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


                                   FORM 10-KSB



 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2006


                       Commission file number: 333-120431


                       China Recycling Energy Corporation

        (Known as "China Digital Wireless, Inc." prior to March 08, 2007)
    -------------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

                                     Nevada
                      ------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   90-0093373
                    ----------------------------------------
                      (I.R.S. Employer Identification No.)

                               429 Guangdong Road
                             Shanghai, China 200001
                    ----------------------------------------
                    (Address of principal executive offices)

                                       N/A
                    ----------------------------------------
                                   (Zip Code)


Issuer's telephone number: (011) 86-21-6336-8686

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

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

Check whether the issuer is not required to file reports  pursuant to Section 13
or 15(d) of the Exchange Act. [ ]



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<PAGE>


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

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

The issuer's  revenues for its most recent  fiscal year ended  December 31, 2006
were US$ 2,889,436.

The  aggregate  market value of the voting  common stock held by  non-affiliates
computed by reference  to the price at which the common  stock was sold,  or the
average bid and asked  prices of such common  stock,  as of March 31,  2007,  is
$3,429,453.  The number of shares of common  stock  outstanding  as of March 31,
2006 was 17,147,268.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]


                       CHINA RECYCLING ENERGY CORPORATION

        (KNOWN AS "CHINA DIGITAL WIRELESS, INC." PRIOR TO MARCH 08, 2007)

                                   FORM 10-KSB

                                TABLE OF CONTENTS


PART I

Item 1.   Description of Business
Item 2.   Description of Property
Item 3.   Legal Proceedings
Item 4.   Submission of Matters to a Vote of Security Holders

PART II

Item 5.   Market For Common Equity and Related Stockholder Matters
Item 6.   Management's Discussion and Analysis or Plan of Operation
Item 7.   Financial Statements
Item 8.   Changes In and Disagreements With Accountants on Accounting
          and Financial Disclosure
Item 8A.  Controls and Procedures.
Item 8B.  Other Information

 PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance With Section 16(a) of the Exchange Act



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Item 10.  Executive Compensation.
Item 11.  Security Ownership of Certain Beneficial Owners and Management
          and Related Shareholder Matters
Item 12.  Certain Relationships and Related Transactions
Item 13.  Exhibits
Item 14.  Principal Accountant Fees and Services

Consolidated Financial Statements............................................F-1


                                     PART I

     When we use the terms "we," "us,"  "our" and "the  Company,"  we mean China
Digital Wireless,  Inc., a Nevada corporation,  and its wholly-owned subsidiary,
Sifang  Holdings  Co.,  Ltd.,  and  Sifang  Holdings  Co.,  Ltd.'s  wholly-owned
subsidiary,  Shanghai TCH Data Technology Co., Ltd. Since March 08, 2007,  China
Digital  Wireless,  Inc.  has  changed  its  name  to  "China  Recycling  Energy
Corporation".  However,  since this Form 10KSB is for fiscal year ended December
31,  2006 when the name  change  has not  occurred,  we still use China  Digital
Wireless, Inc. as the full name of the reporting issuer on this Form 10KSB.

     The information set forth in this Report on Form 10-KSB including,  without
limitation,  that contained in Item 6,  Management's  Discussion and Analysis or
Plan of Operation,  contains "forward looking  statements" within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange Act of 1934, as amended.  These statements relate to future
events or our future financial performance, and involve risks and uncertainties.
In some cases, you can identify  forward-looking  statements by terminology such
as "may," "will," "could," "expect," "plan," "intend," "anticipate,"  "believe,"
"estimate," "predict," "potential," or "continue," or the negative of such terms
or other comparable terminology.  These statements are only predictions.  Actual
results  may  materially  differ  from those  projected  in the  forward-looking
statements  as a result of  certain  risks and  uncertainties  set forth in this
report.  Although management believes that the assumptions made and expectations
reflected  in  the  forward-looking  statements  are  reasonable,  there  is  no
assurance that the underlying  assumptions will, in fact, prove to be correct or
that actual future results will not be different from the expectations expressed
in this report. In evaluating these statements, you should specifically consider
various  factors,  including the risks  outlined in the "Risk  Factors"  section
below.

ITEM 1. DESCRIPTION OF BUSINESS

General

     Our current operations include providing value added information  services,
cellular  phone  distribution  and  advertising  services  through  our  Chinese
operating  subsidiaries.  In 2006 and first  quarter  of 2007,  we also began to
engage in recycling  energy  business,  providing  energy  saving and  recycling
products and services.


Overview

     Business History. We originally began operations as a Colorado  corporation
known as Boulder Brewing Company,  or Boulder Brewing.  We were  incorporated in
Colorado on May 8, 1980 and operated as a microbrewery of various beers. Boulder
Brewing was unable to become profitable within any segment of its core business,



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became illiquid,  and was forced to divest itself of all of its assets.  Boulder
Brewing became dormant without any operations or assets in the second quarter of
1990.

