenyang. One director operates from North American offices located in
Seattle, Washington.

All of our management personnel have university degrees. Customer
  support personnel require a junior college or technical college degree. Software
  engineers require a minimum of a computer science degree.

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The 152 current staff members of Northport and Dalian Beigang
are employed as follows:

|Management                    |  | 9   | 
|----------------------------- |  | --- | 
|Accounting                    |  | 8   | 
|Marketing                     |  | 6   | 
|Tenet tax filing systems      |  | 9   | 
|Software Design/R and D       |  | 11  | 
|Colorstar Operations          |  | 11  | 
|Yingkou Office                |  | 2   | 
|Ling Xiao Dalian              |  | 80  | 
|Ling Xiao Shenyang            |  | 15  | 
|North American Seattle Office |  | 1   | 
|                              |  |     | 
|Total                         |  | 152 | 

ITEM 1A. Risk Factors.

Prospective investors should carefully consider the risks
described below, in conjunction with other information and our consolidated
financial statements and related notes included elsewhere in this Form 10K.. You
should pay particular attention to the fact that we conduct our operations in
China and are governed by a legal and regulatory environment that in some
respects differs significantly from the environment that may prevail in other
countries that you may be familiar with. Our business, financial condition and
results of operations could be affected materially and adversely by any or all
of these risks. Where financial results for our China operations are commented
upon in US dollars, an exchange rate of $1.00 = 6.96 Renminbi (Yuan) has been
used, except where numbers are directly taken from our audited financial
statements..

Risk Factors Relating to the Company and its
Businesses

We have yet to attain profitable operations and our
accountants believe there is substantial doubt about our ability to continue as
a going concern.

As reflected in the accompanying financial statements, the
Company has an accumulated deficit of $1,861,946 at December 31, 2008. The
Company had an accumulated deficit of $1,026,301at its year end of December 31,
2007. The Companys current liabilities also exceed its current assets by
$374,278 and the Company used cash in operations during the year ended December
31, 2008 of $80,276. These factors raise substantial doubt about our ability to
continue as a going concern. In view of the matters described above, continued
operation of the Company is dependent upon the Companys ability to raise
additional capital, reduce its operating expenses, obtain financing and succeed
in its future operations. Management is taking steps to revise its operating and
financial requirements, which it believes will be sufficient to provide the
Company with the ability to continue operations. As of December 31, 2008, a
stockholder has loaned $173,432 to the Company as an unsecured loan and imputed
interest computed. In addition, on August 18, 2008, the Company issued 2,400,012
shares of common stock to 2 stockholders or their nominees for settlement of
shareholder loans owed by the Company in the aggregate amount of $1,200,006 at a
conversion price of $0.50 per share.

As of December 31, 2008, the Company is indebted to a
stockholder for a note payable in the amount of $109,378. In addition, during
the year, a stockholder loaned $173,432 to the Company as an unsecured loan with
imputed interest computed at 5% per annum on the amount due. The balance is
repayable on demand. Management believes that such financing will allow us to
continue operations for the remainder of 2009. The Company is actively pursuing
additional equity funding, bank financing for its planned Colorstar operations,
a potential e-mall website, Ling Xiao expansion, potential merger or acquisition
candidates and strategic partners; any of which would enhance stockholders
investment.

Revenues for the year ended December 31, 2008, were $608,915 as
compared to $236,981 during the previous fiscal year ended December 31, 2007.
The fee schedule for new Tenet subscribers calls for annual fees payable in
advance and decreasing incrementally over a three year period. The annual fee in
year three is 50% of the initial year one annual fee payment. During 2008,
almost all of our subscribers were at the 50% fee level which reduced corporate
revenues. During 2008, the new subscriber rate has been less than the number
that have cancelled their subscriptions.

Because the Company has had insufficient working capital to actively
  promote and market to Tenet non-subscribers in Dalian, there have been fewer
  new subscribers at the high annual rate and a substantial percentage of subscribers
  are at the reduced rates. Subscriber numbers were 10,237 as at December 31,
  2005 (which included 169 new subscribers that year), and 8,243in Dalian as at
  December 31, 2008 (which included minimal

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new subscribers during 2008), and 886 in Yingkou. As described
above, we are currently in discussions with the Dalian national Tax Bureau so as
to allow us to update our Tenet system for our subscribers. If we are unable to
successfully conclude these discussions, we will have no option but to cease
Tenet operations in 2009.

If we are successful and as described elsewhere, the Company
must raise sufficient funds in order to provide working capital for sales and
marketing efforts to promote Tenet and increase the new subscriber numbers. As
yet, the Company has not finalized arrangements for such additional financing
and there is no guarantee that such financing can be raised or that such
financing will be available at terms acceptable to the Company. During 2008, the
Company devoted a significant portion of its surplus capital to the Colorstar
project development, which further increased losses and working capital
deficiencies.

These factors raise substantial doubt about our ability to
continue as a going concern. In view of the matters described above, continued
operation of the Company is dependent upon our ability to raise additional
capital, obtain financing and succeed in our future operations.

Limitations on Liability and Indemnification of Directors
and Officers May Result in Expenditures by the Company.

The Companys bylaws provide that it must indemnify its
directors and officers to the fullest extent permitted under Washington law
against all liabilities incurred by reason of the fact that the person is or was
a director or officer of the Company or a fiduciary of an employee benefit plan,
or is or was serving at the request of the Company as a director or officer, or
fiduciary of an employee benefit plan, of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.

The effect of these provisions is potentially to indemnify the
Companys directors and officers from all costs and expenses of liability
incurred by them in connection with any action, suit or proceeding in which they
are involved by reason of their affiliation with the Company. Pursuant to
Washington law, a corporation may indemnify a director, provided that such
indemnity shall not apply on account of: (a) acts or omissions of the director
finally adjudged to be intentional misconduct or a knowing violation of law; (b)
unlawful distributions; or (c) any transaction with respect to which it was
finally adjudged that such director personally received a benefit in money,
property, or services to which the director was not legally entitled.

The Companys bylaws also permit it to maintain insurance on
behalf of its officers, directors, employees and agents against any liability
asserted against and incurred by that person whether or not the Company has the
power to indemnify such person against liability for any of those acts.

Due to the indemnification and limitation of liability of our
directors and officers, any limitation on the liability of any director, or
indemnification of directors, officer, or employees, could result in substantial
expenditures being made by the Company in covering any liability of such persons
or in indemnifying them.

We have sustained losses in the past and may experience
earnings declines or net losses in the future.

We sustained net losses in the periods prior to 2008. We cannot
assure you that we can sustain profitability or avoid net losses in the future.
We expect that our operating expenses will increase and the degree of increase
in these expenses will be largely based on anticipated organizational growth and
revenue trends. As a result, any decrease or delay in generating additional
sales volume and revenue could result in substantial operating losses.

We may be subject to litigation for information provided on
our websites, which may be time-consuming to defend.

Our websites contain information about the various divisions of
our business operations, both in English and Chinese print. It is possible that
if any information, accessible on our websites, contains errors or false or
misleading information, third parties could take action against us for losses
incurred in connection with the use of such information. Any such claims, with
or without merit, could be time consuming and costly to defend, result in
litigation and divert managements attention and resources.

We could be liable for breaches of security on our websites
and fraudulent transactions by users of our websites.

We conduct a portion of our transactions through our websites.
  In such transactions, secured transmission of confidential information (such
  as customers air ticket reservation information, credit card information,
  personal information and billing addresses) over public networks is essential
  to maintain consumer and supplier confidence. Our current security measures
  may not be adequate. Security breaches could expose us to litigation and possible
  liability for failing to secure confidential customer or supplier information
  and could harm our reputation and ability to attract customers.

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If we are unable to attract, train and retain key
individuals and highly skilled employees, our business may be adversely
affected.

If our business continues to expand, we will need to hire
additional employees, including management personnel to maintain and expand our
networks, information technology and engineering personnel to maintain and
expand our websites, customer service centers and systems, and customer service
representatives to serve an increasing number of customers for Colorstar, Ling
Xiao and other planned operations in China and in North America. If we are
unable to identify, attract, hire, train and retain sufficient employees in
these areas, users of our websites and Colorstar equipment may have negative
experiences and turn to our competitors, which could adversely affect our
business and results of operations.

A slow-down of economic growth in China may adversely affect
our growth and profitability.

Our business and operations are primarily based in China and
almost all of our revenues are derived from our operations in China.
Accordingly, our financial results have been, and are expected to continue to
be, affected by the growth in the economy in China. Although the economy in
China has grown significantly in the past decades, we cannot assure you that
growth will continue or that any slow-down will not have a negative effect on
our businesses. For our Ling Xiao business, any slow-down of economic growth in
China could reduce expenditures for travel, which in turn may adversely affect
our operating results and financial condition.

Our limited operating history makes evaluating our business
and prospects difficult.

We began our operations in 2006. As a result, we have a limited
operating history for you to evaluate our business. It is also difficult to
evaluate our prospective business, because we may not have sufficient experience
to address the risks frequently encountered by early stage companies using new
and unproven business models and entering new and rapidly evolving markets,
including markets for online commerce including air ticket booking. These risks
include our potential failure to:

- obtain new customers at reasonable cost, retain existing customers,
  encourage repeat purchases or convert visitors to our websites into customers;
- increase awareness of our Colorstar and Ling Xiao brand sand continue to
  build user loyalty;
- adequately and efficiently operate, upgrade and develop our platform
  systems that we use to develop additional applications for the technology;
- maintain adequate control of our expenses;
- attract and retain qualified personnel;
- respond to technological changes; and
- respond to competitive market conditions.

If we are unsuccessful in addressing any of these risks, our
business could be materially and adversely affected.

The requirement for additional financing will affect future
profitability.

We continue to experience cash shortages from ongoing
development of the Colorstar technology. We will require additional cash
infusions to finance the expected growth of our Colorstar business, including
purchases of inventory and computer equipment. The Company is anticipating
raising minimum funding of $500,000 over the next 12 months and that such
funding would involve the new issuance of stock of at least 1,000,000 shares.
Failure to generate such funding will have a direct effect on our expansion
plans, cash flows and profitability of China operations and ultimately on our
operations.

As at December 31, 2008 the corporate cash resources were such
that we had a negative working capital position of $374,278. Management has
downsized its Tenet software development staff and reduced all unnecessary
expenditures. However, we have added additional staff for our planned Colorstar
operations and revenues from installed units, combined with proposed bank
inventory financing, should positively impact our existing cash and working
capital positions. We estimate that cash flows from ongoing shareholder loans,
planned Ling Xiao profit generation and planned installed Colorstar units will
be sufficient to allow continuing operations for the next twelve months.

Directors and Officers are non-residents of the United
States and could be beyond reach in the event of litigation.

Because two of our directors and officers reside outside of the
  United States, it may be difficult for shareholders to enforce your rights against
  them or enforce U.S. court judgments against them in the PRC or Canada. Our
  current operations are conducted in China. In addition, two of our directors
  and officers are nationals of

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countries other than the United States. Zhao Yan and Zhong Bo
Jia are both citizens and residents of the PRC. James Wang is a citizen of
Canada but a resident in Washington State under a US L-1 visa.

Each director maintains his or her principal assets in their
country of residence. As a result, it may be difficult for you to effect service
of process within the United States upon those persons residing outside of the
United States. In addition, there is uncertainty as to whether the courts of
China would recognize or enforce judgments of United States courts obtained
against us or such persons predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof, or be competent to
hear original actions brought in these countries against us or such persons
predicated upon the securities laws of the United States or any state
thereof.

We rely on key members of management, the loss of whose
services would have a material adverse effect on our success and
development.

Our success depends to a certain degree upon certain key
members of the management. These individuals are a significant factor in our
growth and success. In particular, our success is highly dependent upon the
efforts of our President and Chief Executive Officer, our Vice President, our
Manager of Technology and our directors; the loss of whose services would have a
material adverse effect on our success and development. In addition, the CEO of
Ling Xiao, Chen Mei Zhou ,

All of our management team located in China currently have
signed employment agreements with us. These individuals are a significant factor
in our growth and success. The loss of the service of members of the management
could have a material adverse effect on us. None of the executives have key life
insurance policies on their lives and the loss of any one of them could have a
negative cash effect on our business.

Risks Related to Conducting Business in China

Chinese government policies could have potential negative
impacts on our businesses.

Policies of the Chinese government can have significant effects
on the economic conditions of China. The Chinese government has confirmed that
economic development will follow a model of market economy under socialism.
Under this direction, we believe that the PRC will continue to strengthen its
economic and trading relationships with foreign countries and business
development in China will follow market forces. While we believe that this trend
will continue, there can be no assurance that such will be the case. Our
interests could be adversely affected through:

- Changes in laws, regulations or the interpretation thereof;
- Confiscatory taxation;
- Restrictions on currency conversion, imports or sources of supplies; or
- The expropriation or nationalization of private enterprises.

Although the Chinese government has been pursuing economic
reform policies for approximately two decades, there is no assurance that the
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 other circumstances affecting China's
political, economic and social life.

As this may specifically relate to our business segments, we
face an emerging economy where laws and regulations are continually changing.
Increased requirements for system security and integrity could result in the
requirement for us to expend additional funds to enhance our systems to meet new
regulatory rules.

China tax rules regarding repatriation of profits and payment
of dividends could be increased which could affect our ability to generate cash
flows from our subsidiary. All such policies could materially affect our future
business operations in China.

Our business may be adversely affected by relationships
between the United States and any country in which we do business which may
impede our ability to operate in the countries in which we are located.

We are a Washington corporation and subject to the laws of the
  United States. Our principal business is conducted through a wholly-owned subsidiary
  that operates in China. Our business is directly affected by political and economic
  conditions in China. Our business may be adversely affected by the diplomatic
  and political relationship between the U.S. and China. This relationship may
  adversely influence the Chinese government and public opinion of U.S. corporations
  conducting business in that country and may affect our ability to obtain or
  maintain regulatory approvals to operate in China.

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Our business may be adversely affected by internal Chinese
issues such as boycotts, strikes, protests and government sanctions which may
impede our ability to operate our business in China.

Our business in China could be affected by government
sanctions, or strikes, boycotts, protests and other actions which could result
from political issues between the United States and China. These are issues of
which we would have no control over. Should such events occur, we would attempt
to distance ourselves as much as possible from local negative actions and could
even consider shutting our business down until such time as the negative actions
have subsided. To date no such actions have occurred that affected our China
business and we anticipate no such actions occurring in Dalian, Shenyang or
elsewhere in northeast China, based on our understanding of current events in
that region of China.

Chinese Laws and Regulations could have potential negative
impact on us.

The Company and Dalian Beigang are considered foreign persons
or foreign funded enterprises under PRC laws and, as a result, we are required
to comply with PRC laws and regulations. The Chinese legal system is a civil law
system based on written statutes. Unlike common law systems, it is a system in
which decided legal cases have little precedential value. In the late 1970s, the
Chinese government began to promulgate a comprehensive system of laws and
regulations governing economic matters. The overall effect of legislation
enacted over the past 20 years has significantly enhanced the protections
afforded to foreign invested enterprises in China. However, these laws,
regulations and legal requirements are relatively recent, are evolving rapidly,
and their interpretation and enforcement involves uncertainties. The
effectiveness of newly enacted laws, regulations or amendments may be delayed,
resulting in detrimental reliance by foreign investors. These uncertainties
could limit the legal protections available to foreign investors, such as the
right of foreign invested enterprises to hold and/or maintain licenses and
permits such as requisite business licenses. New laws and regulations that
affect existing and proposed future businesses may also be applied
retroactively. In addition, the PRC authorities retain broad discretion in
dealing with violations of laws and regulations, including levying fines,
revoking business licenses and requiring actions necessary for compliance. In
particular, licenses, permits and beneficial treatments issued or granted to us
by relevant governmental bodies may be revoked at a later time under contrary
findings of higher regulatory bodies. We may be subject to sanctions, including
fines, and could be required to restructure our operations. As a result of these
substantial uncertainties, we cannot assure you that we will not be found in
violation of any current or future PRC laws or regulations.

China is still a developing nation and therefore the rules,
regulations and practices are not necessarily as transparent as western
investors may be used to. China has made significant changes to its legal and
accounting rules and has recently allowed international accounting firms to
audit domestic Chinese companies.

Management is unaware of any additional current regulations, or
any new regulations that are pending introduction, that are currently required
by Dalian Beigang in respect to its business operations or its Tenet, Ling Xiao
or planned Colorstar systems. Neither the Company nor Dalian Beigang has ever
been found to be in violation of any PRC law or regulation.

Adverse changes in economic and political policies of the
PRC government could have a material and adverse effect on the overall economic
growth of China, which could adversely affect our business.

Substantially all of our business operations are conducted in
China. Accordingly, our results of operations, financial condition and prospects
are subject to a significant degree to economic, political and legal
developments in China. Chinas economy differs from the economies of most
developed countries in many respects, including with respect to the amount of
government involvement, level of development, growth rate, control of foreign
exchange and allocation of resources. While the PRC economy has experienced
significant growth in the past 20 years, growth has been uneven across different
regions and among various economic sectors of China. The PRC government has
implemented various measures to encourage economic development and guide the
allocation of resources. Some of these measures benefit the overall PRC economy,
but may also have a negative effect on us. For example, our financial condition
and results of operations may be adversely affected by government control over
capital investments or changes in tax regulations that are applicable to us.
Since early 2004, the PRC government has implemented certain measures to control
the pace of economic growth. Such measures may cause a decrease in the level of
economic activity in China, which in turn could adversely affect our results of
operations and financial condition.

Restrictions on currency exchange may limit our ability to
receive and use our revenues effectively.

Because substantially all of our revenues are currently in the
  form of RMB, any restrictions on currency exchange may limit our ability to
  use revenue generated in RMB to fund our business activities outside China or
  to make dividend payments in U.S. dollars. The principal regulation governing
  foreign currency exchange in China is the Foreign Currency Administration Rules
  (1996), as amended. Under the Rules, RMB is freely convertible for trade and
  service-related foreign exchange transactions, but not for direct investment,
  loan or

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investment in securities outside China unless the prior
approval of the State Administration of Foreign Exchange of the Peoples
Republic of China is obtained. Although the PRC government regulations now allow
greater convertibility of RMB for current account transactions, significant
restrictions still remain. For example, foreign exchange transactions under our
subsidiaries capital account, including principal payments in respect of
foreign currency-denominated obligations, remain subject to significant foreign
exchange controls and the approval of the State Administration of Foreign
Exchange. These limitations could affect our ability to obtain foreign exchange
for capital expenditures. We cannot be certain that the PRC regulatory
authorities will not impose more stringent restrictions on the convertibility of
RMB, especially with respect to foreign exchange transactions.

Online payment systems in China are at an early stage of
development and may restrict our ability to expand our online commerce service
business.

Online payment systems in China are at an early stage of
development. Although major Chinese banks are instituting online payment
systems, these systems are not as widely available or acceptable to consumers in
China as in the United States and other developed countries. In addition, only a
limited number of consumers in China have credit cards or debit cards, relative
to countries like the United States. The lack of adequate online payment systems
may limit the number of online commerce transactions that we can service. If
online payment services do not develop, our ability to grow our online commerce
business may be limited.

The Internet market has not been proven as an effective
commercial medium in China.

The market for Internet products and services in China has only
recently begun to develop. The Internet penetration rate in China is lower than
those in the United States and other developed countries. Since the Internet is
an unproven medium for commerce in China, our future operating results from
online services will depend substantially upon the increased use and acceptance
of the Internet for distribution of products and services and facilitation of
commerce in China.

The Internet may not become a viable commercial marketplace in
China for various reasons in the foreseeable future. Issues that could detract
from Internet development in China include:

- consumer dependence on traditional means of commerce;
- inexperience with the Internet as a sales and distribution channel;
- inadequate development of the necessary infrastructure to facilitate online
  commerce;
- concerns about security, reliability, cost, ease of deployment,
  administration and quality of service associated with conducting business over
  the Internet;
- inexperience with credit card usage or with other means of electronic
  payment; and
- limited use of personal computers.

If the Internet is not widely accepted as a medium for online
commerce in China, our ability to grow our online business would be impeded.

Uncertainties with respect to the PRC legal system could
adversely affect us.

We conduct our business primarily through our wholly-owned
subsidiaries incorporated in China. Our subsidiaries are generally subject to
laws and regulations applicable to foreign investment in China and, in
particular, laws applicable to wholly foreign-owned enterprises. In addition, we
depend on several affiliated Chinese entities in China to honor their service
agreements with us. Almost all of these agreements are governed by PRC law and
disputes arising out of these agreements are expected to be decided by
arbitration in China. The PRC legal system is based on written statutes. Prior
court decisions may be cited for reference but have limited precedential value.
Since 1979, PRC legislation and regulations have significantly enhanced the
protections afforded to various forms of foreign investments in China. However,
since the PRC legal system is still evolving, the interpretations of many laws,
regulations and rules are not always uniform and enforcement of these laws,
regulations and rules involve uncertainties, which may limit remedies available
to us. In addition, any litigation in China may be protracted and result in
substantial costs and diversion of resources and management attention.

The continued growth of Chinese Internet market depends on
the establishment of an adequate telecommunications infrastructure.

In China, almost all access to the Internet is maintained through
  state-owned telecommunication operations under the administrative control and
  regulatory supervision of Chinas Ministry of Information Industry. In
  addition, the national networks in China connect to the Internet through government-controlled
  international gateways. These international gateways are the only channels through
  which a domestic Chinese user can connect to the international Internet network.
  We rely on this infrastructure, China Telecom and China Unicom

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to provide data communications capacity primarily through local telecommunications lines. Although the government has announced plans to develop aggressively the national information infrastructure, we cannot assure you that this infrastructure will
be developed. In addition, we will have no access to alternative networks and services, on a timely basis if at all, in the event of any infrastructure disruption or failure. The Internet infrastructure in China may not support the demands
associated with continued growth in Internet usage.

The lack of availability in China of business liability insurance could materially affect our business.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products and do not, to our knowledge, offer business liability insurance. As a result, we do not have any
business liability insurance coverage for our operations.  Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any
business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

Downward pressure on our product pricing from government price bureaus will have a material effect on our business.

Price levels for taxpayer use of Tenet are initially set by each local Pricing Bureau which sets the maximum price for taxpayers to use the Tenet System or other systems. There is no assurance that each Local Price Bureau will agree to the prices
Dalian Beigang has set nor that fees will not change as time goes by. All consumer products require pricing bureau approval on list prices when initially offered.

Restrictions on dividends imposed by the Chinese government could negatively affect our business.

Chinese legal restrictions could affect the Companys ability to distribute dividends. Chinese legal restrictions permit payment of dividends only out of its net income, if any, determined in accordance with Chinese accounting standards and
regulations.

Under current Chinese regulations, the payment of dividends, trade and service-related foreign transactions to a foreign investor or a foreign-invested enterprise is treated as a current account payment for which the approval of the
State Administration of Foreign Exchange is not required. However, in order to distribute dividends the Company must file documentation to a designated foreign exchange bank that certifies that all requirements have been met, such as payment of
taxes, board of directors approval and a capital verification report issued by an accounting firm. A return of capital, which includes foreign direct investment, upon the dissolution of a foreign-invested enterprise, is treated as a
capital account payment and requires the State Administration of Foreign Exchange approval in addition to the filing of documentation. Restrictions on dividends flow through to the parent company could adversely affect cash flows and the
US companys ability to honor its financial obligations including providing dividends to our shareholders. In this document, we have disclosed all figures in US dollars other than the disclosures on annual fees paid by Tenet subscribers.

Potential restrictions on dividends could adversely affect our cash flow.

Dalian Beigang may not be able to obtain sufficient foreign exchange to satisfy its foreign exchange requirements or pay dividends to us.  A substantial portion of our revenues and operating expenses are denominated in Renminbi while a portion of
our capital expenditures is denominated in US dollars. Accordingly, failure by Dalian Beigang to generate sufficient foreign exchange to pay dividends to us could adversely affect our cash flows and adequately address our ongoing working capital
needs.

Restrictions on the Ability of our Subsidiary to pay Dividends.

Failure of our Chinese subsidiary to generate profits will restrict us from paying dividends to our US parent corporation. Restrictions on dividends flow through to the parent company could adversely affect cash flows and the US companys
ability to honor its financial obligations including providing dividends to our shareholders. Although we currently do not anticipate such an issue, new China government policies could be implemented or be change such that we are restricted from
paying dividends from our China subsidiary to our US parent corporation. This again would restrict our ability to meet our corporate cash flow needs and restrict our abilities to pay dividends to our shareholders.

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Currency conversion could have a negative impact on our business.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. We receive substantially all of our revenues in Renminbi, which is currently not a freely
convertible currency. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends, or otherwise satisfy foreign currency dominated obligations. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions, interest payments and expenditures from the transaction, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange
by complying with certain procedural requirements. However, approval from appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the
repayment of bank loans denominated in foreign currencies.

The Companys major operation is in the PRC, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between United States dollars and the Chinese Renminbi.
Historically, the PRC government has benchmarked the Renminbi exchange ratio against the US dollar, thereby mitigating the associated foreign currency exchange rate fluctuation risk. The Company does not believe that its foreign currency exchange
rate fluctuation risk is significant, especially if the PRC government continues to benchmark the Renminbi against the US dollar.

The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency
demands, we may not be able to pay certain of our expenses as they come due.

The PRC government regulates the air-ticketing, travel agency, advertising and Internet industries. If we fail to obtain or maintain all pertinent permits and approvals or if the PRC government imposes more restrictions on these industries, our
business may be adversely affected.

The PRC government regulates the air-ticketing, travel agency, advertising and Internet industries. We are required to obtain applicable permits or approvals from different regulatory authorities to conduct our business, including separate licenses
for Internet content provision, air-ticketing, advertising and travel agency activities. If we fail to obtain or maintain any of the required permits or approvals, we may be subject to various penalties, such as fines or suspension of operations in
these regulated businesses, which could severely disrupt our business operations. As a result, our financial condition and results of operations may be adversely affected.

In particular, the Civil Aviation Administration of China, or CAAC, regulates pricing of air tickets as well as commissions payable to air- ticketing agencies. If restrictive policies are adopted by CAAC or any of its regional branches, our
air-ticketing revenues may be adversely affected.

Risk Factors Relating to the Companys Colorstar Industry

The requirement for additional financing will affect future profitability.

Currently the Company uses its existing cash resources to finance construction of Colorstar test units. We anticipate that our current sales and marketing efforts will result in agreements being entered into under which we will be required to
provide Colorstar units for partner retail locations, Since we intend to maintain ownership of all Colorstar units at all times, we must fully finance all manufacturing, assembly and operating costs. Our current banking arrangements will not cover
such needs, however we are in discussions with a number of other Chinese banking entities regarding a 100% inventory financing program for orders in hand. We believe that such bank financing will materialize. In the event that it does not, then we
will be forced to implement a program whereby we sell the Colorstar units for a fee and then charge an ongoing monthly fee to operate such units on behalf of the purchasers. Alternatively we would scale back proposed Colorstar operations which would
have a negative effect on planned operations and on the financial health of the Company.

Our Systems May Experience Operating Difficulties as The Number of Colorstar Kiosks Increases.

To date we have had a limited number of kiosk units installed
  in the Dalian, China area which have been subject to constant and ongoing consumer
  usage for over eighteen months. The current model unit has achieved the performance
  levels which we have set and we have concluded that the unit has reached a commercial
  stage. However, once we start producing units in volume and we start subjecting
  our server units to increasing unit and transaction volumes, we could expect
  operational issues may develop that could seriously impact our financial performance
  and ability to enter into further agreements or franchise-type arrangements.
  Our historical expertise in developing the Tenet system, with its online security
  and access systems, makes us confident that we have the expertise to correct
  any issues that may arise from Colorstar unit operations.

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Security Issues related to cash Controls and Debit/Credit card handling procedures Could Negatively Affect Profitability.

Our planned Colorstar business will entail the installation of many individual Colorstar kiosks, each installed remotely from our central server, and each located in a separate retail location. Users will be paying for transactions with cash, bank
debit cards or credit cards. We must ensure that our security systems adequately provide for payment transactions to be handled correctly and that auditable cash handling procedures are implemented at each location. Our online server, to which each
Colorstar kiosk is connected at all times, has systems built in which will indicate actual cash and debit-credit card payments and when such payments were picked up-collected. We are confident that our expertise in development of Tenet systems has
provided us with the expertise to develop and implement any and all security related issues required for the Colorstar network.

Component failures in Kiosk manufacture Could result in Field Location Financial problems.

Our manufacturing process for Colorstar kiosk assembly and production includes a comprehensive and detailed quality control program which has been designed to ensure that all units are fully operational when shipped. Since each unit is connected to
our central server at all times, we expect that any field malfunctions will be immediately identified. The Company will establish a field service team whose responsibility will be to address any repair and maintenance issues as soon as they
arise.

Introduction of Colorstar into North America and Elsewhere Could be restricted Due to Local regulatory Compliance issues.

Currently we have two Colorstar units located in Vancouver, Canada where they are being analyzed to determine any and all issues that could affect performance and regulatory compliance if the units were to be introduced into the North American
marketplace. We expect that such analysis will be completed by second quarter 2009, after which the North American Colorstar business plan should be finalized.

Competition could have a materially adverse effect on our business.

In China, we expect that stand alone digital photo kiosks produced by other manufacturers will continue to be introduced into the marketplace. Management`s assessment of potential market demand is such that competition is inevitable and likely from
significant players such as Kodak, Sony and others. Our plan is to aggressively approach the geographical markets that we have expertise in and to establish operating relationships with large partners, who have retail locations located in areas
where we currently do not conduct business. Based on our market research to date, we believe that Colorstar units are more cost efficient and provide higher quality photo products that all other photo production units currently on the market. Hence,
we believe that we will have a significant competitive advantage in our planned expansion in China. In North America, we are currently analyzing Colorstar units to confirm regulatory compliance and user acceptance in the United States and in Canada.
Once that analysis is completed, we will then finalize our business plan for that market.

Resistance by users towards our products could negatively affect our revenues and profits.

Consumers may not find value in Colorstar units such that average usage numbers are below break-even levels. Based on usage figures of test units installed, we believe that our projected 35% usage figure is reasonable and achievable. Because of the
cost effectiveness of the design and production process, we could lower user selling prices if required, although to date, consumer response has indicated that our price point is acceptable to the market.

Intellectual Property Protection May be Inadequate to Protect Us from Competitive Intervention.

Our ability to compete effectively will depend on our success in protecting our proprietary technology, both in China, in the United States and elsewhere. We have filed for patent protection in China and certain other countries to cover proprietary
design aspects of our Colorstar products.

These patent applications are under review by the Chinese
  Patent Office and, to date, we have not been issued any patent approvals in
  China or elsewhere. No assurance can be given that any patents relating to our
  existing technology will be issued from any patent offices; that we will receive
  any patent approvals in the future based on our continued development of our
  technology; or that any patent protection, once approved, will be sufficient

to deter others, legally or otherwise, from developing or marketing competitive products utilizing our technologies.

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In addition to seeking patent protection, we rely on trade secrets, know-how and continuing technological advancement to seek to achieve and thereafter maintain a competitive advantage. Although we have entered into or intend to enter into
confidentiality and invention agreements with our employees, consultants and advisors, no assurance can be given that such agreements will be honored or that we will be able to effectively protect our rights to our unpatented trade secrets and
know-how. Moreover, no assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and know-how.

Risk factors relating to our Ling Xiao Travel Services Business

Growth in the Overall Economy and Demand for Travel Services in China.

We expect that our financial results will continue to be affected by the overall growth of the economy and demand for travel services in China. According to the statistical report published on the website of the National Bureau of Statistics of
China on February 28, 2007, GDP per capita  rose from RMB 9,398 (US$1,135) to RMB15,973 (US$2,047), representing a 14% compound annual growth rate. This growth led to a significant increase in the demand for travel services. According to the
statistical report published on the website of National Bureau of Statistics of China on February 28, 2007, domestic tourism spending grew from RMB387.8 billion (US$46.9 billion) in 2002 to RMB623.0 billion (US$79.8 billion) in 2006,
representing a compound annual growth of 13%. However, current economic conditions have changed and such continued growth rates are not now expected. A slow-down of the Chinese economy, will have a material and adverse effect on the travel industry
in China, which in turn would harm our business.

Our business may be harmed if our infrastructure and technology are damaged or otherwise fail or become obsolete.

Our customer service center and substantially all of our computer and communications systems are located at single facilities in Dalian and Shenyang and are therefore vulnerable to damage or interruption from human error, computer viruses, fire,
flood, power loss, telecommunications failure, physical or electronic break-ins, sabotage, vandalism, natural disasters and similar events. We currently do not have backup systems and do not carry business interruption insurance to compensate us for
losses that may occur.

We use an internally developed booking software system known as 8000e that supports the aspects of our booking transactions. Capacity constraints could cause unanticipated system disruptions, slower response times, poor customer service, impaired
quality, and delays in reporting accurate financial and operating information. These factors could cause us to lose customers , which will have a material and adverse effect on our results of operations and financial condition.

Declines or disruptions in the travel industry generally could reduce our revenue.

A large part of our Ling Xiao business is driven by the trends that occur in the travel industry in China, including the  airline and tour sectors. As the travel industry is highly sensitive to business and personal discretionary spending levels, it
tends to decline during general economic downturns. We could be severely affected by declines or disruptions in the travel industry and in many cases, have little or no control over those changes.

Seasonality in the Travel Service Industry.

The travel service industry is characterized by seasonal fluctuations and accordingly our Ling Xiao revenues may vary from quarter to quarter. Typically, the revenues generated during the summer season of each year generally are higher than those
generated during the winter season, mainly because the summer season coincides with the peak business and leisure travel season, while the winter season of each year includes the Chinese New Year holiday, during which our customers reduce their
business activities.

Risk Factors Relating to the Companys Capital Stock

There is no significant trading market for our common stock as yet and if a market for our common stock does not develop, our investors will be unable to sell their shares.

We currently have our common stock quoted on the National
  Association of Securities Dealers Inc.'s OTC Bulletin Board under the trading
  symbol NNWS. The trading market for our common stock has not yet developed to
  any significant level. We cannot provide our investors with any assurance that
  a significant public market will materialize for our common stock. Further,
  the OTC Bulletin Board is not a listing service or

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exchange, but is instead a dealer quotation service for subscribing members. The market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions
and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of developmental stage companies, which may materially
adversely affect the market price of our common stock.

Risks of Dilution in New Stock Issuance.

We intend to approach potential funders, investors and brokerage firms to assist in raising a minimum of $500,000 over the next 12 month period.  Such investment, if available at all, will result in dilution of our existing shareholders
holdings.  Such dilution percentage could vary dependent upon our acceptance in the investment community as against other investment opportunities available. We anticipate that such financing would result in new share issuances of at least 1,000,000
shares. We` are authorized to issue up to 100,000,000 preferred shares of which none are currently issued and also authorized to issue up to100,00,000 common shares of which only 32,700,012 are currently issued.

Sales of a substantial number of shares of our common stock into the public market by the selling stockholders may result in significant downward pressure on the price of our common stock and could affect the ability of our stockholders to
realize any current trading price of our common stock.

Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock, when and if such market develops. Based upon the registration of stock in our registration statement,
selling stockholders may be reselling a substantial number of our shares of common stock which have been issued and are available for resale when any significant market develops for our common stock, which could have an adverse effect on the price
of our common stock. As a result of any such decreases in price of our common stock, purchasers who acquire shares from the selling stockholders may lose some or all of their investment.

Selling shareholders may impact our stock value through the execution of short sales which may decrease the value of our common stock.

Any significant downward pressure on the price of our common stock as the selling stockholders sell their registered shares of our common stock could encourage short sales by the selling stockholders or others. Any such short sales could place
further downward pressure on the price of our common stock.

Short sales are transactions in which a selling shareholder sells a security it does not own. To complete the transaction, a selling shareholder must borrow the security to make delivery to the buyer.  The selling shareholder is then obligated to
replace the security borrowed by purchasing the security at the market price at the time of replacement. The price at such time may be higher or lower than the price at which the security was sold by the selling shareholder.  If the underlying
security goes down in price between the time the selling shareholder sells our security and buys it back, the selling shareholder will realize a gain on the transaction. Conversely, if the underlying security goes up in price during the period, the
selling shareholder will realize a loss on the transaction. The risk of such price increases is the principal risk of engaging in short sales. The selling shareholders could short the stock by borrowing and then selling our securities in the market.
Because the selling shareholders control a large portion of our common stock, the selling shareholders could have a large impact on the value of our stock if they were to engage in short selling of our stock. Such short selling could impact the
value of our stock in an extreme and volatile manner to the detriment of other shareholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. DESCRIPTION OF PROPERTY

Our North American executive office consists of approximately 100 square feet of temporary space and is located at Suite #4200, 601 Union Street, Seattle, Washington, 98101. The lease is a month-to month arrangement with the option to increase space
as needs require. The current monthly rent is $225.

In Dalian, China, as at December 31, 2007, we lease approximately
  557 square meters under two different lease agreements. We use these facilities
  for all corporate activities as well as Tenet production, design and training
  functions. The leases on these facilities have been renewed and now terminate
  in 2009 and the aggregate monthly rent is $2320.

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The Ling Xiao business in Dalian operates from leased office
space in the central area of Dalian at Rooms 2704, 2705, 2706, and 1101 in the
Yue Xiu Building, No.82 Xin Kai Road, Xi Gang District, Dalian, China

Ling Xiao in Shenyang operates from office and dormitory
facilities located at No. 109- 6-1 Nanjing North Street, Peace District,
Shenyang, China and lease payments are $1,681 per month.

ITEM 3. LEGAL PROCEEDINGS

We are not party to any legal proceedings, nor are we aware of
any contemplated or pending legal proceedings against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS

On October 9, 2008 we held our annual shareholders meeting at
our offices in Dalian China. At the meeting, our shareholders approved all of
the proposals listed below which were provided in Form 14 Proxy documents and
presented at the meeting for vote and discussion:

|Proposal 1:  | To re-elect the current three (3) directors to serve
      until the next annual meeting of shareholders; A total of 20,910,000
      shares were voted in favor and 125,000 shares were voted against the
      election of each of the directors nominated by the Board. All votes were
      identical for all three nominees. There were no abstentions.                                                                                                                                                                                                                                                                                                                 
|------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Proposal 2:  | To approve a plan of merger for the reincorporation of
      the Company from the State of Colorado to the State of Washington and the
      change of the name of the Company to Northport Network Systems, Inc.; A
      total of 20,910,000 shares were voted in favor and 125,000 shares were
      voted against regarding approval of a plan of merger for the
      reincorporation of the Company from Colorado to Washington State and also
      to change the name of the Company to Northport Network Systems, Inc. There
      were no abstentions.                                                                                                             
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Proposal 2A: | To approve the authorization of 100,000,000 shares of
      preferred stock with a par Value of $.001 to be adopted in the Articles of
      Incorporation, governed by the Washington Business Corporation Act in
      connection with the reincorporation merger. A total of 20,910,000 shares
      were voted in favor and 125,000 shares were voted against regarding
      approval of authorization of 100,000,000 shares of preferred stock with a
      par value of $.001 to be adopted in the Articles of Incorporation governed
      by the Washington Business Corporation Act in connection with the
      reincorporation merger. There were no abstentions.
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Proposal 2B: | To approve the requirement that not less than 25% of all
      the votes entitled to be cast on an issue will have the right to call a
      special meeting of the shareholders by submitting a written demand to the
      Company. A total of 20,910,000 shares were voted in favor and 125,000
      shares were voted against regarding approval for the requirement that not
      less than 25% of all the votes entitled to be cast on an issue will have
      the right to call a special meeting of the shareholders by submitting a
      written demand to the Company. There were no abstentions.                                                              
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Proposal 3:  | To approve the Companys proposed 2008 Stock Option Plan
      authorizing the amount of 2,750,000 shares of common stock; A total of
      20,910,000 shares were voted in favor and 125,000 shares were voted
      against regarding approval of the Companys proposed 2008 Stock Option
      Plan authorizing the amount of 2,750,000 shares of common stock. There
      were no abstentions.                                                                                                                                                                                                                                                                         
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Proposal 4:  | To ratify the appointment of Jimmy C.H. Cheung & Co
      as the Companys independent registered public accountants for the fiscal
      year ending December 31, 2008; A total of 20,910,000 shares were voted in
      favor and 125,000 shares were voted against regarding approval of
      appointment of our auditors for the next fiscal year. There were no
      abstentions.                                                                                                                                                                                                                                                                                     
|             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|             | Accordingly, all proposals were approved by the
      shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

25



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Disclosure of approval of the merger and other related issues
was disclosed in Form 8K filed with the SEC on November 17, 2008.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Market For Common Stock

Our common stock has been traded on the NASD OTC Bulletin Board
under the symbol NPCA since January 2008 and changed to NNWS in November
2008. The following table sets forth the high and low bid price per share of our
common stock for the quarters during 2008. These over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions:

Quarter
      Ended
    High
    LowDecember 31, 2008
    $1.20
    $1.00September 30, 2008
    $1.25
    $1.10June 30, 2008
    $1.48
    $0.26March 31, 2008
    $1.98
    $0.10


We had 251 registered shareholders of record as of December 31,
2008.