     In September 2001,  Boulder Brewing changed its state of incorporation from
Colorado  to Nevada and  changed  its name to  Boulder  Acquisitions,  Inc.,  or
Boulder  Acquisitions.  From the date of  reincorporation  until  June 23,  2004
Boulder Acquisitions had no material operations or assets.

     On June 23,  2004,  we  completed  a stock  exchange  transaction  with the
shareholders of Sifang Holdings Co., Ltd. ("Sifang Holdings").  The exchange was
consummated  under  Nevada and Cayman  Islands  law  pursuant  to the terms of a
Securities  Exchange  Agreement  dated as of June 23, 2004 by and among  Boulder
Acquisitions,  Sifang Holdings and the shareholders of Sifang Holdings. Pursuant
to the Securities Exchange Agreement,  we issued 13,782,636 shares of our common
stock to the shareholders of Sifang Holdings,  representing  approximately 89.7%
of our post-exchange  issued and outstanding  common stock, in exchange for 100%
of the outstanding  capital stock of Sifang Holdings.  We presently carry on the
business  of  Sifang  Holdings'  wholly-owned  subsidiary,   Shanghai  TCH  Data
Technology Co., Ltd., a corporation organized under the laws of the PRC, or TCH.

     Effective  August 6, 2004,  we changed our name from Boulder  Acquisitions,
Inc. to China Digital Wireless, Inc.

     On January 24,  2007,  a group of  individuals  purchasers  entered a share
purchase  agreement  with a group of  shareholders  of the  Company to  purchase
12,911,835  shares of  Company's  common  stocks  owned by Sellers,  $ 0.001 par
value, for an aggregate  purchase price of $ 490, 000.00.  Purchasers are Guohua
Ku, Hanqiao Zheng,  Ping Sun,  Qianping  Huang,  Xiaohong Zhang and Lixia Zhang.
Sellers are Caihua Tai, Ming Mao, Ying Shi, Sixing Fu,  Xiaodong  Zhang,  Tianqi
Huang,  Wei Huang,  Jing Song,  Ruijie Yu,  and  Weiping  Jing,  all of whom are
shareholders of Company.

     On March 8, 2007, we changed our name from China Digital Wireless,  Inc. to
China Recycling Energy Corporation.

     Our business is primarily  conducted  through our wholly-owned  subsidiary,
Sifang Holdings and its wholly-owned  subsidiary,  TCH. TCH was established as a
foreign  investment  enterprise in Shanghai under the laws of the PRC on May 25,
2004, with registered capital of $7.2 million.

     Our  current  operations  were  originally  a business  division  of Sifang
Information.  Sifang Information is a Shanghai-based  privately owned enterprise
established under the laws of the PRC on August 14, 1998. Sifang  Information is
engaged in the  business of pager and mobile  phone  distribution  and  provides
value added information  services to the customers in the Shanghai  metropolitan
area. In March 2004, Sifang  Information spun off its mobile phone  distribution
business and the majority of its value added  information  services  business to
TCH. As the acquiring entity under common control,  TCH initially recognized all
the assets and liabilities transferred at their carrying amounts in the accounts
of  Sifang  Information  at the  date of  transfer  under  the  guidance  of the
Statement of Financial Accounting Standard ("SFAS") No. 141, Appendix D.

     On May 26, 2004, Sifang  Information  exchanged 100% of the equity interest
in TCH for 100% of the equity  interest in Sifang  Holdings.  Since the ultimate
owners  of the  three  entities  were the same  owners  and the  three  entities
remained under common control,  the ownership exchange transaction was accounted
for at historical costs under the guidance of SFAS No. 141, Appendix D. Prior to
May 26, 2004,  there were no activities in Sifang  Holdings.  As a result of the
exchange  of  ownership  between  TCH  and  Sifang  Holdings,  TCH's  historical
financial  statements  became  the  historical  financial  statements  of Sifang
Holdings.



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     As a result of the  spin-off,  TCH engages in the  business of mobile phone
distribution  and  provides  pager and mobile phone users with access to certain
value-added  information  reformatted  by TCH. TCH purchases  mobile phones from
first tier  distributors  and sells  them to  retailers  with a mark-up.  In the
process  of  providing   value-added   information   services   through  monthly
subscription  agreements  with various  users,  TCH purchases  trading  activity
information  from stock  exchanges,  comments and analysis on PRC stock  markets
provided  by  certain  reputable  security  and  investment  companies,  lottery
information,  weather forecast, and other value-added products and reformats the
aforementioned  information  through  decoding  and  recoding  and  then has the
reformatted   information   transmitted  by  Sifang  Information,   via  service
contracts,  to pager users.  The value-added  information is constantly saved on
TCH's  server in order for  mobile  phone  users to dial in via China  Mobile or
China Unicom.  By signing a monthly  subscription  agreement,  wireless receiver
users  agree to make  advance  payments  for our  services  for either  three or
six-month subscription periods.