Penny Stock Rule

Our shares currently comply with the Penny Stock Reform Act of
1990 which may potentially decrease your ability to easily transfer our shares.
Broker-dealer practices in connection with transactions in penny stocks are
regulated. Penny stocks generally are equity securities with a price of less
than $5.00. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and monthly account statements showing the market value of each penny stock held
in the customers account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchasers written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that has to comply with the
penny stock rules. As our shares will likely have to comply with such penny
stock rules, our shareholders will in all likelihood find it more difficult to
sell their securities.

Our common stock commenced trading on the NASD OTC Bulletin
Board on January 16, 2008 under the symbol NPCA. and changed to NNWS in
November, 2008. During 2007 there was no formal market for our shares.

Holders of Common Stock

As of December 31, 2008, we had approximately 251 shareholders
of record for our common stock.

Dividend Policy

To date, we have not declared or paid cash dividends on our
shares of common stock. We intend to retain all future earnings, if any, for our
business and do not anticipate paying cash dividends in the foreseeable future.

Any future determination to pay cash dividends will be at the
discretion of our board of directors and will be dependent upon our financial
condition, results of operations, capital requirements, general business
conditions and such other factors as our board of directors may deem relevant.

Recent Issuances of Unregistered Securities

During 2008, we undertook the following share transactions involving
  our common stock:

26

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On February 25, 2008, the Company issued 1,000,000 shares of
restricted common stock to the original inventor of the Colorstar technology in
return for his agreement to continue his services employment with the Company
and to continue his research and development activities on Colorstar. The stock
was valued at $0.001 par value. The Company recognized consulting expense of
$1,000 included in legal and professional fees for the year ended December 31,
2008.

On August 11, 2008, the Company issued a total of 100,000
shares of common stock at $1 per share to two third parties for cash

On August 18, 2008, the Company issued 2,400,012 shares of
common stock to 2 stockholders or their nominees for settlement of the loans
owed by the Company in the aggregate amount of $1,200,006 at the conversion
price of $0.5 per share.

On October 9, 2008, the Company entered into an agreement to
acquire a 51% equity interest in Ling Xiao with a purchase price of 2,700,000
common shares of the Company. These shares have not yet been printed and issued
to the shareholders of Ling Xiao but will be during second quarter 2009.

Equity Compensation Plan Information

The Company currently has no equity compensation plan in place
for its employees, consultants or directors.

ITEM 6. SELECTED FINANCIAL DATA

Set forth below is our historical financial data with respect
to the fiscal years ended December 31, 2008, 2007, 2006, and 2005. The
information is only a summary. This information has been derived from, and
should be read in conjunction with, our historical Unaudited Condensed
Consolidated Financial Statements and Consolidated Financial Statements and
related notes beginning on page F-1 and the section entitled "Management's
Discussion and Analysis" beginning on page 26.

Selected Historical Financial Data

|                                                                                  |   | As of and for the Year Ended
      December 31, |  
|--------------------------------------------------------------------------------- | - | ----------------------------------------------- | -
|                                                                                  |   | 2008                                            |  
|                                                                                  |   |                                                 |  
|Total revenues                                                                    | $ | 608,915                                         |  
|Income (loss) from operations                                                     | $ | (680,276                                        | )
|Net income (loss)                                                                 | $ | (818,894                                        | )
|                                                                                  |   |                                                 |  
|Net income (loss) per share: basic and
      diluted                              |   | $ (0.03                                         | )
|Wt. Avg. shares outstanding: basic and diluted                                    |   | 28,897,265                                      |  
|Total assets                                                                      | $ | 4,862,828                                       |  
|Long-term debt including capital lease, obligations,
      net of current portion | $ |                                                 |  
|Shareholders' equity/deficit                                                      | $ | 2,959,499                                       |  

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION

Introduction

This Report 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. The words believe, expect, anticipate,
  intend, estimate, may, should,
  could, will, plan, future, continue,
  and other expressions that are predictions of or indicate future events and
  trends and that do not relate to historical matters identify

27

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forward-looking statements. These forward-looking statements
are based largely on our expectations or forecasts of future events, can be
affected by inaccurate assumptions, and are subject to various business risks
and known and unknown uncertainties, a number of which are beyond our control.
Therefore, actual results could differ materially from the forward-looking
statements contained in this document, and readers are cautioned not to place
undue reliance on such forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. A wide variety of factors could
cause or contribute to such differences and could adversely impact revenues,
profitability, cash flows and capital needs. There can be no assurance that the
forward-looking statements contained in this document will, in fact, transpire
or prove to be accurate.

Factors that could cause or contribute to our actual results
differing materially from those discussed herein or for our stock price to be
adversely affected include, but are not limited to: (i) our short operating
history; (ii) our ability to increase revenues and profits in 2009 as we
anticipate through greater market penetration within China and possible
introduction of our Colorstar technology into the United States and operating
and other efficiencies and to otherwise manage our planned rapid business
expansion; (iii) whether there will be a commercial market, domestically and
internationally, for our Colorstar products, (iv) the success of Ling Xiao
air-ticket operations in Dalian, Shenyang and other potential northeastern China
city locations where Ling Xiao may decide to commence business operations
therein; (v)characterization of our market by new products and rapid
technological change and an ability to adapt to the same; (vi) our ability to
compete against other companies that have greater economic and human resources
than we do; (vii) our dependence on key personnel; (viii) our ability to attract
and retain quality employees; (ix) ) our dependence on manufacturers and
suppliers; (x) our ability to protect technology through patents; (xi) our
ability to protect our proprietary technology and information as trade secrets
and through other similar means; (xii) our revenues and operating results may
fluctuate unexpectedly from quarter to quarter; (xiii) sale of substantial
amounts of our common stock that may have a depressive effect on the market
price of the outstanding shares of our common stock; (xiv) our ability to comply
with Sarbanes-Oxley Act of 2002 Section 404 in 2008; (xv) our non-payment of
dividends and lack of plans to pay dividends in the future; (xvi) future sale of
a substantial number of shares of our common stock that could depress the
trading price of our common stock, lower our value and make it more difficult
for us to raise capital; (xvii) our additional securities available for
issuance, which, if issued, could adversely affect the rights of the current
holders of our common stock; (xviii) our stock price which is likely to be
highly volatile because of several factors, including a relatively limited
public float; and (xix) indemnification of our officers and directors.

Since inception of our Chinese subsidiary, we have been
primarily engaged in the commercial tax filing software systems business, with
operations located in Dalian city in Liaoning province in northeast China. Since
2005, we have also undertaken a research and development program of a
proprietary digital photo processing technology, (`Colorstar`), which has now
been commercialized in a kiosk format. The technology has been developed as a
platform, thus allowing additional applications to be developed for the kiosk
technology besides the photo processing use. Very preliminary revenues have been
generated in 2007 and in 2008 and we anticipate a number of agreements with
retail store partners to develop in 2009. Subsequent to December 31, 2007, we
entered into an agreement on March 1, 2008 to supply and operate a total of 564
Colorstar kiosks in conjunction with China Netcom, a significant Chinese telecom
company. A form 8K was filed on March 6, 2008 regarding this agreement signing.
This agreement has now lapsed and we do not expect renewal because of customer
re-structuring of their business which will preclude arrangements such as we had
originally entered into. We also acquired a 51% equity interest in a China based
air ticket booking business known as Ling Xiao which is generating business and
expanding rapidly.

Results of Operations-Fiscal Year Ended
December 31, 2008 Compared to Fiscal year Ended December 31, 2007

The Company currently operates its business exclusively through
  its Chinese subsidiary. Dalian Beigang has three businesses; one being a business
  of providing platforms to customers in Dalian China for electronic filing of
  federal tax returns and payment of taxes(Tenet), a second being the supply and
  operation of stand alone, digital photo processing kiosks in partnership with
  retail locations, either by way of license or franchise-type arrangements; and
  the third being an air ticket booking business known as Ling Xiao which has
  operations in the north eastern China cities of Shenyang and Dalian, and in
  which the Company has a 51% equity interest. Revenues for Tenet take the form
  of annual fees paid by new and renewing subscribers. We provide services to
  our customers based on fixed-price contracts. We recognize services-based revenue
  from all of our contracts when the service has been performed, the customer
  has approved the completion of services and an invoice has been issued and collectability
  is reasonably assured. Revenue received by us for future services not yet performed
  is deferred. In late 2008, the China State Administration of Taxation installed
  a systematic black box on its website, designed to guarantee network safety
  for the system. As a result, Dalian Beigang is now unable to upgrade its TENET
  tax filing system. We are currently negotiating with representatives of the
  Federal

28

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Administration of Taxation in the Dalian Office on how to deal
with the problems that have risen as a result. Because we are currently unable
to update the Tenet system for our subscribers, we are not billing for services
or access- thus not currently generating any Tenet revenues. If we are unable to
resolve this issue, we will have no option but to discontinue Tenet operations
in 2009.

Revenues from Colorstar installations take the form of a
revenue charge to users of the kiosks, and such revenues are typically split
between the Company and the retail location on an 85/15 basis.

Revenues from Ling Xiao take the form of commissions earned
from air ticket bookings to a number of China airlines as conducted through Ling
Xiaos in-house call centers and also through a network of some 300 independent
travel agents that utilize Ling Xiaos proprietary booking systems.

The Company operates in three reportable segments; provision of
platforms for electronic filing of tax returns and payment of taxes, color photo
printing and air-ticketing agency services. The accounting policies of the
segments are the same as described in the summary of significant accounting
policies. The Company evaluates segment performance based on income from
operations. All inter-company transactions between segments have been
eliminated. As a result, the components of operating income for one segment may
not be comparable to another segment. The following is a summary of the
Companys segment information for the years ended December 31, 2008 and
2007:

|Provision of platform             |   |             |             |   |          |               |   |           |  |  
|--------------------------------- | - | ----------- | ----------- | - | -------- | ------------- | - | --------- |  | -
|for electronic filing of          |   |             | Color photo |   |          | Air-ticketing |   |           |  |  
|                                  |   | tax returns |             |   | printing |               |   | agency    |  |  
|2008                              |   |             |             |   |          |               |   |           |  |  
|Revenues                          | $ | 123,163     |             | $ | 11,760   |               | $ | 473,992   |  | $
|Gross profit (loss)               |   | 38,082      |             |   | (61,132  | )             |   | 272,868   |  |  
|Net income (loss) from operations |   | (322,796    | )           |   | (289,326 | )             |   | 58,543    |  |  
|Total assets                      |   | 42,151      |             |   | 427,026  |               |   | 1,284,160 |  |  
|Depreciation and amortization     |   | 19,531      |             |   | 26,935   |               |   | 1,829     |  |  
|                                  |   |             |             |   |          |               |   |           |  |  
|2007                              |   |             |             |   |          |               |   |           |  |  
|Revenues                          | $ | 234,763     |             | $ | 2,218    |               | $ | -         |  | $
|Gross profit (loss)               |   | 132,322     |             |   | (8,155   | )             |   | -         |  |  
|Net loss from operations          |   | (147,281    | )           |   | (152,960 | )             |   | -         |  |  
|Total assets                      |   | 35,221      |             |   | 310,474  |               |   | -         |  |  
|Depreciation and amortization     |   | 36,427      |             |   | 10,424   |               |   | -         |  |  

A reconciliation is provided for unallocated amounts relating
to corporate operations which is not included in the segment information.

|                                                      |   | Year ended December 31, |  
|----------------------------------------------------- | - | ----------------------- | -
|                                                      |   | 2008                    |  
|                                                      |   |                         |  
|Total net loss for reportable segments                | $ | (553,579                | )
|Unallocated amounts relating to corporate operations: |   |                         |  
|Legal and professional
      fees                     |   | (217,771                | )
|Others                                                |   | (47,544                 | )
|                                                      | $ | (818,894                | )

Revenues/Sales

Revenues for the year ended December 31, 2008, were $608,915
  as compared to $236,981 during the previous fiscal year ended December 31, 2007.
  The primary reason for the increase was due to the acquisition of a 51% equity
  interest in Ling Xiao on October 9, 2008 and the allocated revenues from Ling
  Xiao since that date. The fee schedule for new Tenet subscribers calls for annual
  fees payable in advance and decreasing incrementally over a three year period.
  The annual fee in year three is 50% of the initial year one annual fee payment.
  During the past year, almost 100% of subscribers had reached the 50% fee level
  which reduced corporate revenues. Revenues of Dalian Beigang are also affected
  by an annual average decrease of approximately 7% of subscribers that cease
  business every year and do not re-subscribe and also approximately 5% of business
  subscribers that merge with other entities, change their core business or move
  operations outside of Dalian city. During 2007 our Dalian subscriber base increased
  by only 19 although our existing subscriber base remained constant. There were
  minimal new subscribers enrolled during 2008.New subscribers pay annual fees
  of 1200 Yuan and thereafter, the annual fees incrementally decrease over three
  years until they reach a base of 600 Yuan per annum, or 50% of year one annual
  fees.

29

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Because the Company has had insufficient working capital to
actively promote non-subscribers in Dalian, there have been fewer new
subscribers at the high annual rate and a substantial percentage of subscribers
are at the reduced rates. Subscriber numbers were 10,237 as at December 31, 2005
(which included 169 new subscribers); 8,562 as at December 31, 2006 (which
included 102 new subscribers), 8,581 as at December 31, 2007(which included 19
new subscribers) and 8,243 as at December 31, 2008. As described elsewhere, the
Company must raise sufficient funds in order to provide working capital for
sales and marketing efforts to promote Tenet and increase the new subscriber
numbers. As yet, the Company has not finalized arrangements for such additional
financing and there is no guarantee that such financing can be raised or that
such financing will be available at terms acceptable to the Company.

The fee schedule for new Tenet subscribers calls for annual
fees payable in advance and decreasing incrementally over a three year period.
The annual fee in year three is 50% of the initial year one annual fee payment.
During the past year, a number of subscribers reached the 50% fee level which
reduced corporate revenues, especially since there has also been a decrease of
1,656 subscribers in Dalian since December 31, 2005, many of which had been year
one and two level subscribers. Revenues of Dalian Beigang from Tenet operations
are also affected by an annual average decrease of approximately 7% of
subscribers that cease business every year and do not re-subscribe and also
approximately 5% of business subscribers that merge with other entities, change
their core business or move operations outside of Dalian city. The new
subscriber rate has been less than those that have cancelled their
subscriptions. New subscribers pay annual fees of 1,200 Yuan and thereafter, the
annual fees incrementally decrease over three years until they reach a base of
600 Yuan per annum, or 50% of year one annual fees.

As described above, in late 2008, the China State
Administration of Taxation installed a systematic black box on its website,
designed to guarantee network safety for the system. As a result, Dalian Beigang
is now unable to upgrade its TENET tax filing system. We are currently
negotiating with representatives of the Federal Administration of Taxation in
the Dalian Office on how to deal with the problems that have risen as a result.
Because we are currently unable to update the Tenet system for our subscribers,
we are not billing for services or access- thus not currently generating any
Tenet revenues. If we are unable to resolve this issue, we will have no option
but to discontinue Tenet operations in 2009.

During 2007 and 2008 we installed a number of Colorstar photo
processing kiosks in the Dalian area under informal franchise arrangements.
Minor income amounts were generated from these units, although the purpose of
such installations was to generate consumer feedback and also to prove that
units were operating effectively and correctly. By December 31, 2007 we had
confirmed that this latest Colorstar model met all operating conditions
established by management and had reached a commercial stage. Due to failure by
the Company to generate working capital to pay for manufacturing of kiosks, only
12 units were produced in 2008 and none are currently in service. Until such
time as the Company can raise sufficient capital to cover kiosk manufacturing
costs, expansion of this division will be limited.

During the period since acquisition of a 51% equity interest in
Ling Xiao by the Company, Ling Xiao generated net revenue of $473,992 which was
generated from air ticket bookings incurred since October 9, 2008 of 99,517,732
yuan ($14,298,524.). The material majority of revenues originated from air
ticket bookings with other income totalling less than $30,000 during the
period.

Revenue Recognition

The Company recognizes revenues under the provisions of Staff
Accounting Bulletin (SAB) 104, Revenue Recognition when all of the following
have occurred: persuasive evidence of arrangement with the customer, services
have been performed, fees are fixed or determinable and collectability of the
fees is reasonably assured. These criteria as related to the Companys revenues
are considered to have been met as follows:

--Electronic tax filing services

The Company provides electronic tax filing services to its
customers based on fixed price contracts with contractual period of one year.
The customers are billed on approval of the contracts and based on the terms
included in the contracts. Revenue is recognized rateably over the term of the
contract and those billed and received in advanced by the Company for future
services not yet performed is deferred. On early termination of the contracts,
the fees received in advanced will be refunded to the customers.

Revenues are received upon execution of new Tenet subscription
contracts. Annual fees are paid in advance and are 1,200 Yuan for year one; 960
Yuan for year two; 720 Yuan for year three and 600 Yuan each year thereafter. As
at December 31, 2008, Dalian Beigang had a total of 8,243 subscribers.

30

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In Yingkou, a joint venture Tenet operation is operated by Lenovo
  Corporation and there were 886 subscribers as at December 31, 2008, compared
to 880 as at December 31, 2005. Fees charged to subscribers in Yingkou are similar to those in Dalian. Dalian Beigang receives 30% of fee revenues from the Yingkou operations, once subscribers exceed 1,000 in total.

All fees are paid annually in advance. Access to the Tenet system requires password usage which is altered annually at renewal dates. Typically, sales representatives sign up new subscribers after which subscribers attend training sessions at the
Dalian office facility. Thereafter, new subscribers are eligible to attend additional training sessions at no charge if needed.

As described above, in late 2008, the China State Administration of Taxation installed a systematic black box on its website, designed to guarantee network safety for the system. As a result, Dalian Beigang is now unable to upgrade its TENET tax
filing system. We are currently negotiating with representatives of the Federal Administration of Taxation in the Dalian Office on how to deal with the problems that have risen as a result. Because we are currently unable to update the Tenet system
for our subscribers, we are not billing for services or access- thus not currently generating any Tenet revenues. If we are unable to resolve this issue, we will have no option but to discontinue Tenet operations in 2009.

--Color photo printing services

Revenue from the sale of color photo printing services is derived from its own and affiliate operations, which consist of franchise agency and licensing program. The Company follows the guidance of Emerging Issues Task Force (EITF) 99-19, "Recording
Revenue Gross as a Principal versus Net as an Agent", for its presentation of revenue and direct costs. This guidance requires the Company to assess whether it acts as a principal in the transaction or as an agent acting on behalf of others. Where
the Company is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded gross in the statements of income. Revenue and related costs of services generated by the franchise agents are not included as
part of the Company's consolidated revenue and costs of services, respectively, since the Company has the direct contractual relationships with the customers, holds title to the related customer receivables and is the legal employer of the
employees.

The franchise agent acts as the Company's agent in a similar manner as a branch manager in the Company-owned locations. In the franchise arrangement, the Company has the direct contractual relationships with its customers and contracts with
customers are binding to the Company. The Company is also obligated for the employee payroll, electricity and related overheads regardless of customer acceptance of the services. These factors, among others, designate the Company as principal with
respect to its franchise agent operations. Franchise agents sales were $6,532 and $1,403 for fiscal 2008 and 2007, respectively.

The Company also has a licensing program whereby the licensee had the direct contractual relationships with the customers, held title to the related customer receivables and was the legal employer of the employees. Accordingly, net sales and costs
of services generated by the license operation are not included in the Company's consolidated financial statements. Fees are paid to the Company based on a fixed price for each of the photo printed and such license fees are recorded by the Company
as revenue. Fees received from licensed offices were $428 and $815 for fiscal 2008 and 2007, respectively.

For sale from its own operation, revenue is recognized after the photos are printed and delivered to the customers and cash has been collected.

--Air-ticketing agency services

The Company receives commissions from travel suppliers for air-ticketing services through the Companys transaction and service platform under various services agreements. Commissions from air-ticketing services rendered are recognized after
air tickets are issued, net of estimated cancellations. The Company presents revenues from such transactions on a net basis in the statements of operations as the Company, generally, does not assume inventory risks and has no obligations for
cancelled airline ticket reservations. Contracts with certain airlines contain discretionary escalating commissions that are paid to the Company subject to achieving specific performance targets. Such discretionary escalating commissions are
recognized when the air tickets are issued and performance guarantees, if any, are achieved.

Selling, General and Administrative Expenses.

General and administrative expenses were $532,093 in 2008,
  as compared to $299,761 in 2007; an increase of 177%. This increase was
  primarily a result of the costs incurred with attempted commercialization of
  Colorstar, increased travel to North America to investigate market opportunities
  and ongoing public entity related legal and audit costs. In addition, during
  the year we added administrative staffing for the Colorstar project, which also
  added to overall general expenses. Overall legal and audit costs in 2008 were
  $217,771 as compared to

31

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$106,545 in 2007.Depreciation costs were similar at $17,336 in
2008 as compared to $17,961 in 2007.Research and development expenses were
$162,894 in 2008 as compared to $100,822 in 2007. Losses from operations were
$680,276 in 2008 as compared to losses of $400,922 in 2007 with the loss due
primarily to the public professional services costs, reduced new Tenet
subscribers, reduced annual fees for Tenet renewal clients and increased support
costs in anticipation of the Colorstar product launch. After consideration for
miscellaneous expenses of positive $6,614 in 2008 and positive $34,979 in 2007(
both positive figures due to interest expenses), net loss for the comparable
year periods of 2008 and 2007 were $818,894 and $435,901 respectively.

Gross profit for fiscal year 2008 was $249,818 as compared to
$124,167 in 2007this reflected a favorable change of $125,651 compared to
fiscal year 2007. Gross profit as a percentage of revenues decreased from 52 %
in fiscal year 2007 to 41% in fiscal year 2008. The favorable change in gross
profit was due primarily to the addition of Ling Xiao revenues and profits
generated there from.

Research and Development

Research and development costs related to both present and
future products are expensed as incurred. Total expenditures on research and
development related to the color printing project and charged to general and
administrative expenses for the years ended December 31, 2008 and 2007 were
$162,894 and $100,822 respectively

Payroll and Employees Benefits Expense

The full time employees of the Company are entitled to employee
benefits including medical care, welfare subsidies, unemployment insurance and
pension benefits through a Chinese government mandated multi-employer defined
contribution plan. The Company is required to accrue for those benefits based on
certain percentages of the employees salaries and make contributions to the
plans out of the amounts accrued for medical and pension benefits. The total
provision and contributions made for such employee benefits was $16,147 and
$11,851 for the years ended December 31, 2008 and 2007, respectively. The
Chinese government is responsible for the medical benefits and the pension
liability to be paid to these employees.

The statutory reserve funds are restricted for use to set off
against prior period losses, expansion of production and operation or for the
increase in the registered capital of the Company. The statutory public welfare
fund is restricted for use in capital expenditures for the collective welfare of
employees. These reserves are not transferable to the Company in the form of
cash dividends, loans or advances. These reserves are therefore not available
for distribution except in liquidation.

Dalian Beigang is not required to make further appropriations
to the statutory reserve funds after 2004 as the funds have exceeded 50% of its
registered capital after the 2003 appropriation.

In 2008, Ling Xiao appropriated $16,751 to the reserves funds
based on its net income in accordance with the laws and regulations of the
PRC.

Depreciation

Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for additions, major renewals and betterments are
capitalized and expenditures for maintenance and repairs are charged to expense
as incurred.

Depreciation is provided on a straight-line basis, less
estimated residual value over the assets estimated useful lives. The estimated
useful lives are as follows:

| | Motor vehicles                    | 5 to 10 Years
| | --------------------------------- | -------------
| | Color printing machine            | 4 Years      
| | Furniture, fixtures and equipment | 2 to 5 Years 

The following is a summary of property and equipment at December
  31:

32

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2008
    
    
    2007Motor vehicles
    $
    155,430
    
    $
    145,657Color photo printing machines
    
    309,389
    
    
    88,475Furniture and office equipment
    
    186,307
    
    
    117,996Construction in progress - color photo printing machine
    
    -
    
    
    191,915651,126
    
    
    544,043Less: accumulated depreciation
    
    231,286
    
    
    198,348Property and equipment, net
    $
    419,840
    
    $
    345,695


Depreciation expense for the years ended December 31, 2008 and
2007 was $48,295 and $46,851 respectively.

Net Income (Loss) and earnings (Loss) per Share

Basic loss per share is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding during the year. Diluted loss per share is computed on a similar
basis to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. The increase in loss per share was primarily the result of
increased administrative costs and legal and audit requirements as components of
the public company disclosure process .

Liquidity and Capital Resources

As reflected in the accompanying financial statements, the
Company has an accumulated deficit of $1,861,946 at December 31, 2008 as
compared to an accumulated deficit of $1,026,301 at its year end of December 31,
2007. The Companys current liabilities exceed its current assets by $374,278
and the Company used cash in operations during the year period ended December
31, 2008 of $80,276. As of December 31, 2008, we had yet to issue the 2,700,000
treasury shares to the Ling Xiao shareholder as payment for the 51% equity
interest acquired by the Company in October 2008. This share issuance was valued
at $3,240,000.

Contractual cash commitments for the fiscal years subsequent to
December 31, 2008, are summarized as follows:

The Company leases office spaces from certain third parties under ten operating leases which expire on dates
between January 31, 2009 and September 30, 2013 at monthly rentals of between
$58 and $1,715.

As of December 31, 2008, the Company has outstanding
commitments of with respect to the above operating leases, which are due as
follows:

2009
    $
    53,9512010
    
    44,9362011
    
    35,5012012
    
    35,0152013
    
    26,261$
    195,664


For the year ended December 31, 2008, our cash and cash
equivalents increased by $426,292 to $440,226 project.

With respect to our Tenet operation, we must be able to
generate sufficient capital to advertise and promote our Tenet system to Dalian
businesses not yet utilizing the system. The local national tax authorities
support our program and competitive systems in Dalian are not likely given the
issues of compatibility and potential problems with different interfaces. As of
December 31, 2008, Beigang had 8,243 subscribers of a total potential market of
35,000 business enterprises in Dalian alone.

As reflected in the accompanying financial statements, we had
  an accumulated deficit of $1,861,946 at December 31, 2008. Our current liabilities
  exceed our current assets by $374,278 and during the year period, we

33

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used cash in operations of $80,276. Our auditor commented that
these factors raise substantial doubt about our ability to continue as a going
concern. In view of the matters described above, continued operation of the
Company is dependent upon the Companys ability to raise additional capital,
reduce its operating expenses, obtain financing and succeed in its future
Colorstar and Tenet operations. Management is taking steps to revise our
operating and financial requirements, which we believe will be sufficient to
provide us with the ability to continue as a going concern.

We are now pursuing additional funding and potential merger or
acquisition candidates, which would enhance stockholders investment. Management
believes that the above actions will allow us to continue operations through the
next fiscal year.

Cash Used in Operating Activities

Cash used in operating activities was $80,276 during the year
ended December 31, 2008, as compared to $374,893 during the year ended December
31, 2007.

Cash Used in Investing Activities

Cash used in investing activities was a negative amount of
$98,327 comprised primarily of issues related to the Ling Xiao acquisition.

Cash from Financing Activities

We have funded our business to date primarily from sales of our
common stock and by way of shareholder loans. During 2008, we converted an
amount of $1,200,006 to common stock at a rate of $.50 per share and also sold
100,000 shares at a rate of $1.00 per share. As at December 31, 2008, our
capital account reflected total investments of $1,525,270 which included
original share purchases, debt to equity conversions and imputed interest on
stockholder advances.

During 2008, specific financing activities totaled $539,176 and
which included sale of securities for $100,000 and additional stockholder loans
of $439,176.

There are no assurances that we will be able to achieve further
sales of our common stock or any other form of additional financing. If we are
unable to achieve the financing necessary to continue our plan of operations,
then we will not be able to continue our exploration of the prospect lease and
our venture will fail.

Going Concern

We have not attained profitable operations and are dependent
upon obtaining financing to pursue any extensive exploration activities. As
reflected in the accompanying financial statements, the Company has an
accumulated deficit of $1,861,946 as at December 31, 2008 that includes a net
loss of $818,894 for the year ended December 31, 2008. The Companys total
current liabilities exceed its total current assets by $374,278 and the Company
used cash in operations of $80,276. These factors raise substantial doubt about
our ability to continue as a going concern. In view of the matters described
above, continued operation of the Company is dependent upon the Companys
ability to raise additional capital, obtain financing and succeed in its future
operations. Our attached, audited financial statements do not include any
adjustments relating to the classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.

Management has taken steps to revise
  its operating and financial requirements, which it believes are sufficient to
  provide the Company with the ability to continue as a going concern. The Company
  is also actively pursuing additional funding and potential merger and
  acquisition candidates and strategic partners, which would enhance stockholders
  investment. Management believes that the above actions will allow the Company to
  continue operations through the next fiscal year.

For these reasons our auditors stated in their report on our
audited financial statements for the year ended December 31, 2008 that they have
substantial doubt we will be able to continue as a going concern.

34

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Future Financings

We anticipate continuing to rely on equity sales of our common
shares in order to continue to fund our business operations. Issuances of
additional shares will result in dilution to our existing shareholders. There is
no assurance that we will achieve any additional sales of our equity securities
or arrange for debt or other financing to fund our planned exploration
activities.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet debt nor did we have any
transactions, arrangements, obligations (including contingent obligations) or
other relationships with any unconsolidated entities or other persons that may
have material current or future effect on financial conditions, changes in the
financial conditions, results of operations, liquidity, capital expenditures,
capital resources, or significant components of revenue or expenses.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial conditions
and results of operations are based upon the Company's consolidated financial
statements that have been prepared in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP"). The
preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

We believe the following critical accounting policies affect
our more significant judgments and estimates used in the preparation of our
consolidated financial statements.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with
generally accepted accounting principles 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 period.
Actual results could differ from those estimates.

Revenue Recognition

Revenues are recognized upon subscription sign-on dates.
Contract revenues, where the subscription terms extend beyond our year-end, are
recognized under the percentage-of-completion method. The percentage of
completion is determined by computing the percentage of the subscription period
completed. As at December 31, 2008, a total of $5,023 was classified as deferred
revenue.

Substantially all of the Companys revenue is generated from
the Ling Xiao travel booking business, the sale of electronic tax filing service
contracts and color photo printing services. Effective December 31, 2008, the
electronic tax filing business ceased all revenue generating activities, pending
resolution of a change in China Tax Bureau policy regarding provision of
Tenet-type services... During 2008, the Company recognized revenue from the sale
of electronic tax filing service contracts and color photo printing services
under the provisions of Staff Accounting Bulletin (SAB) 104, Revenue
Recognition, where persuasive evidence of an arrangement exists; the service is
rendered; the fee is fixed or determinable; the collection of the receivable is
reasonably assured; and no significant post-delivery obligations remain
unfulfilled.

The Company provided electronic tax filing services to its
customers based on fixed price contracts with contractual period of one year.
The customers was billed on approval of the contracts and based on the terms
included in the contracts. Revenue was recognized rateably over the term of the
contract and those billed and received in advanced by the Company for future
services not yet performed was deferred. On early termination of the contracts,
the fees received in advanced are refunded to the customers.

Revenue from the sale of color photo printing services is derived
  from affiliate operations, which consist of franchise agency and licensing program.
  The Company follows the guidance of Emerging Issues Task Force (EITF) 99-19,
  "Recording Revenue Gross as a Principal versus Net as an Agent", for its presentation
  of revenue and direct costs. This guidance requires the Company to assess whether
  it acts as a principal in the transaction or as an agent acting on behalf of
  others. Where the Company is the principal in the transaction and has the risks
  and rewards of ownership, the transactions are recorded gross in the statements
  of income. Revenue and related costs of services generated by the franchise
  agents are included as part of the Company's consolidated revenue and costs
  of services, respectively, since the Company has the direct contractual relations.

35

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The franchise agent acts as the Company's agent in a similar manner as a branch manager in the Company-owned locations. In the franchise arrangement, the Company has the direct contractual relationships with its customers and contracts with
customers are binding to the Company. The Company is also obligated for the employee payroll, electricity and related overheads regardless of customer acceptance of the services. These factors, among others, designate the Company as principal with
respect to its franchise agent operations. Franchise agent sales were $6,532 and $1,403 for fiscal 2008 and 2007, respectively.

The Company also has a licensing program whereby the licensee had the direct contractual relationships with the customers, held title to the related customer receivables and was the legal employer of the employees. Accordingly, sales and costs of
services generated by the license operation are not included in the Company's consolidated financial statements. Fees are paid to the Company based on a fixed price for each of the photo printed and such license fees are recorded by the Company as
revenue. Fees received from licensed offices were $428 and $815for fiscal 2008 and 2007, respectively.

Allowance for Doubtful Accounts

The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts.  An allowance for doubtful accounts is established and
recorded based on managements assessment of the credit history with the customer and current relationships with them.

Foreign currency translation

Northport Network and Dalian Beigang maintain their accounting records in their functional currencies of US$ and RMB respectively.

Foreign currency transactions during the year are translated to the functional currency at the approximate rates of exchange on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date
are translated at the approximate rates of exchange at that date. Non-monetary assets and liabilities are translated at the rates of exchange prevailing at the time the asset or liability was acquired. Exchange gains or losses are recorded in the
statement of operations.

The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported as other comprehensive loss in the statements of operations and stockholders equity. The foreign
currency translation loss for the years ended December 31, 2008 and 2007 was $46,737 and $29,810 respectively

The financial statements of Dalian Beigang and Ling Xiao whose functional currencies are RMB are translated into US$ using the closing rate method. The balance sheet items are translated into US$ using the exchange rates at the respective
balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the year. All exchange
differences are recorded within equity.

Valuation of Inventories

In our Tenet business, we had minimal inventories on hand since the business entails online access to our systems. Inventory typically takes the form of brochures and training manuals for potential new subscribers. For Colorstar, it is our intention
to continue to own all units and to enter into agreements with business partners to place kiosks in their retail facilities, with all operational management to be handled by us, and for revenues to be split on an 85-15 percent basis between us and
the agreement partner.

Our Colorstar manufacturing process will add all inventories into assets rather than revenue based inventories because of our strategy to maintain ownership of all kiosks at all times.

Ling Xiao inventories consist primarily of brochures and marketing related documents.

Impairment of Long-Lived Assets and Long-Lived Assets of which to be Disposed

In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the impairment or disposal of Long-Lived Assets, long-lived assets and certain identifiable intangible assets held and used by the Company are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using
undiscounted net cash flows related to the long- lived assets. The Company reviews long-lived assets to determine that carrying values are not impaired.

36

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Disclosure about Fair value of Financial Instruments

Statement of Financial Accounting Standards No. 107,
"Disclosure about Fair Value of Financial Instruments," requires certain
disclosures regarding the fair value of financial instruments. Fair value of
financial instrument is made at a specific point in time, based on relevant
information about financial markets and specific financial instruments. As these
estimates are subjective in nature, involving uncertainties and matters of
significant judgments, they cannot be determined with precision. Changes in
assumptions can significantly affect estimated fair values.

Trade accounts receivable, other receivables, accounts payable,
other payables and accrued liabilities, notes payable and due to stockholders
are reflected in the financial statements at fair value because of the
short-term maturity of the instruments.

The Companys major operation is in the PRC, which may give
rise to significant foreign currency risks from fluctuations and the degree of
volatility of foreign exchange rates between the United States dollars (US$)
and the Chinese Renminbi (RMB). On July 21, 2005, PRC let the RMB to fluctuate
ending its decade-old valuation peg to the US$. The new RMB rate reflects an
approximately 2% increase in value against the US$. Historically, the PRC
government has benchmarked the RMB exchange ratio against the US$, thereby
mitigating the associated foreign currency exchange rate fluctuation risk. The
Company does not believe that its foreign currency exchange rate fluctuation
risk is significant, especially if the PRC government continues to benchmark the
RMB against the US$.

Income and Other Taxes and Obligatory Payments

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.

Northport Network was incorporated in the United States and has
incurred net operating loss for income tax purposes for 2008 and 2007. Northport
Network has net operating loss carry forwards for income taxes amounting to
approximately $506,844 as at December 31, 2008 which may be available to reduce
future years taxable income. These carry forwards, will expire, if not
utilized, commencing in 2027. Management believes that the realization of the
benefits from these losses appears uncertain due to the Companys limited
operating history and continuing losses. Accordingly, no deferred tax asset
benefit has been recorded. The tax benefit not recorded at December 31, 2008 and
2007 was $172,327 and $83,084 respectively. The net change in the tax benefit
for 2008 was an increase of $89,243.

Dalian Beigang and Ling Xiao were incorporated in the PRC and
are subject to PRC income tax which is computed according to the relevant laws
and regulations in the PRC. Beginning January 1, 2008, the new Enterprise Income
Tax (EIT) law has replaced the old income tax laws for Domestic Enterprises
(DES) and Foreign Invested Enterprises (FIEs). The key changes are:

| | a. | The new standard EIT rate of 25% replaces the 33% rate
      applicable to both DES and FIEs, except for High Tech companies that pay a
      reduced rate of 15%;                                                                                   
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                      
| | b. | Companies established before March 16, 2007 continue to
      enjoy tax holiday treatment approved by their local government for a grace
      period of either for the next 5 years or until the tax holiday term
      expire, whichever is sooner.

In addition, the new EIT also grants tax holidays to entities
operating in certain approved industries, such as the agriculture, fishing, and
environmental protection. Entities in approved industries enjoy a three-year
period tax exempt and a three-year period with 50% reduction in the income tax
rates respectively.

Prior to 2007, Dalian Beigang being registered as a new and
high technology enterprise is entitled to an income tax reduction from 33% to
15%. This tax benefit was not available in 2008.

The income tax expense for 2008 and 2007 was $51,160 and $0
respectively.

The reconciliation of income taxes computed at the statutory
  income tax rates to total income taxes for the years ended December 31, 2008
  and 2007 is as follows:

37

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|                             |   | 2008     |   |   | 2007     |  
|---------------------------- | - | -------- | - | - | -------- | -
|                             |   |          |   |   |          |  
|Federal tax rate on net loss | $ | (233,543 | ) | $ | (148,206 | )
|Valuation allowance          |   |          |   |   |          |  
|Northport Network            |   | 89,243   |   |   | 46,125   |  
|Dalian Beigang               |   | 160,770  |   |   | 45,036   |  
|Foreign tax differential     |   | 34,690   |   |   | 57,045   |  
|Actual tax expense           | $ | 51,160   |   | $ | -        |  

In addition, the business in China has a number of other
mandated tax requirements.

The Companys PRC subsidiary is required to make appropriations
to reserves funds, comprising the statutory surplus reserve, statutory public
welfare fund and discretionary surplus reserve, based on after-tax net income
determined in accordance with the laws and regulations of the PRC. Prior to
January 1, 2006 the appropriation to the statutory surplus reserve should be at
least 10% of the after tax net income determined in accordance with the laws and
regulations of the PRC until the reserve is equal to 50% of the entities
registered capital. Appropriations to the statutory public welfare fund are at
5% to 10% of the after tax net income determined by the Board of Directors.
Effective January 1, 2006, the Company is only required to contribute to one
statutory reserve fund at 10 percent of net income after tax per annum, such
contributions not to exceed 50 percent of the respective companies registered
capital.

The statutory reserve funds are restricted for use to set off
against prior period losses, expansion of production and operation or for the
increase in the registered capital of the Company. The statutory public welfare
fund is restricted for use in capital expenditures for the collective welfare of
employees. These reserves are not transferable to the Company in the form of
cash dividends, loans or advances. These reserves are therefore not available
for distribution except in liquidation.

In 2008, Ling Xiao appropriated $16,751 to the reserves funds
based on its net income in accordance with the laws and regulations of the
PRC.

Recently Issued Accounting Standards

In December 2007, the Financial Accounting Standards Board
(FASB) issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
141R). SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business
combination. This statement is effective beginning January 1, 2009. The Company
does not expect the adoption of this statement to have a material impact on its
financial position and results of operations.

In December 2007, FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51.
This statement improves the relevance, comparability, and transparency of the
financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that
require; the ownership interests in subsidiaries held by parties other than the
parent and the amount of consolidated net income attributable to the parent and
to the noncontrolling interest be clearly identified and presented on the face
of the consolidated statement of income, changes in a parents ownership
interest while the parent retains its controlling financial interest in its
subsidiary be accounted for consistently, when a subsidiary is deconsolidated,
any retained noncontrolling equity investment in the former subsidiary be
initially measured at fair value, entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 affects those entities that
have an outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
Early adoption is prohibited. The adoption of this statement did not have a
material impact on the Company's financial position and results of
operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures
  about Derivative Instruments and Hedging Activities, an amendment of FASB Statement
  No. 133. This statement is intended to improve transparency in financial
  reporting by requiring enhanced disclosures of an entitys derivative instruments
  and hedging activities and their effects on the entitys financial position,
  financial performance, and cash flows. SFAS 161 applies to all derivative instruments
  within the scope of SFAS 133, Accounting for Derivative Instruments and
  Hedging Activities (SFAS 133) as well as related hedged items, bifurcated
  derivatives, and nonderivative instruments that are designated and qualify as
  hedging instruments. Entities with instruments subject to SFAS 161 must

38

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provide more robust qualitative disclosures and expanded quantitative disclosures.  SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application
permitted. The adoption of this statement did not have a material impact on the Companys financial position and results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of
financial statements of nongovernmental entities that presented in conformity with generally accepted accounting principles in the United States of America. SFA 162 will be effective 60 days following the SECs approval of the PCAOB amendments
to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.The adoption of this statement did not have a material impact on the Companys financial position and results of
operations.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60.  The scope of this Statement is limited to financial guarantee insurance and reinsurance
contracts, as described in the Statement, issued by enterprises included within the scope of Statement 60. Accordingly, this Statement does not apply to financial guarantee contracts issued by enterprises excluded from the scope of Statement 60 or
to some insurance contracts that seem similar to financial guarantee insurance contracts issued by insurance enterprises (such as mortgage guaranty insurance or credit insurance on trade receivables). This Statement also does not apply to financial
guarantee contracts that are derivative instruments included within the scope of SFAS No. 133, Accounting for Derivative instruments and Hedging Activities. SFAS 163 is effective prospectively for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal years; disclosure requirements in paragraphs 30(g) and 31 are effective for the first period (including interim periods) beginning after May 23, 2008. The adoption of
this statement did not have a material impact on the Companys financial position and results of operations.

In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, to clarify guidance on determining the fair value of a financial asset under SFAS 157 in a
market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The adoption of this statement effective September 30, 2008 did not have a material impact on the
Companys financial position and results of operations.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about the Companys market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

The Company is exposed to market risk related to changes in interest rates. The Company does not use derivative financial instruments for speculative or trading purposes.

Interest Rate Sensitivity. The Company maintains cash and cash equivalents which consist of cash, money market funds and certificates of deposit with financial institutions. Due to the conservative nature and relatively short duration of our cash
and cash equivalents, interest rate risk is mitigated.

We currently maintain no short-term investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTAL DATA.

The financial statements of the Company are included following the signature page to this Form 10-K commencing on page 48.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES. 
Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation
  of its management, has evaluated the effectiveness of the design and operation
  of the Company's disclosure controls and procedures, as such term
  is defined in Rules 13a-15(e) under the Exchange Act, as of this annual report.
  Disclosure controls and procedures are controls and other procedures that are
  designed to ensure that information required to be disclosed by our Company
  is recorded, processed, summarized and reported within the time periods specified
  in the rules and forms of the Securities and Exchange Commission. In making
  this assessment, management used the framework

39

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set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our President and Chief Executive Officer, Zhao Yan, our Northport Chief Financial Officer James Wang and our Dalian Beigang Chief Financial Officer, Zi Feng Liu, are responsible for establishing and maintaining disclosure controls and procedures
for our Company.

Our management has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2008 (under the supervision and with the participation of our Chief Executive Officer, our Northport Chief Financial Officer and the Dalian
Beigang Chief Financial Officer), pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our Companys Chief Executive Officer, our Northport Chief Financial Officer and our
Dalian Beigang Chief Financial Officer identified no material weakness in our Companys disclosure controls and procedures as of December 31, 2008, We will state that the disclosure controls and procedures as at December 31, 2008 were effective
and we concluded that the financial statements included in this Annual Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

During 2007 we installed and implemented a custom software program known as Northport Office Anywhere-2007, which was custom designed for us by Lenovo Corporation. The system provides us with a complete document edit and control function
and requires authorized approvals prior to any financial transaction or entry being concluded. Our test procedures concluded that the system is fully functional and provides us with an acceptable process of accounting and financial control so as to
ensure correct financial reporting.

Changes in Internal Control over Financial Reporting

The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the Companys principal executive and principal financial officers, or persons performing similar functions, and
effected by the Companys board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:

- pertain to the maintenance of records that in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and
- provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.

Managements Report on Assessment of Internal Control Over Financial Reporting

There have not been any changes in the Companys internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect our internal control over financial reporting in our financial statements prior to December 31, 2008.

A material weakness is defined in Public Company Accounting Oversight Board Auditing Standard No. 2 as a significant deficiency, or a combination of significant deficiencies, in internal control, over financial reporting that results in there being
more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Our management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only the managements report in
this annual report.

Inherent Limitation of the Effectiveness of Internal Control

Our internal control system is designed to provide reasonable
  assurance to our management and board of directors regarding the preparation
  and fair presentation of published financial statements. All internal control
  systems, no matter how well designed, have inherent limitations. Therefore,
  even those systems determined to

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be effective can provide only reasonable assurance with respect
to financial statement preparation and presentation. Further, because of changes
in conditions, the effectiveness of internal control may vary over time.

ITEM 9B.OTHER INFORMATION

Not applicable.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL
PERSONS, AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THEEXCHANGE ACT

Directors and Executive Officers:

|Name         | Age | Position with Company                               
|------------ | --- | ----------------------------------------------------
|Yan Zhao     | 55  | Chairman of the Board, Chief
      Executive Officer
|Zhong Bo Jia | 55  | Vice President and Director                         
|James Wang   | 57  | Director and Secretary                              

Yan Zhao  Chairperson and President

Yan Zhao is Chairperson and President of Dalian, China based,
Dalian Beigang Information Industry Development Co. Ltd., which she co-founded
in 1997. Prior to 1997, she spent five years as general manager of Dalian
Electronic and Telecommunication Co. Ltd. From 1969 to 1992, she was general
manager of the Dalian Post and Telecommunication Bureau. Yan Zhao is a 1976
Bachelor of Science graduate of Chang Chun Post and Telecommunications College.
She became President and director of Northport in April 2004.

Zhong Bo Jia  Vice President and Director

From 1992 until co-founding Dalian Beigang Information Industry
Development Co. Ltd. in 1997, Mr. Jia was President of Dalian Electronic and
Telecommunication Co. Ltd. From 1969 to 1973 and from 1977 to 1992, he was with
the Dalian Post and Telecommunication Bureau as Vice General Manager. Mr. Jia is
a 1977 Bachelor of Science graduate from Beijing Post and Telecommunication
University. He became a director of Northport in April 2004.

James Wang  Director and Secretary

James Wang, a Canadian citizen, has experience in business in
both Canada and the US in areas of distribution and technology. Since 2001 and
over the past five years, he has devoted his time and efforts with Dalian
Beigang as a marketing consultant. He has been extensively involved in assisting
the management of the Dalian business in aspects of their core business and also
assisting the Company in planning a US share listing. He became a director of
Northport in April 2004. In February 2006, he changed his legal name from
Richard Wang to James Wang.

Directors

Directors serve for a term of one year or until their successors
  are elected and qualified. Directors do not receive cash compensation for serving
  as such.

41

---

Executive officers are appointed by and serve at the will of
the Board of Directors. There are no family relationships between or among any
of the directors or executive officers of the Company except Yan Zhao and Zhong
Bo Jia who are husband and wife.

Section 16(a) beneficial ownership reporting
Compliance

Section 16(a) of the Securities Exchange Act of 1934, as
amended (the Exchange Act), requires the Companys officers, directors and
persons who own more than ten percent of either the Common Stock or the Series A
Preferred Shares to file reports of ownership on Form 3 and changes in ownership
on Form 4 or 5 with the SEC. Such officers, directors and ten percent
shareholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms that they file. Based solely on its review of copies
of such reports received or representations from certain reporting persons, the
Company believes that, during the year ended December 31, 2008, all of its
officers, directors and ten percent shareholders complied with all Section 16(a)
filing requirements applicable to them with respect to transactions during
fiscal 2008.

Audit Committee

The Companys Audit Committee consists of the President, the
Vice President and the CFO of the Companys Chinese subsidiary.

Promoters

By virtue of their activities in founding and organizing the
Company, as well as their beneficial ownership of its voting securities, Yan
Zhao, Zhong Bo Jia and James Wang may be deemed to be "promoters" of the
Company.

Related Party Transactions

On July 10, 2008, note payable of $109,378 was assigned by the
lender to a stockholder of the Company. Immediately after this assignment, the
Company is indebted to the stockholder for $109,378.

On August 18, 2008, the Company issued 2,400,012 shares of
common stock to 2 stockholders or their nominees for settlement of the loans
owed by the Company in the aggregate amount of $1,200,006 at the conversion
price of $0.5 per share.

As of December 31, 2008, a stockholder loaned $173,432 to the
Company as unsecured loan and imputed interest is computed at 5% per annum on
the amount due. The balance is repayable on demand.

Total imputed interest expenses recorded as additional paid-in
capital amounted to $32,025 and $32,173 for the years ended December 31, 2008
and 2007 respectively.

ITEM 11-EXECUTIVE COMPENSATION

Summary Executive Compensation Table

The following table sets forth a summary of all compensation
for the last fiscal ending year on December 31, 2008, awarded to, earned by, or
paid to the persons serving as the Companys principal executive officer and the
two most highly compensated executive officers other than our principal
executive officer.

|             |  |      |  |   |             |  |  |       |  |  | Option |  |  |                |  |  |              |  |  | All          |  |   | OtherTotal   | 
|------------ |  | ---- |  | - | ----------- |  |  | ----- |  |  | ------ |  |  | -------------- |  |  | ------------ |  |  | ------------ |  | - | ------------ | 
|             |  |      |  |   | Base Salary |  |  | Bonus |  |  | Awards |  |  | Non-Equity     |  |  |              |  |  | Compensation |  |   | Compensation | 
|Name,        |  |      |  |   |             |  |  |       |  |  |        |  |  | Incentive Plan |  |  | Change in    |  |  |              |  |   |              | 
|             |  |      |  |   | $           |  |  | $     |  |  | $      |  |  | Compensation   |  |  | Pension      |  |  | $            |  |   | $            | 
|Principal    |  |      |  |   |             |  |  |       |  |  |        |  |  |                |  |  | Value and    |  |  |              |  |   |              | 
|Position     |  | Year |  |   | (1)         |  |  | (2)   |  |  |        |  |  |                |  |  | Nonqualified |  |  |              |  |   |              | 
|             |  |      |  |   |             |  |  |       |  |  |        |  |  |                |  |  |              |  |  |              |  |   |              | 
|Yan Zhao,    |  | 2007 |  | $ | 18,227.48   |  |  |       |  |  |        |  |  |                |  |  |              |  |  |              |  | $ | 18,227.48    | 
|Chairperson, |  |      |  |   |             |  |  | -0-   |  |  | -0-    |  |  | -0-            |  |  | -0-          |  |  | -0-          |  |   |              | 
|President    |  | 2008 |  | $ | 21,551.72   |  |  |       |  |  |        |  |  |                |  |  |              |  |  |              |  | $ | 21,551.72    | 

42

---

|Zhong Bo Jia,  |  | 2007 |  | $ | 15,189.87 |  |  |     |   |  |     |  |  |     |  |  |     |  |  |     |  | $ | 15,189.87 |  
|-------------- |  | ---- |  | - | --------- |  |  | --- | - |  | --- |  |  | --- |  |  | --- |  |  | --- |  | - | --------- | -
|               |  |      |  |   |           |  |  | -0- |   |  | -0- |  |  | -0- |  |  | -0- |  |  | -0- |  |   |           |  
|Vice President |  | 2008 |  | $ | 17,241.37 |  |  |     |   |  |     |  |  |     |  |  |     |  |  |     |  | $ | 17,241.37 |  
|               |  |      |  |   |           |  |  |     |   |  |     |  |  |     |  |  |     |  |  |     |  |   |           |  
|               |  |      |  |   |           |  |  |     |   |  |     |  |  |     |  |  |     |  |  |     |  |   |           |  
|James Wang,    |  | 2007 |  |   | -0-       |  |  | (5  | ) |  |     |  |  |     |  |  |     |  |  | -0- |  |   | (5        | )
|               |  |      |  |   |           |  |  | -0- |   |  | -0- |  |  | -0- |  |  | -0- |  |  |     |  |   | -0-       |  
|Secretary      |  | 2008 |  |   | -0-       |  |  |     |   |  |     |  |  |     |  |  |     |  |  |     |  |   | -0-       |  

(1) Executives residing in China, receive compensation in
Chinese Yuan. The U.S. Dollar amounts expressed above have been derived using an
exchange rate of $1.00 = 6.96 Yuan.

(2) There are no employment agreements or any other
arrangements currently in place whereby the Companys executive officers receive
compensation in the form of bonuses, options or other compensation under
non-equity incentive plans.

(3) There is no formal pension plan currently in place for the
Companys executives or employees other than pension plans required by law for
Chinese staff.

(4) The Company has not paid any other compensation to its
executives.

(5) During the 2007 and 2008 fiscal years, Mr. Wang did not
receive any compensation for his duties as secretary of the Company.

Employment Agreements with Our Executives and
Employees

Currently, employment agreements are in place with all of the
Companys China based executives and employees No other arrangements exist
whereby our executive officers would receive compensation in the form of
bonuses, options or other compensation under non-equity incentive plans.
Furthermore, no pension plan is currently in place for the Companys executives
or employees other than as required by law for China based executives.

The Company did not offer a pension plan during fiscal year
2008 other than as required by law for China based staff. The full time Chinese
employees of the Company are entitled to employee benefits including medical
care, welfare subsidies, unemployment insurance and pension benefits through a
Chinese government mandated multi-employer defined contribution plan. The
Company is required to accrue for those benefits based on certain percentages of
the employees salaries and make contributions to the plans out of the amounts
accrued for medical and pension benefits. The total provision and contributions
made for such employee benefits was $16,147 and $11,851 for the years ended
December 31, 2008 and 2007, respectively. The Chinese government is responsible
for the medical benefits and the pension liability to be paid to these
employees.

Employment Bonus Compensation

The Company did not offer any employment bonuses during fiscal
year 2008 other than an incentive provided to Zhao Jun, the developer of the
Colorstar technology who received 1,000,000 restricted common shares of the
Company on February 25, 2008.

Outstanding Equity Awards at Fiscal Year End

The Company did not offer any equity options during fiscal year
2008.

Director Compensation

The Company did not enter into any director compensation
arrangements during the fiscal year 2008.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of December 31, 2008, the
  Companys outstanding Common Stock owned of record or beneficially by each
  Executive Officer and Director and by each person who owned of record, or was
  known by the Company to own beneficially, more than 5% of the Companys
  Common Stock, and the shareholdings of all Executive Officers and Directors
  as a group. Each person has sole voting and investment power with respect to
  the shares shown.

43

---

NAME
    SHARES OWNED
    PERCENTAGE OF SHARES
      OWNED AS AT DECEMBER 31, 2008Zhao Yan
    5,750,000
    17.58%Zhong Bo Jia
    3,375,000
    10.3%James Wang
    2,239,120
    6.84%All Executive Officers and Directors
    11,364,120
    34.75%


As a Group

The Company is not aware of any arrangement which might result
in a change in control in the future. The addresses of the principal
shareholders are:

Zhao Yan:7th Floor, 21 Huabin Street Xigang
District Dalian, Liaoning Province, China

Zhong Bo Jia: Room 504, 32 Kang Zhuang Street Bai Yun
Xin ChunXigang District, Dalian, Liaoning Province, China

James Wang:#4200, 601 Union Street, Seattle,
Washington, 98101

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

Transactions with Management, Promoters and Others.

We have not entered into any transactions with our directors,
executive officers, any promoter or founder, or beneficial owners of our common
stock. All of our Chinese directors, officers and employees have entered into
employment agreements with the Companys wholly owned Chinese subsidiary, as is
required by Chinese labor laws.

Contribution from Shareholder

Since 2005, our President, who owns a condominium unit located
in western Beijing city, has provided such facility to the Company for its use
at no charge.

Director Independence

None of the members of our Board of Directors are considered
independent.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Audit fees billed or expected to be billed to us by Jimmy C. H.
Cheung and Co. for the audit of the financial statements for the fiscal years
ended December 31, 2008 and 2007 and for review of registration statements,
quarterly reports on Form 10-QSB and annual reviews on Form 10-K/10-KSB for the
same fiscal years totalled $52,000 and $52,000, respectively.

44

---

Financial Information Systems Design and Implementation
Fees

We did not engage Jimmy C. H. Cheung and Co. to provide advice
regarding financial information systems design and implementation during the
last fiscal year.

Tax Fees

There have been no other fees billed or expected to be billed
to us by Jimmy C. H. Cheung and Co. for any other non-audit services, including
tax-related services, provided during the last two fiscal years.

All Other Fees

For fiscal years 2008 and 2007, Jimmy C. H. Cheung and Co. did
not bill any fees for any other non-audit services rendered to us.

Audit Committee

The audit committee meets prior to filing of any Form 10-Q or
10-K to approve those filings. The policy of our audit committee is to review
and pre-approve both audit and non-audit services to be provided by the
independent public accountants (other than de minimisexceptions
permitted by the Sarbanes Oxley Act of 2002). This duty may be delegated to one
or more designated members of the audit committee with any such approval
reported to the committee at its next meeting. Approval of non-audit services
shall be disclosed to investors in periodic reports required by section 13 (a)
of the Securities and Exchange Act of 1934. All fees paid by the Company to our
auditors were pre-approved by the audit committee.

PART IV

ITEM 15. EXHIBITS AND REPORTS on FORM 8-K

|2.1  | Equity Transfer Agreement, dated June
        23, 2005, among the Company and the four shareholders of Dalian Beigang
        Information Industry Development Company Limited (1)              
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                 
|2.2  | Amendment to Equity Transfer Agreement
        dated January 16, 2006 among the Company and the four shareholders of
        Dalian Beigang Information Industry Development Company Limited (1)
|     |                                                                                                                                                                                                 
|2.3  | Equity Transfer Agreement dated October
        9, 2008 among Dalian Beigang Information Industry Development Company
        Limited and Chen Mei Zhou as shareholder of Shenyang Ling Xiao (2)
|     |                                                                                                                                                                                                 
|3.1  | Articles of Incorporation (3)                                                                                                                                                                   
|     |                                                                                                                                                                                                 
|3.3  | Bylaws (3)                                                                                                                                                                                      
|     |                                                                                                                                                                                                 
|10.1 | Agreement between Dalian Beigang and
        Yingkou City Beigang Network Information Industry Services Co., Ltd. (1)                                                                           
|     |                                                                                                                                                                                                 
|10.2 | Agreement and Plan of Merger by and
        Between Northport Capital, Inc. and Northport Network Systems, Inc. (3)                                                                             
|     |                                                                                                                                                                                                 
|31.1 | Rule 13a-14(a)/15(d)-14(a)
        Certification of CEO*                                                                                                                                        
|     |                                                                                                                                                                                                 
|31.2 | Rule 13a-14(a)/15(d)-14(a)
        Certification of CFO*                                                                                                                                        
|     |                                                                                                                                                                                                 
|32.1 | Section 1350
        Certification of CEO*                                                                                                                                                      
|     |                                                                                                                                                                                                 
|32.2 | Section 1350
        Certification of CFO*                                                                                                                                                      

| | (1) | Previously filed as an exhibit to our amended
      registration statement on Form SB-2/A filed on December 14, 2006.
| | --- | ---------------------------------------------------------------------------------------------------------------------
| | (2) | Previously filed as an exhibit to Form 8-K
      filed on October 16, 2008                                           
| | (3) | Previously filed as an exhibit to Form 8-K
      filed on November 17, 2008.                                         
| |     |                                                                                                                      
| |     |                                                                                                                      
| | *   | Filed herewith                                                                                                       

Form 8-K filings during the quarter ended December 31,
2008

|October 16, 2008 | Form 8K entitled Equity Transfer Agreement
      disclosing the 51% equity acquisition by the Company of Shenyang Ling Xiao Aviation Service Company
      Limited;
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

45

---

|**November 17,
      2008** | Form 8K disclosing the Plan of Merger between
      Northport Capital Inc and Northport Network Systems, Inc. and enclosing
      the Formal Plan of Merger, new Articles of Incorporation of Northport
    Network Systems, Inc. and By-Laws of Northport Network Systems, Inc.
|--------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SIGNATURES

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

| | NORTHPORT NETWORK
      SYSTEMS, INC.,
| | --------------------------------------
| | a Washington
      corporation        
| |                                       
| | By:                                   
| |                                       
| |                                       

Each person whose signature appears below authorizes Zhao Yan
to execute in the name of each such person who is then an officer or director of
the registrant, and to file, any amendments to this Annual Report on Form 10-K
necessary or advisable to enable the registrant to comply with the Securities
Exchange Act of 1934 and any rules, regulations and requirements of the
Securities and Exchange Commission in respect thereof, which amendments may make
such changes in such Report as such attorney-in-fact may deem appropriate.

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

|Signature and
      Title                 |  | Date          
|----------------------------------------- |  | --------------
|                                          |  |               
|/s/ Zhao Yan                              |  | April 13, 2009
|Zhao Yan, Director and Chief Executive    |  |               
|Officer                                   |  |               
|                                          |  |               
|/s/ Zhong Bo Jia                          |  | April 13, 2009
|Zhong Bo Jia, Vice-President and Director |  |               
|                                          |  |               
|/s/ James Wang                            |  | April 13, 2009
|James Wang, Chief Financial Officer and   |  |               
|Director                                  |  |               

46

---

NORTHPORT NETWORK SYSTEMS, INC.AND SUBSIDIARIES

(fkaNorthport Capital Inc.)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 AND 2007

---

|NORTHPORT NETWORK SYSTEMS, INC.
|-------------------------------
|AND SUBSIDIARIES               
|                               
|(fkaNorthport Capital Inc.)    
|                               
|CONTENTS                       

|                                                                                                                        | Pages     
|----------------------------------------------------------------------------------------------------------------------- | ----------
|Report of Independent Registered
      Public Accounting Firm                                                           | F-1       
|Consolidated Balance Sheets as of December
      31, 2008 and 2007                                                      | F-2       
|Consolidated Statements
      of Operations and Comprehensive Loss for the years ended December 31, 2008
      and 2007 | F-3       
|Consolidated Statements of Stockholders
      Equity for the years ended December 31, 2008 and 2007                    | F-4       
|Consolidated Statements
      of Cash Flows for the years ended December 31, 2008 and 2007                              | F-5       
|Notes to the Consolidated Financial Statements                                                                          | F-6 - F-25

---

|                                    | Jimmy C.H. Cheung &
      Co       | 
|----------------------------------- | ---------------------------------- | 
|                                    | Registered with the Public Company
|Certified Public
      Accountants  | Accounting Oversight Board        
|(A member of Kreston International) |                                   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

To the Board of Directors of: Northport Network Systems,
Inc.

We have audited the accompanying consolidated balance sheets of
Northport Network Systems, Inc. and its subsidiaries as of December 31, 2008 and
2007 and the related consolidated statements of operations and comprehensive
loss, stockholders equity and cash flows for the years ended December 31, 2008
and 2007. These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits of the financial statements 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
Northport Network Systems, Inc. and subsidiaries, as of December 31, 2008 and
2007, and the results of its operations and its cash flows for the years ended
December 31, 2008 and 2007 in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 15 to the consolidated financial statements, the Company had a
net loss of $818,894, an accumulated deficit of $1,861,946 and a working capital
deficiency of $374,278 and used cash in operations of $80,276. These factors
raise substantial doubt about its ability to continue as a going concern.
Managements plans concerning this matter are also described in Note 15. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

JIMMY C.H. CHEUNG & COCertified Public
Accountants

Hong Kong

Date: March 6, 2009

|                                                                     |                                                           
|-------------------------------------------------------------------- | ----------------------------------------------------------
|                                                                    
|                                                                    
|1607 Dominion Centre, 43 Queens Road East, Wanchai, Hong
      Kong
|                                                                    
|Tel: (852) 25295500 Fax: (852) 28651067                             
|                                                                     |                                                           
|Email: jchc@krestoninternational.com.hk                              | Kreston
      International with offices in Europe        
|                                                                     |                                                           
|Website: http://www.jimmycheungco.com                                | America, The Middle
      East, The Far East and Australia

F-1

---

|NORTHPORT NETWORK SYSTEMS, INC. AND SUBSIDIARIES
|------------------------------------------------
|(fka Northport Capital Inc.)                    
|                                                
|CONSOLIDATED BALANCE SHEETS                     
|AS OF DECEMBER 31, 2008 AND 2007                

|ASSETS                                                                 |  
|---------------------------------------------------------------------- | -
|                                                                       |  
|                                                                       |  
|CURRENT ASSETS                                                         |  
|Cash and cash equivalents                                              | $
|Accounts receivable,
      net                                         |  
|Prepaid expenses and other current
      assets                        |  
|Total Current Assets                                                   |  
|                                                                       |  
|PROPERTY AND EQUIPMENT, NET                                            |  
|GOODWILL                                                               |  
|TOTAL ASSETS                                                           | $
|                                                                       |  
|LIABILITIES AND
      STOCKHOLDERS' EQUITY                             |  
|                                                                       |  
|CURRENT LIABILITIES                                                    |  
|Accounts payable                                                       | $
|Other payables and
      accrued liabilities                           |  
|Due to stockholders                                                    |  
|Note payable                                                           |  
|Other taxes payable                                                    |  
|Deferred revenue                                                       |  
|Total
      Current Liabilities                                        |  
|                                                                       |  
|LONG-TERM LIABILITIES                                                  |  
|Due to a stockholder                                                   |  
|                                                                       |  
|TOTAL LIABILITIES                                                      |  
|                                                                       |  
|MINORITY INTERESTS                                                     |  
|                                                                       |  
|COMMITMENTS AND CONTINGENCIES                                          |  
|                                                                       |  
|STOCKHOLDERS' EQUITY                                                   |  
|Preferred stock, $0.001 par value,
      100,000,000 shares authorized |  
|0 share issued and outsanding                                          |  
|Common stock, $ 0.001 par value,
      100,000,000 shares authorized,  |  
|30,000,012 and 26,500,000 shares issued and                            |  
|outstanding
      as of December 31, 2008 and 2007                     |  
|respectively                                                           |  
|Common stock, 2,700,000 shares to be
      issued                      |  
|Additional paid-in
      capital                                       |  
|Retained earnings (Accumulated
      deficits)                         |  
|Unappropriated                                                         |  
|Appropriated                                                           |  
|Accumulated other
      comprehensive loss                             |  
|Total
      Stockholders' Equity                                       |  
|TOTAL LIABILITIES AND STOCKHOLDERS'
      EQUITY                       | $



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

F-2

---

|NORTHPORT NETWORK SYSTEMS, INC. AND SUBSIDIARIES
|------------------------------------------------
|(fka Northport Capital Inc.)                    
|                                                
|CONSOLIDATED STATEMENTS OF OPERATIONS AND       
|COMPREHENSIVE LOSS FOR THE YEARS ENDED          
|DECEMBER 31, 2008 AND 2007                      

|                                                                    |   | 2008       |   |   | 2007       |  
|------------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|NET SALES                                                           |   |            |   |   |            |  
|Provision of platform for electronic                                |   |            |   |   |            |  
|filing of tax returns                                               | $ | 123,163    |   | $ | 234,763    |  
|Color photo printing                                                |   | 11,760     |   |   | 2,218      |  
|Air-ticketing agency
      services                                 |   | 473,992    |   |   | -          |  
|Total net sales                                                     |   | 608,915    |   |   | 236,981    |  
|                                                                    |   |            |   |   |            |  
|COST OF SALES                                                       |   |            |   |   |            |  
|Provision of platform
      for electronic                          |   |            |   |   |            |  
|filing of tax returns                                               |   | (85,081    | ) |   | (102,441   | )
|Color photo printing                                                |   | (72,892    | ) |   | (10,373    | )
|Air-ticketing agency services                                       |   | (201,124   | ) |   | -          |  
|Total cost of sales                                                 |   | (359,097   | ) |   | (112,814   | )
|                                                                    |   |            |   |   |            |  
|GROSS PROFIT                                                        |   | 249,818    |   |   | 124,167    |  
|                                                                    |   |            |   |   |            |  
|OPERATING EXPENSES                                                  |   |            |   |   |            |  
|Selling, general and administrative                                 |   | 532,093    |   |   | 299,761    |  
|Legal and professional
      fees                                   |   | 217,771    |   |   | 106,545    |  
|Research and development expenses                                   |   | 162,894    |   |   | 100,822    |  
|Depreciation                                                        |   | 17,336     |   |   | 17,961     |  
|Total Operating Expenses                                            |   | 930,094    |   |   | 525,089    |  
|                                                                    |   |            |   |   |            |  
|LOSS FROM OPERATIONS                                                |   | (680,276   | ) |   | (400,922   | )
|                                                                    |   |            |   |   |            |  
|OTHER INCOME (EXPENSES)                                             |   |            |   |   |            |  
|Other income                                                        |   | 30,189     |   |   | 331        |  
|Interest income                                                     |   | 1,352      |   |   | 195        |  
|Imputed interest
      expense on due to stockholders               |   | (32,025    | ) |   | (32,173    | )
|Loss on disposals of property and
      equipment                   |   | (5,006     | ) |   | (3,332     | )
|Interest expense                                                    |   | (70        | ) |   | -          |  
|Other expenses                                                      |   | (1,054     | ) |   | -          |  
|Total Other Expenses, net                                           |   | (6,614     | ) |   | (34,979    | )
|                                                                    |   |            |   |   |            |  
|LOSS FROM OPERATIONS BEFORE TAXES                                   |   | (686,890   | ) |   | (435,901   | )
|                                                                    |   |            |   |   |            |  
|INCOME TAX EXPENSE                                                  |   | (51,160    | ) |   | -          |  
|                                                                    |   |            |   |   |            |  
|MINORITY INTERESTS                                                  |   | (80,844    | ) |   | -          |  
|                                                                    |   |            |   |   |            |  
|NET LOSS                                                            |   | (818,894   | ) |   | (435,901   | )
|                                                                    |   |            |   |   |            |  
|OTHER COMPREHENSIVE LOSS                                            |   |            |   |   |            |  
|Foreign currency translation loss                                   |   | (46,737    | ) |   | (29,810    | )
|                                                                    |   |            |   |   |            |  
|COMPREHENSIVE LOSS                                                  | $ | (865,631   | ) | $ | (465,711   | )
|                                                                    |   |            |   |   |            |  
|Net loss per share                                                  |   |            |   |   |            |  
|-basic and diluted                                                  | $ | (0.03      | ) | $ | (0.02      | )
|                                                                    |   |            |   |   |            |  
|Weighted average number of shares
      outstanding during the year |   |            |   |   |            |  
|-basic and diluted                                                  |   | 28,897,265 |   |   | 26,500,000 |  



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

F-3

---

|NORTHPORT NETWORK SYSTEMS, INC. AND SUBSIDIARIES
|------------------------------------------------
|(fka Northport Capital Inc.)                    
|                                                
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY 
|FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007  

|                                                     | Common stock |  | Shares to be issued |        |  | Additional |  |   | Unappropriated |  |   | Appropriated |  |   | Accumulated other |   |   |          | 
|---------------------------------------------------- | ------------ |  | ------------------- | ------ |  | ---------- |  | - | -------------- |  | - | ------------ |  | - | ----------------- | - | - | -------- | 
|                                                     | Number of    |  |                     |        |  | Number of  |  |   |                |  |   | paid-in      |  |   | accumulated       |   |   | retained | 
|                                                     | shares       |  |                     | Amount |  | shares     |  |   | Amount         |  |   | capital      |  |   | deficits          |   |   | earnings | 
|Balance at December 31, 2006                         | 26,500,000   |  | $                   | 26,500 |  | -          |  | $ | -              |  | $ | 128,461      |  | $ | (590,400          | ) | $ | 129,897  | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Components of comprehensive
      loss               |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Net loss for the year                                | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | (435,901          | ) |   | -        | 
|Foreign currency
      translation loss              | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | -                 |   |   | -        | 
|Comprehensive loss                                   | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Imputed interest on advances from
      stockholders | -            |  |                     | -      |  | -          |  |   | -              |  |   | 32,173       |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Balance at December 31, 2007                         | 26,500,000   |  |                     | 26,500 |  | -          |  |   | -              |  |   | 160,634      |  |   | (1,026,301        | ) |   | 129,897  | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Components of comprehensive loss                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Net loss for the
      year                          | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | (818,894          | ) |   | -        | 
|Foreign currency translation
      loss              | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | -                 |   |   | -        | 
|Comprehensive loss                                   | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Shares to be issued for
      acquisition            | -            |  |                     | -      |  | 2,700,000  |  |   | 2,700          |  |   | 3,237,300    |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Issue of shares to an
      employee for services    | 1,000,000    |  |                     | 1,000  |  | -          |  |   | -              |  |   | -            |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Issue of shares to two
      stockholders for        |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|settlement of loans                                  | 2,400,012    |  |                     | 2,400  |  | -          |  |   | -              |  |   | 1,197,606    |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Issue of shares to two third parties for cash        | 100,000      |  |                     | 100    |  | -          |  |   | -              |  |   | 99,900       |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Imputed interest on advances from
      stockholders | -            |  |                     | -      |  | -          |  |   | -              |  |   | 32,025       |  |   | -                 |   |   | -        | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Transfer from retained earnings to statutory         |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|and staff
      welfare reserve                      | -            |  |                     | -      |  | -          |  |   | -              |  |   | -            |  |   | (16,751           | ) |   | 16,751   | 
|                                                     |              |  |                     |        |  |            |  |   |                |  |   |              |  |   |                   |   |   |          | 
|Balance at December 31, 2008                         | 30,000,012   |  | $                   | 30,000 |  | 2,700,000  |  | $ | 2,700          |  | $ | 4,727,465    |  | $ | (1,861,946        | ) | $ | 146,648  | 

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

F-4

---

|NORTHPORT NETWORK SYSTEMS, INC. AND SUBSIDIARIES
|------------------------------------------------
|(fka Northport Capital Inc.)                    
|CONSOLIDATED STATEMENTS OF CASH FLOWS           
|FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007  



|                                                                                      |   | 2008           |   |   | 2007            |  
|------------------------------------------------------------------------------------- | - | -------------- | - | - | --------------- | -
|CASH FLOWS FROM OP ERATING
      ACTIVITIES                                           |   |                |   |   |                 |  
|Net l oss                                                                             | $ | (818,894       | ) | $ | (435,901        | )
|A djusted to reconcile n et lo ss to ca sh
      u se d in                            |   |                |   |   |                 |  
|op erating a ctivities:                                                               |   |                |   |   |                 |  
|Depre ciation - cost of sales                                                         |   | 30,959         |   |   | 28,890          |  
|Depre ciation                                                                         |   | 17,336         |   |   | 17,961          |  
|Lo ss on disp osals of p rope
      rty and eq uipme nt                               |   | 5,006          |   |   | 3,332           |  
|Imp uted intere st expen se o n due to stockho
      lders                            |   | 32,025         |   |   | 32,173          |  
|Stock i ssu ed for se rvice s                                                         |   | 1,000          |   |   | -               |  
|Minority intere sts i n su bsidia ry                                                  |   | 80,844         |   |   | -               |  
|Cha nge s in op erating a sse ts and li
      abilitie s                              |   |                |   |   |                 |  
|(Increase ) De cre ase in:                                                            |   |                |   |   |                 |  
|Accoun ts recei va ble                                                                |   | (441,586       | ) |   | -               |  
|Pre paid e xp enses and o th er cu rren t
      assets                                |   | (381,690       | ) |   | ( 128           | )
|Increase (Decre ase):                                                                 |   |                |   |   |                 |  
|Accoun ts payab le                                                                    |   | 135,730        |   |   | 549             |  
|Other p ayable s an d accrued
      lia bilitie s                                     |   | 1,239,856      |   |   | 5 5,838         |  
|Deferre d revenu e                                                                    |   | (53,863        | ) |   | (7 7,207        | )
|Other taxes payab le                                                                  |   | 73,0 01        |   |   | ( 400           | )
|Net ca sh u sed in ope rating
      activities                                        |   | (80,2
      76 | ) |   | (37
      4,893 | )
|                                                                                      |   |                |   |   |                 |  
|CASH FLOWS FROM INVES TING ACTIVITIES                                                 |   |                |   |   |                 |  
|Acqu isiti on of a su bsidia
      ry, net of cash an d ca sh e quivalents a cq uired |   | 26,5 83        |   |   | -               |  
|Pu rchase of prop erty and e quip ment                                                |   | (125,4 94      | ) |   | (308,792        | )
|Pro ceeds from d isposal s of
      prop erty an d equipment                          |   | 584            |   |   | 7,259           |  
|Net ca sh u sed in investing activities                                               |   | (98,3
      27 | ) |   | (301,533        | )
|                                                                                      |   |                |   |   |                 |  
|CASH FLOWS FROM FINANCING ACTIV ITIES                                                 |   |                |   |   |                 |  
|Pro ceed from issu e of common
      stock                                            |   | 100,0 00       |   |   | -               |  
|Due to stockho lders                                                                  |   | 439,1
      76 |   |   | 697,045         |  
|Net cash
      provided by financing activities                                       |   | 539,1 76       |   |   | 697,045         |  
|                                                                                      |   |                |   |   |                 |  
|E FFE CT OF EXCHANGE RATE S ON CASH                                                   |   | 65,7 19        |   |   | (3 1,147        | )
|                                                                                      |   |                |   |   |                 |  
|NE T INCRE AS E (DECREASE) IN CASH AND
      CASH EQ UIVALENTS                        | $ | 426,2 92       |   | $ | (10,528         | )
|                                                                                      |   |                |   |   |                 |  
|CASH AND CASH EQ UIVALENTS AT BEG INNING
      O F Y EAR                              |   | 13,9 34        |   |   | 24,462          |  
|                                                                                      |   |                |   |   |                 |  
|CASH AND CASH EQ UIVALENTS AT END OF
      YEAR                                       | $ | 440,2 26       |   | $ | 13,934          |  
|                                                                                      |   |                |   |   |                 |  
|S UPPLEME NTAL DISCLOS URE O F CASH FLOW
      INFO RM ATION                          |   |                |   |   |                 |  
|Cash paid fo r in te rest                                                             | $ | 70             |   | $ | -               |  

SUPPLEME NTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES

During 2008 , the Compan y issued 2 ,4 00,012 sha res of common
stock valu ed at $ 1,200,00 6 to settle amoun ts due to stockho lders.
During 2008 , note payable of $109,378 was assigned by the lender
  to a stockholder of the Company. 
  During 2008 , the Company has contracted to
  issue 2,700,000 shares of common stock of the Company at a fair value of $3,240,000
  to acquire 51% equity interest in Ling Xia o. As of December 31, 2008, the 2
  ,700,000 consideration shares have not been issued to the previous stockholders
  of the subsidia ry and is recorded as shares to be issued .

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

F-5

---



NORTHPORT NETWORK SYSTEMS, INC. AND SUBSIDAIRIES (fkaNorthport Capital Inc.)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      AND ORGANIZATION
|-- | -----------------------------------------------------------------

| | (A) | Organization
| | --- | ------------

Northport Network Systems, Inc.
(Northport Network) was incorporated under the laws of the State of Colorado
on July 25, 2000 as Dotcom-netmgmt.com Inc. (Dotcom). The name was changed
from Dotcom to Northport Capital Inc. on April 28, 2004. On October 9, 2008, the
stockholders approved in the annual general meeting : (i) a plan of merger for
the reincorporation of the Company from Colorado to Washington State, and change
of the name of the Company to Northport Network Systems, Inc. which became
effective on November 7, 2008; (ii) the authorization of one hundred million
(100,000,000) shares of preferred stock with a par value of $.001 in connection
with the reincorporation merger; and (iii) the Companys 2008 Stock Option Plan
authorizing the issuance of two million seven hundred fifty thousand (2,750,000)
shares of common stock of the Company. Northport Network is an investment
holding company.

Dalian Beigang Information Industry
  Development Company Limited (Dalian Beigang) was incorporated in the Peoples
  Republic of China (PRC) on June 20, 1997 with its principal place of business
in Dalian, PRC.

Dalian Beigang is principally engaged
  in the provision of platforms, among other things, to customers in Dalian for
  electronic filing of tax returns and payment of taxes and color photo printing
  business in the PRC. The Company owns a trade name Colorstar which was
  registered with the China State Administration for Industry and Commerce in
  China as well as a Chinese patent which was applied for on the color photo
  printing technology. In accordance with the business permit, the Companys right
  of operation expires on June 20, 2026 and is renewable.

F-6

---

On June 23, 2005, Northport Network
entered into a definitive agreement with the stockholders of Dalian Beigang in
which Northport Network exchanged 100% of the registered and fully paid up
capital of Dalian Beigang for $150,000 satisfied by the issue of 1,500,000
shares of common stock of $0.001 par value to the stockholders of Dalian
Beigang. As both companies are under common management, the exchange of shares
has been accounted for as a reorganization of entities under common control.

On October 9, 2008, Dalian Beigang
entered into a definitive agreement with the stockholders of Shenyang Ling Xiao
Aviation Services Co., Ltd (Ling Xiao) to acquire 51% equity interest of Ling
Xiao for 2,700,000 treasury shares of common stock of the Company. Ling Xiao is
engaged in air-ticketing agency services. See Note 2 for details of the
transaction.

Northport Network, Dalian Beigang,
Ling Xiao are hereafter referred to as (the Company).

| | (B) | Principles of consolidation
| | --- | ---------------------------

The accompanying consolidated
financial statements as of December 31, 2008 include the financial statements of
Northport Network and its wholly owned subsidiary company, Dalian Beigang and
51% equity interest owned subsidiary, Ling Xiao. The minority interests
represent the minority stockholders 49% share of the results of Ling Xiao.

The accompanying consolidated
financial statements as of December 31, 2007 include the financial statements of
Northport Network and its wholly owned subsidiary company, Dalian Beigang.

All significant inter-company accounts
  and transactions have been eliminated in consolidation.

| | (C) | Use of estimates
| | --- | ----------------

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

F-7

---

| | (D) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | For purpose of the statements of cash flows, cash and
      cash equivalents include cash on hand and demand deposits with bankers
      with a maturity of less than 3 months.                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | (E) | Accounts receivable                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Company extends unsecured credit to its customers in
      the ordinary course of business but mitigates the associated risks by
      performing credit checks and actively pursuing past due accounts. An
      allowance for doubtful accounts is established and recorded based on
      managements assessment of the credit history with the customer and
      current relationships with them.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| | (F) | Property and equipment                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Property and equipment are stated at cost, less
      accumulated depreciation. Expenditures for additions, major renewals and
      betterments are capitalized and expenditures for maintenance and repairs
      are charged to expense as incurred.                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Depreciation is provided on a straight-line basis, less
      estimated residual value over the assets estimated useful lives. The
      estimated useful lives are as follows:                                                                                                                                                                                                                           

| | Motor vehicles                    | 5 to 10 Years
| | --------------------------------- | -------------
| | Color printing machine            | 4 Years      
| | Furniture, fixtures and equipment | 2 to 5 Years 

| | (G) | Long-lived assets
| | --- | -----------------

The Company accounts for long-lived
assets under the Statements of Financial Accounting Standards (SFAS) Nos. 142
and 144 Accounting for Goodwill and Other Intangible Assets and Accounting
for Impairment or

F-8

---

Disposal of Long-Lived Assets (SFAS
No. 142 and 144). In accordance with SFAS No. 142 and 144, long-lived assets
held and used by the Company are reviewed for impairment annually in the fourth
quarter or more frequently if events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. For purposes of
evaluating the recoverability of long-lived assets, when undiscounted future
cash flows will not be sufficient to recover an assets carrying amount, the
asset is written down to its fair value. The long-lived assets of the Company,
which are subject to evaluation, consist primarily of property and equipment.
For the years ended December 31, 2008 and 2007, the Company has not recognized
any allowances for impairment to its long-lived assets.

| | (H) | Goodwill
| | --- | --------

Goodwill represents the excess purchase
price of net tangible and intangible assets acquired in business combinations
over their estimated fair value. The Company accounts for goodwill in accordance
with SFAS No. 142 and SFAS No. 141, Business Combinations ( SFAS No. 141 ). SFAS
No. 142 requires goodwill to be tested for impairment on an annual basis or more
frequently, if impairment indicators arise, and written down when impaired. In
accordance with SFAS No. 142, the Company tests goodwill for impairment at the
reporting unit level at least annually and more frequently upon the occurrence
of certain events. The annual test of goodwill impairment is performed in the
fourth quarter using a two-step process in accordance with SFAS No. 142. First,
the Company determines if the carrying amount of its reporting unit exceeds the
fair value of the reporting unit, which would indicate that goodwill may be
impaired. If the Company determines that goodwill may be impaired, the Company
compares the implied fair value of the goodwill, as defined by SFAS No. 142, to
its carrying amount to determine if there is an impairment loss. There was no
goodwill impairment recorded by the Company during the year ended December 31,
2008.

| | (I) | Fair value of financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | SFAS No. 107, "Disclosure About Fair Value of Financial
      Instruments," requires certain disclosures regarding the fair value of
      financial instruments. Fair value of financial instrument is made at a
      specific point in time, based on relevant information about financial
      markets and specific financial instruments. As these estimates are
      subjective in nature, involving uncertainties and matters of significant
      judgments, they cannot be determined with precision. Changes in
      assumptions can significantly affect estimated fair
  values.

The carrying value of cash and cash
equivalents, accounts receivable (trade and others), accounts payable (trade and
related party) and accrued liabilities approximate their fair values because of
the short-term nature of these instruments. The management of the Company is of
the opinion that the Company is not exposed to significant interest or credit
risks arising from these financial instruments.

| | (J) | Minority interests
| | --- | ------------------

F-9

---

The minority shareholders interest in
the equity and net income of Ling Xiao for the year ended December 31, 2008 is
included in minority interests in the accompanying consolidated financial
statements.

In late 2007, the Financial Accounting
Standard Board (FASB) issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements- an amendment of ARB No. 51 (SFAS 160),
which establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary (minority interest) and for the deconsolidation of a
subsidiary. We will be required to adopt the provisions of SFAS 160 beginning
January 1, 2009. The adoption of FAS 160 will not have significant impact on the
financial position and results of operations of the Company.

| | (K) | Revenue recognition
| | --- | -------------------

The Company recognizes revenues under
the provisions of Staff Accounting Bulletin (SAB) 104, Revenue Recognition when
all of the following have occurred: persuasive evidence of arrangement with the
customer, services have been performed, fees are fixed or determinable and
collectibility of the fees is reasonably assured. These criteria as related to
the Companys revenues are considered to have been met as follows:

Electronic tax filing services

The Company provides electronic tax
filing services to its customers based on fixed price contracts with
contractual period of one year. The customers are billed on approval of the
contracts and based on the terms included in the contracts. Revenue is
recognized ratably over the term of the contract and those billed and received
in advanced by the Company for future services not yet performed is deferred. On
early termination of the contracts, the fees received in advanced will be
refunded to the customers.

Color photo printing services

Revenue from the sale of color photo
printing services is derived from its own and affiliate operations, which
consist of franchise agency and licensing programs. The Company follows the
guidance of Emerging Issues Task Force (EITF) 99-19, "Recording Revenue Gross as
a Principal versus Net as an Agent" for its presentation of revenue and direct
costs. This guidance requires the Company to assess whether it acts as a
principal in the transaction or as an agent acting on behalf of others. Where
the Company is the principal in the transaction and has the risks and rewards of
ownership, the transactions are recorded gross in the statements of income.
Revenue and related costs of services generated by the franchise agents are
included as part of the Company's consolidated revenue and costs of services,
respectively, since the Company has the direct contractual relationships with
the customers, holds title to the related customer receivables and is the legal
employer of the employees.

F-10

---

The franchise agent acts as the
Company's agent in a similar manner as a branch manager in the Company-owned
locations. In the franchise arrangement, the Company has the direct contractual
relationships with its customers and contracts with customers are binding to the
Company. The Company is also responsible for the employees payroll, electricity
and related overheads regardless of customer acceptance of the services. These
factors, among others, designate the Company as the principal with respect to
its franchise agent operations. Franchise agents sales were $6,532 and $1,403
for 2008 and 2007 respectively.

The Company also has a licensing
program whereby the licensee has direct contractual relationships with the
customers, held title to the related customers receivables and is the legal
employer of the employees. Accordingly, net sales and costs of services
generated by the licensee are not included in the Company's consolidated
financial statements. Fees are paid to the Company based on a fixed price for
each of the photo printed and such license fees are recorded by the Company as
revenue. Fees received from licensees were $428 and $815 for 2008 and 2007
respectively.

For sale from its own operations,
revenue is recognized after the photos are printed and delivered to the
customers and cash has been collected.

Air-ticketing agency services

The Company receives commissions from
travel suppliers for air-ticketing services through the Companys transaction
and service platform under various services agreements. Commissions from
air-ticketing services rendered are recognized after air tickets are issued, net
of estimated cancellations. The Company presents revenues from such transactions
on a net basis in the statements of operations as the Company does not assume
inventory risks and has no obligations for cancelled airline ticket
reservations. Contracts with certain airlines contain discretionary escalating
commissions that are paid to the Company subject to achieving specific
performance targets. Such discretionary escalating commissions are recognized
when the air tickets are issued and performance guarantees, if any, are
achieved.

| | (L) | Research and development
| | --- | ------------------------

Research and development costs related
to both present and future products are expensed as incurred. Total expenditures
on research and development related to the color printing project and charged to
general and administrative expenses for the years ended December 31, 2008 and
2007 were $162,894 and $100,822 respectively.

| | (M) | Income taxes
| | --- | ------------

F-11

---

The Company accounts for income taxes
under the SFAS No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS
109, 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. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that included the enactment date.

On January 1, 2007, the Company adopted
the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48). FIN 48 prescribes a more-likely-than-not threshold for
financial statements recognition and measurement of a tax position taken (or
expected to be taken) in a tax return. This Interpretation also provides
guidance on derecognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for
interest and penalties associated with tax positions, accounting for interest
and penalties associated with tax positions, accounting for income taxes in
interim periods and income tax disclosures. The adoption of FIN 48 has not
resulted in any material impact on the Companys financial position or
results.

| | (N) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Northport Network maintains its accounting records in its
      functional currencies of United States Dollars (US$) while Dalian
      Beigang and Ling Xiao maintain their accounting records in their
      functional currencies of Renminbi (RMB).                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Foreign currency transactions during the year are
      translated to the functional currency at the approximate rates of exchange
      on the dates of transactions. Monetary assets and liabilities denominated
      in foreign currencies at the balance sheet date are translated at the
      approximate rates of exchange at that date. Non-monetary assets and
      liabilities are translated at the rates of exchange prevailing at the time
      the asset or liability was acquired. Exchange gains or losses are recorded
      in the statement of operations.

The financial statements of Dalian
Beigang and Ling Xiao whose functional currencies are RMB are translated into
US$ using the closing rate method. The balance sheet items are translated into
US$ using the exchange rates at the respective balance sheet dates. The capital
and various reserves are translated at historical exchange rates prevailing at
the time of the transactions while income and expenses items are translated at
the average exchange rate for the year. All exchange differences are recorded
within equity.

The exchange rates used to translate
amounts in RMB into US$ for the purposes of preparing the financial statements
were as follows:

F-12

---

| |                                                                                                                            |  | December 31,
    2008 |  |  | December 31,
    2007 | 
| | -------------------------------------------------------------------------------------------------------------------------- |  | --------------------- |  |  | --------------------- | 
| | Balance sheet items, except for common
      stock, additional paid-in capital and retained earnings, as of
      year end |  | US$1=RMB6.8542        |  |  | US$1=RMB7.3141        | 
| |                                                                                                                            |  |                       |  |  |                       | 
| | Amounts included in the statements of
      operations and cash flows for the year                                         |  | US$1=RMB6.96225       |  |  | US$1=RMB7.6172        | 

The translation difference recorded for
the years ended December 31, 2008 and 2007 was loss of $46,737 and $29,810
respectively.

No presentation is made that RMB
amounts have been, or would be, converted into US$ at the above rates. Although
the Chinese government regulations now allow convertibility of RMB for current
account transactions, significant restrictions still remain. Hence, such
translations should not be construed as representation that the RMB could be
converted into US$ at that rate or any other rate.

The value of RMB against US$ and other
currencies may fluctuate and is affected by, among other things, changes in
Chinas political and economic conditions, any significant revaluation of RMB
may materially affect the Companys financial condition in terms of US$
reporting.

| | (O) | Other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The foreign currency translation gain or loss resulting
      from translation of the financial statements expressed in RMB to US$ is
      reported as other comprehensive loss in the statements of operations and
      stockholders equity. The foreign currency translation loss for the years
      ended December 31, 2008 and 2007 was $46,737 and $29,810
    respectively.                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (P) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Basic loss per share is computed by dividing income
      available to common stockholders by the weighted average number of common
      shares outstanding during the year. Diluted loss per share is computed
      similar to basic loss per share except that the denominator is increased
      to include the number of additional common shares that would have been
      outstanding if the potential common shares had been issued and if the
      additional common shares were dilutive. There are no potentially dilutive
      securities for 2008 and 2007.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (Q) | Segments
    The Company operates in three reportable segments, provision of platforms for electronic filing of tax returns and payment of taxes, color photo printing and air-ticketing agency.                                                                                                                                                                                                                                                                                                                                                                            

F-13

---

| | (R) | Recent Accounting Pronouncements
| | --- | --------------------------------

In December 2007, the Financial
Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007), Business
Combinations (SFAS 141R). SFAS 141R establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. This statement is effective beginning
January 1, 2009. The Company does not expect the adoption of this statement to
have a material impact on its financial position and results of operations.

In December 2007, FASB issued SFAS No.
160, Noncontrolling Interests in Consolidated Financial Statements  an
amendment of ARB No. 51. This statement improves the relevance, comparability,
and transparency of the financial information that a reporting entity provides
in its consolidated financial statements by establishing accounting and
reporting standards that require; the ownership interests in subsidiaries held
by parties other than the parent and the amount of consolidated net income
attributable to the parent and to the noncontrolling interest be clearly
identified and presented on the face of the consolidated statement of income,
changes in a parents ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for consistently,
when a subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary be initially measured at fair value,
entities provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 affects those entities that have an outstanding noncontrolling
interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS
160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Early adoption is prohibited.
The adoption of this statement did not have a material impact on the Company's
financial position and results of operations.

In March 2008, the FASB issued SFAS No.
161, Disclosures about Derivative Instruments and Hedging Activities, an
amendment of FASB Statement No. 133. This statement is intended to improve
transparency in financial reporting by requiring enhanced disclosures of an
entitys derivative instruments and hedging activities and their effects on the
entitys financial position, financial performance, and cash flows. SFAS 161
applies to all derivative instruments within the scope of SFAS 133, Accounting
for Derivative Instruments and Hedging Activities (SFAS 133) as well as related
hedged items, bifurcated derivatives, and nonderivative instruments that are
designated and qualify as hedging instruments. Entities with instruments subject
to SFAS 161 must provide more robust qualitative disclosures and expanded
quantitative disclosures. SFAS 161 is effective prospectively for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application permitted. The adoption of this statement did
not have a material impact on the Companys financial position and results of
operations.

F-14

---

In May 2008, the FASB issued SFAS No.
162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements of
nongovernmental entities that presented in conformity with generally accepted
accounting principles in the United States of America. SFA 162 will be effective
60 days following the SECs approval of the PCAOB amendments to AU Section 411,
The Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles.The adoption of this statement did not have a
material impact on the Companys financial position and results of
operations.

In May 2008, the FASB issued SFAS No.
163, Accounting for Financial Guarantee Insurance Contracts, an interpretation
of FASB Statement No. 60. The scope of this Statement is limited to financial
guarantee insurance and reinsurance contracts, as described in the Statement,
issued by enterprises included within the scope of Statement 60. Accordingly,
this Statement does not apply to financial guarantee contracts issued by
enterprises excluded from the scope of Statement 60 or to some insurance
contracts that seem similar to financial guarantee insurance contracts issued by
insurance enterprises (such as mortgage guaranty insurance or credit insurance
on trade receivables). This Statement also does not apply to financial guarantee
contracts that are derivative instruments included within the scope of SFAS No.
133, Accounting for Derivative instruments and Hedging Activities. SFAS 163 is
effective prospectively for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years; disclosure requirements in paragraphs 30(g) and 31 are effective for the
first period (including interim periods) beginning after May 23, 2008. The
adoption of this statement did not have a material impact on the Companys
financial position and results of operations.

In October 2008, the FASB issued FSP
FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for
That Asset Is Not Active, to clarify guidance on determining the fair value of
a financial asset under SFAS 157 in a market that is not active. FSP FAS 157-3
was effective upon issuance, including prior periods for which financial
statements had not been issued. The adoption of this statement effective
September 30, 2008 did not have a material impact on the Companys financial
position and results of operations.

|2. | BUSINESS COMBINATION
|-- | --------------------

On October 9, 2008, Dalian Beigang
entered into a definitive agreement with the stockholders of Ling Xiao to
acquire 51% equity interest of Ling Xiao for 2,700,000 shares of treasury stock
of the Company at a fair value of $3,240,000 based on the closing price of the
Companys common stock as quoted on the Over-the-Counter Bulletin Board as of
the date of the closing of the transaction. The stockholders of Ling Xiao do not
have any prior affiliation with the Company. According to the terms of the
definitive agreement, the consideration amount is determined on the basis of a
formula of 51% of 5 times of the planned Ling Xiaos net earnings for the year
ending March 31, 2009. After completion of the review of the Ling Xiaos
operation and the audited financial statements for the year ending March 31,
2009, additional treasury shares of the Company may be issued if the net
earnings is in excess of the net earnings projected in the formula for the
consideration of 2,700,000 shares. Additional contingent purchase consideration
paid, if any, will be recorded as goodwill.

F-15

---

As of December 31, 2008, the 2,700,000
consideration shares have not been issued to the previous stockholders of Ling
Xiao and are recorded as shares to be issued. The Company will issue the
2,700,000 consideration shares together with any contingent consideration shares
to be issued when this is determined.

Ling Xiao was registered with the
Shenyang Industrial and Commercial Administration on September 26, 2007 and its
business term is approved until September 2017. Ling Xiao is principally engaged
in air-ticketing agency business. In addition to its operation in the city of
Shenyang, Liaoning Province in the PRC, Ling Xiao assumed all of the business
operations of Dalian Ling Xiao Aviation Service Co., Ltd (Dalian Ling Xiao) on
October 10, 2008. Dalian Ling Xiao is owned by the stockholders of Ling Xiao and
principally engaged in air-ticketing agency business in the City of Dalian,
Liaoning Province in the PRC.

The preliminary allocation of the net
  assets acquired is as follows:

| | Cash and cash equivalents      | $ | 26,583    |  
| | ------------------------------ | - | --------- | -
| | Other receivables and deposits |   | 42,337    |  
| | Due by stockholders            |   | 190,851   |  
| | Due from related companies     |   | 3,400     |  
| | Total current assets           |   | 263,171   |  
| | Property and equipment, net    |   | 2,536     |  
| | Goodwill                       |   | 3,114,938 |  
| | Total assets                   |   | 3,380,645 |  
| | Less: Accrued liabilities      |   | (2,205    | )
| | Other taxes
      payable      |   | (18,283   | )
| | Minority interest              |   | (120,157  | )
| | Total purchase price           | $ | 3,240,000 |  

Analysis of the net inflow of cash and
cash equivalents in respect of the business combination is as follows:

| | Consideration paid                       | $ | -      | 
| | ---------------------------------------- | - | ------ | 
| | Less: cash and cash equivalents acquired |   | 26,583 | 
| | Net cash inflow                          | $ | 26,583 | 

The acquisition of Ling Xiao was
accounted for as a purchase under SFAS No. 141, Business Combinations.
Accordingly, the operating results of Ling Xiao have been included in the
consolidated statements of operation and comprehensive loss after the effective
date of the acquisition of October 9, 2008.

F-16

---

The following table reflects the
unaudited pro forma combined results of operations for the year ended December
31, 2008, assuming the acquisition of Ling Xiao had occurred and was completed
at the beginning of 2008.

| | Revenues           | $ | 1,950,234 |  
| | ------------------ | - | --------- | -
| |                    |   |           |  
| | Net loss           | $ | (175,869  | )
| |                    |   |           |  
| | Net loss per share |   |           |  
| | - basic            | $ | (0.01     | )
| | - diluted          | $ | (0.01     | )

|3. | ACCOUNTS RECEIVABLE, NET                                                           
|-- | -----------------------------------------------------------------------------------
|   |                                                                                    
|   | Accounts receivable at December 31, 2008 and 2007
      consisted of the following:

| |                                       |   | 2008    |  |   | 2007 | 
| | ------------------------------------- | - | ------- |  | - | ---- | 
| |                                       |   |         |  |   |      | 
| | Accounts receivable                   | $ | 448,547 |  | $ | -    | 
| | Less: allowance for doubtful accounts |   | -       |  |   | -    | 
| | Accounts receivable, net of allowance | $ | 448,547 |  | $ | -    | 

As of December 31, 2008 and 2007, the
Company considered all accounts receivable collectable and has not recorded a
provision for doubtful accounts.

|4. | PREPAID EXPENSES AND OTHER CURRENT ASSETS,
    NET                                                       
|-- | ---------------------------------------------------------------------------------------------------------
|   |                                                                                                          
|   | Prepaid expenses and other current assets at December 31,
      2008 and 2007 consisted of the following:

| |                                                 |   | 2008    |  |   | 2007  | 
| | ----------------------------------------------- | - | ------- |  | - | ----- | 
| |                                                 |   |         |  |   |       | 
| | Cash at online paying agents                    | $ | 223,954 |  | $ | -     | 
| | Deposits for purchase of color printing machine |   | 88,264  |  |   | -     | 
| | Other deposits                                  |   | 38,502  |  |   | 690   | 
| | Other receivable                                |   | 67,759  |  |   | -     | 
| | Prepaid expenses                                |   | 6,004   |  |   | 2,565 | 
| | Due from staff                                  |   | 14,794  |  |   | 4,772 | 
| |                                                 | $ | 439,277 |  | $ | 8,027 | 

|5. | PROPERTY AND EQUIPMENT, NET                                               
|-- | --------------------------------------------------------------------------
|   |                                                                           
|   | The following is a summary of property and equipment at
      December 31:

F-17

---

| |                                                         |   | 2008    |  |   | 2007    | 
| | ------------------------------------------------------- | - | ------- |  | - | ------- | 
| |                                                         |   |         |  |   |         | 
| | Motor vehicles                                          | $ | 155,430 |  | $ | 145,657 | 
| | Color photo printing machines                           |   | 309,389 |  |   | 88,475  | 
| | Furniture and office equipment                          |   | 186,307 |  |   | 117,996 | 
| | Construction in progress - color photo printing machine |   | -       |  |   | 191,915 | 
| |                                                         |   | 651,126 |  |   | 544,043 | 
| | Less: accumulated depreciation                          |   | 231,286 |  |   | 198,348 | 
| | Property and equipment, net                             | $ | 419,840 |  | $ | 345,695 | 

Depreciation expense for the years
ended December 31, 2008 and 2007 was $48,295 and $46,851 respectively.

|6. | OTHER PAYABLES AND ACCRUED LIABILITIES
|-- | --------------------------------------

Other payables and accrued liabilities
at December 31, 2008 and 2007 consisted of the following:

| |                                                        |   | 2008      |  |   | 2007    | 
| | ------------------------------------------------------ | - | --------- |  | - | ------- | 
| |                                                        |   |           |  |   |         | 
| | Due to a minority stockholder of a
      subsidiary    | $ | 414,859   |  | $ | -       | 
| | Deposit for purchase of common stock of the Company    |   | 426,708   |  |   | -       | 
| | Other payables                                         |   | 79,163    |  |   | 28,896  | 
| | Deposits received                                      |   | 16,048    |  |   | 28,712  | 
| | Advanced payment from other air-ticketing
      agents |   | 126,226   |  |   | -       | 
| | Accrued liabilities                                    |   | 228,116   |  |   | 113,189 | 
| |                                                        | $ | 1,291,120 |  | $ | 170,797 | 

|7. | NOTE PAYABLE
|-- | ------------

Note payable at December 31, 2008 and
2007 consisted of the following:

| |                                                                                                                                                                               |   | 2008 |  |   | 2007    | 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---- |  | - | ------- | 
| |                                                                                                                                                                               |   |      |  |   |         | 
| | Note payable to a third party, interest
      free, secured by plant and equipment owned by a third party and
      guaranteed by a stockholder, with no fixed repayment date | $ | -    |  | $ | 109,378 | 

Interest expense paid for the years
ended December 31, 2008 and 2007 was $0 and $0.

|8. | NET LOSS PER SHARE
|-- | ------------------

The following is a reconciliation of
the numerators and denominators used in computing basic and diluted net loss per
share (in thousands, except per share amounts):

F-18

---

| |                                                                          |   | 2008   |   |   | 2007   |  
| | ------------------------------------------------------------------------ | - | ------ | - | - | ------ | -
| | Numerator:                                                               |   |        |   |   |        |  
| | Net loss used in computing basic and
    diluted net loss per share      | $ | (819   | ) | $ | (436   | )
| |                                                                          |   |        |   |   |        |  
| | Denominator:                                                             |   |        |   |   |        |  
| | Shares used in computation of basic and
      diluted net loss per share |   |        |   |   |        |  
| | Weighted average issued common stock outstanding                         |   | 28,276 |   |   | 26,500 |  
| | Weighted
      average common stock to be issued                         |   | 621    |   |   | -      |  
| |                                                                          |   | 28,897 |   |   | 26,500 |  
| | Basic and diluted net loss per share                                     | $ | (0.03  | ) | $ | (0.02  | )

|9. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

| | (A) | Employee benefits
| | --- | -----------------

The full time employees of the Company
are entitled to employee benefits including medical care, welfare subsidies,
unemployment insurance and pension benefits through a Chinese government
mandated multi-employer defined contribution plan. The Company is required to
accrue for those benefits based on certain percentages of the employees
salaries and make contributions to the plans out of the amounts accrued for
medical and pension benefits. The total provision and contributions made for
such employee benefits was $16,147 and $11,851 for the years ended December 31,
2008 and 2007, respectively. The Chinese government is responsible for the
medical benefits and the pension liability to be paid to these employees.

| | (B) | Commitments
| | --- | -----------

The Company leases office spaces from  certain third parties under ten operating leases which
expire on dates between January 31, 2009 and September 30, 2013 at monthly
rentals of between $58 and $1,715.

As of December 31, 2008, the Company
has outstanding commitments of with respect to the above operating leases, which
are due as follows:

F-19

---

| | 2009 | $ | 53,951  | 
| | ---- | - | ------- | 
| | 2010 |   | 44,936  | 
| | 2011 |   | 35,501  | 
| | 2012 |   | 35,015  | 
| | 2013 |   | 26,261  | 
| |      | $ | 195,664 | 

| | (C) | Capital Commitments
| | --- | -------------------

On October 24, 2007, the registered
capital of Dalian Beigang was increased from $144,928 (Rmb1.2 million) to
30,144,928 (Rmb220 million) to allow for new investment of foreign capital
either in the form of equity or debt. According to the amended Articles of
Association of Dalian Beigang, the Company has to fulfill registered capital
contribution of $30 million. As of December 31, 2008, the Company has
outstanding capital contribution of $30 million which is payable on or before
January 16, 2010. If the Company is unable to fully pay the increased capital of
Rmb220 million by January 16, 2010, the registered capital of Dalian Beigang
will become the actual capital contribution as of that date.

| | (D) | Contingent consideration
| | --- | ------------------------

As stated in note 2, the Company
acquired 51% equity interest of Ling Xiao for 2,700,000 shares of treasury stock
of the Company at a fair value of $3,240,000 based on the closing price of the
Companys common stock as quoted on the Over-the-Counter Bulletin Board as of
the date of the closing of the transaction. According to the terms of the
definitive agreement, the consideration amount is determined on the basis of a
formula of 51% of 5 times of the planned Ling Xiaos net earnings for the year
ending March 31, 2009. After completion of the review of the Ling Xiaos
operation and the audited financial statements for the year ending March 31,
2009, additional treasury shares of the Company may be issued if the net
earnings is in excess of the net earnings projected in the formula for the
consideration of 2,700,000 shares. Additional contingent purchase consideration
paid, if any, will be recorded as goodwill.

|10. | STOCKHOLDERS EQUITY
|--- | --------------------

| | (A) | Registered capital
| | --- | ------------------

Stocks issued for services

On February 25, 2008, the Company
  issued 1,000,000 shares of restricted common stock to the original

F-20

---

inventor of the Colorstar technology in
return for his agreement to continue his service employment with the Company and
to continue his research and development activities on Colorstar. The stock was
valued at $0.001 par value. The Company recognized consulting expense of $1,000
included in legal and professional fees for the year ended December 31,
2008.

Unregistered sales of equity
securities

On August 11, 2008, the Company issued
a total of 100,000 shares of common stock at $1 per share to two third parties
for cash.

Stocks issued for settlement of
loans

On August 18, 2008, the Company issued
2,400,012 shares of common stock to 2 stockholders or their nominees for
settlement of the loans owed by the Company in the aggregate amount of
$1,200,006 at the conversion price of $0.5 per share.

Shares to be issued

On October 9, 2008, Dalian Beigang
  entered into a definitive agreement with the stockholders of Ling Xiao to
  acquire 51% equity interest of Ling Xiao for 2,700,000 treasury shares of common
  stock of the Company.

As of December 31, 2008, the 2,700,000
consideration shares have not been issued to the previous stockholders of Ling
Xiao and are recorded as shares to be issued. The Company will issue the
2,700,000 consideration shares together with any contingent consideration shares
to be issued when this is determined.

| | (B) | Appropriated retained earnings
| | --- | ------------------------------

The Companys PRC subsidiaries are
required to make appropriations to reserves funds, comprising the statutory
surplus reserve, statutory public welfare fund and discretionary surplus
reserve, based on after-tax net income determined in accordance with the laws
and regulations of the PRC. Prior to January 1, 2007 the appropriation to the
statutory surplus reserve should be at least 10% of the after tax net income
determined in

F-21

---

accordance with the laws and
regulations of the PRC until the reserve is equal to 50% of the entities
registered capital. Appropriations to the statutory public welfare fund are at
5% to 10% of the after tax net income determined by the Board of Directors.
Effective January 1, 2007, the Company is only required to contribute to one
statutory reserve fund at 10 percent of net income after tax per annum, such
contributions not to exceed 50 percent of the respective companies registered
capital.

The statutory reserve funds are
restricted for use to set off against prior period losses, expansion of
production and operation or for the increase in the registered capital of the
Company. The statutory public welfare fund is restricted for use in capital
expenditures for the collective welfare of employees. These reserves are not
transferable to the Company in the form of cash dividends, loans or advances.
These reserves are therefore not available for distribution except in
liquidation.

Dalian Beigang is not required to make
  further appropriations to the statutory reserve funds after 2004 as the funds have exceeded 50% of its
registered capital after the 2003 appropriation.

In 2008, Ling Xiao appropriated $16,751
  to the reserves funds based on its net income in accordance with the laws and
  regulations of the PRC.

|11. | INCOME TAX
|--- | ----------

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.

Northport Network was incorporated in
the United States and has incurred net operating loss for income tax purposes
for 2008 and 2007. Northport Network has net operating loss carry forwards for
income taxes amounting to approximately $506,844 as at December 31, 2008 which
may be available to reduce future years taxable income. These carry forwards,
will expire, if not utilized, commencing in 2027. Management believes that the
realization of the benefits from these losses appears uncertain due to the
Companys limited operating history and continuing losses. Accordingly, no
deferred tax asset benefit has been

F-22

---

recorded. The tax benefit not recorded
at December 31, 2008 and 2007 was $172,327 and $83,084 respectively. The net
change in the tax benefit for 2008 was an increase of $89,243.

Dalian Beigang and Ling Xiao were
incorporated in the PRC and are subject to PRC income tax which is computed
according to the relevant laws and regulations in the PRC. Beginning January 1,
2008, the new Enterprise Income Tax (EIT) law has replaced the old income tax
laws for Domestic Enterprises (DES) and Foreign Invested Enterprises (FIEs).
The key changes are:

| | c. | The new standard EIT rate of 25% replaces the 33% rate
      applicable to both DES and FIEs, except for High Tech companies that pay a
      reduced rate of 15%;                                                                                   
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                      
| | d. | Companies established before March 16, 2007 continue to
      enjoy tax holiday treatment approved by their local government for a grace
      period of either for the next 5 years or until the tax holiday term
      expire, whichever is sooner.

In addition, the new EIT also grants
tax holidays to entities operating in certain approved industries, such as the
agriculture, fishing, and environmental protection. Entities in approved
industries enjoy a three-year period tax exempt and a three-year period with 50%
reduction in the income tax rates respectively.

Prior to 2007, Dalian Beigang being
registered as a new and high technology enterprise is entitled to an income tax
reduction from 33% to 15%. This tax benefit was not available in 2008.

The income tax expense for 2008 and
2007 was $51,160 and $0 respectively.

The reconciliation of income taxes
computed at the statutory income tax rates to total income taxes for the years
ended December 31, 2008 and 2007 is as follows:

| |                              |   | 2008     |   |   | 2007     |  
| | ---------------------------- | - | -------- | - | - | -------- | -
| |                              |   |          |   |   |          |  
| | Federal tax rate on net loss | $ | (233,543 | ) | $ | (148,206 | )
| | Valuation allowance          |   |          |   |   |          |  
| | Northport Network            |   | 89,243   |   |   | 46,125   |  
| | Dalian Beigang               |   | 160,770  |   |   | 45,036   |  
| | Foreign tax differential     |   | 34,690   |   |   | 57,045   |  
| | Actual tax expense           | $ | 51,160   |   | $ | -        |  

F-23

---

|**12.** | CONCENTRATIONS AND RISKS
|------- | ------------------------

During 2008 and 2007, 100% of the
Companys assets were located in the PRC and 100% of the Companys revenues were
derived from companies located in the city of Dalian and Shenyang which are both
located in the PRC.

The Company has a diversified base of
customers. No individual customer contributed to more than 10% of total revenues
for the years ended December 31, 2008 and 2007. No individual customer accounted
for more than 10% of accounts receivable as of December 31, 2008 and 2007.

The business of the Companys newly
acquired subsidiary, Ling Xiao is subject to certain risks and concentrations
including dependence on relationships with travel suppliers, primarily airlines
and exposure to risks associated with online commerce security. Agency
commission from an airline accounted for 84 % of the Companys total revenues
for the year ended December 31, 2008. As of December 31, 2008, accounts
receivable from this airline was $272,678.

|**13.** | SEGMENTS
|------- | --------

The Company operates in three
reportable segments; provision of platforms for electronic filing of tax returns
and payment of taxes, color photo printing and air-ticketing agency services.
The accounting policies of the segments are the same as described in the summary
of significant accounting policies. The Company evaluates segment performance
based on income from operations. All inter-company transactions between segments
have been eliminated. As a result, the components of operating income for one
segment may not be comparable to another segment. The following is a summary of
the Companys segment information for the years ended December 31, 2008 and
2007:

| | Provision of platform             |   |                   |             |   |          |               |   |           |  |  
| | --------------------------------- | - | ----------------- | ----------- | - | -------- | ------------- | - | --------- |  | -
| | for electronic filing of          |   |                   | Color photo |   |          | Air-ticketing |   |           |  |  
| |                                   |   | tax
      returns |             |   | printing |               |   | agency    |  |  
| | 2008                              |   |                   |             |   |          |               |   |           |  |  
| | Revenues                          | $ | 123,163           |             | $ | 11,760   |               | $ | 473,992   |  | $
| | Gross profit (loss)               |   | 38,082            |             |   | (61,132  | )             |   | 272,868   |  |  
| | Net income (loss) from operations |   | (322,796          | )           |   | (289,326 | )             |   | 58,543    |  |  
| | Total assets                      |   | 42,151            |             |   | 427,026  |               |   | 1,284,160 |  |  
| | Depreciation and amortization     |   | 19,531            |             |   | 26,935   |               |   | 1,829     |  |  
| |                                   |   |                   |             |   |          |               |   |           |  |  
| | 2007                              |   |                   |             |   |          |               |   |           |  |  
| | Revenues                          | $ | 234,763           |             | $ | 2,218    |               | $ | -         |  | $
| | Gross profit (loss)               |   | 132,322           |             |   | (8,155   | )             |   | -         |  |  
| | Net loss from operations          |   | (147,281          | )           |   | (152,960 | )             |   | -         |  |  
| | Total assets                      |   | 35,221            |             |   | 310,474  |               |   | -         |  |  
| | Depreciation and amortization     |   | 36,427            |             |   | 10,424   |               |   | -         |  |  

F-24

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A reconciliation is provided for
unallocated amounts relating to corporate operations which is not included in
the segment information.

| |                                                       |   | Year ended December 31, |  
| | ----------------------------------------------------- | - | ----------------------- | -
| |                                                       |   | 2008                    |  
| |                                                       |   |                         |  
| | Total net loss for reportable segments                | $ | (553,579                | )
| | Unallocated amounts relating to corporate operations: |   |                         |  
| | Legal and professional
      fees                     |   | (217,771                | )
| | Others                                                |   | (47,544                 | )
| |                                                       | $ | (818,894                | )

|14. | RELATED PARTY TRANSACTIONS
|--- | --------------------------

On July 10, 2008, note payable of
$109,378 was assigned by the lender to a stockholder of the Company. Immediately
after this assignment, the Company is indebted to the stockholder for
$109,378.

On August 18, 2008, the Company issued 2,400,012 shares of
  common stock to 2 stockholders or their nominees for settlement of the loans
  owed by the Company in the aggregate amount of $1,200,006 at the conversion
price of $0.5 per share.

As of December 31, 2008, a stockholder loaned $173,432 to the
  Company as unsecured loan and imputed interest is computed at 5% per annum on
the amount due. The balance is repayable on demand.

Total imputed interest expenses recorded as additional paid-in
  capital amounted to $32,025 and $32,173 for the years ended December 31, 2008
  and 2007 respectively.

|15. | GOING CONCERN
      As reflected in the accompanying financial statements, the
        Company has an accumulated deficit of $1,861,946 at December 31, 2008 that
        includes a net loss of $818,894 for the year ended December 31, 2008. The
        Companys total current liabilities exceed its total current assets by $374,278
        and the Company used cash in operations of $80,276. These factors raise
        substantial doubt about its ability to continue as a going concern. In view of
        the matters described above, continued operation of the Company is dependent
        upon the Companys ability to raise additional capital, obtain financing and
        succeed in its future operations. The financial statements do not include any
        adjustments relating to the classification of liabilities that might be
        necessary should the Company be unable to continue as a going concern.
      Management has taken steps to revise
        its operating and financial requirements, which it believes are sufficient to
        provide the Company with the ability to continue as a going concern. The Company
        is also actively pursuing additional funding and potential merger or acquisition
        candidates and strategic partners, which would enhance stockholders investment.
        Management believes that the above actions will allow the Company to continue
    operations through the next fiscal year.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-25

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