     In the  spin-off  process,  the cost of  sales  included  in the  Company's
financial  statements is directly related to the product revenue and the cost of
services is directly  related to different types of service.  The business taxes
(similar to sales taxes in the U.S.) are  related  only to service  revenue at a
tax rate of approximately  3.3%. The selling expenses are allocated based on the
relationship  between  expense  and  revenue  (such as  commission)  and payroll
records.  The  general  and  administrative  expenses  are  allocated  based  on
management  hours spent and payroll  records.  The income tax provision has been
calculated on a separate company basis and is in line with the historical actual
income tax provision at the Sifang  Information  level  assuming that all income
taxes had been paid by Sifang  Information  and no income tax  liability  was in
existence  in the periods  reported in the  accompanying  financial  statements.
Management believes that the costs,  operating expenses,  interest expense,  and
income tax  provision  included  in the  Company's  financial  statements  are a
reasonable  representation  of the  costs  and  expenses  that  would  have been
incurred if the Company had performed these functions as a stand-alone company.

     We launched a new digital  media  project to move into the media  market in
China in 2005. In conjunction with charitable  organizations,  we have installed
donation boxes with digital TV  incorporated  on top of them in the main lobbies
of  commercial  banks,  hotels,  malls and other  public  locations  to call the
public's attention to the charity and broadcast commercial advertisements.

     Value-Added  Information  Services  for Mobile  Phone and Pager  Users.  We
render  value-added  information  services in China by  purchasing  content from
third-party providers and reformatting that content. Our value-added information
services  enable  wireless  receiver  (mobile phone and pager) users in China to
access  financial  information and various  entertainment-related  services.  We
contract  with  our  affiliated  wireless  service  providers  to  transmit  the
reformatted content to customers of China's various network operators.

     The primary  focus of our  value-added  information  services is to provide
wireless receiver users in China with access to financial information. We derive
the vast  majority of our  value-added  information  services  revenue  from our
financial  information  business.  Our financial  information  software,  Sifang
Gutong,  allows our customers to access stock and currency exchange  information
and execute  stock  trades.  We are one of the  largest  stock  information  and
trading value-added information service providers in China.

     We began providing our  entertainment-related  services,  including  icons,
screen savers,  multiplayer  games,  Western  horoscopes,  jokes, and sports and
entertainment  news during the latter part of 2003. These services are ancillary
to our financial information services and they represent only a small portion of
our value-added information services revenue at the present time.



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     Leveraging  our experience and  understanding  of the wireless  value-added
services  market  in  China,  we have  consistently  purchased  and  reformatted
content,  applications and technologies that are popular in the Chinese wireless
market. To further enhance and differentiate our services, we have entered into,
and will continue to actively  pursue,  collaborative  relationships  with third
parties to customize, market and provide access to their content through various
wireless technologies to Chinese consumers. In addition, all of our services are
promoted by our sales force and supported by our customer  service team, each of
which is strategically based in Shanghai.

     In order to meet ownership requirements under Chinese law that restrict us,
as a foreign company,  from operating in certain  industries such as value-added
telecommunication  and  Internet  services,  we have  entered  into  information
service  and  cooperation  agreements  with  two  of  our  affiliates  that  are
incorporated  in the People's  Republic of China  ("PRC" or  "China"):  Shanghai
Sifang Information  Technology Co. ("Sifang Information") and Tianci. We hold no
ownership  interest in Sifang  Information  or Tianci.  Sifang  Information  and
Tianci contract with China Mobile Communications  Corporation,  or China Mobile,
and China United Telecommunications  Corporation, or China Unicom, respectively,
to provide  wireless  value-added  information  services  to  wireless  receiver
customers  in China  via  China  Mobile  and China  Unicom.  Sifang  Information
transmits those services to customers of China Mobile and China Unicom on behalf
of itself and Tianci pursuant to a signed agreement  between Sifang  Information
and Tianci.

     Mobile Phone Distribution. We distribute various mobile phone brands in the
Shanghai,  China region. We distribute mobile phones  manufactured  primarily by
SAMSUNG Electronics Co., Ltd. ("Samsung") and NOKIA Corporation  ("Nokia"),  and
to a lesser  extent,  by  Motorola,  Inc.  ("Motorola").  We began  distributing
Motorola mobile phones in early 2002, Samsung mobile phones in November 2002 and
Nokia mobile phones in March 2005. We began  discontinuing  our Motorola  mobile
phone  distribution  business on June 30, 2004.  We are a  distributor,  for the
Shanghai  region,  of over ten  different  mobile phone models  manufactured  by
Samsung and plan to increase our sales of Samsung mobile phones.

     Most of the  Samsung  models  we  distribute  are  compatible  with the GSM
network and only a few Samsung models we distribute are compatible with the Code
Division Multiple Access, or CDMA, network.

     There are three main  first-tier  wholesalers  of Samsung  phones in China:
Shanghai Taili Communication Equipment Co., Ltd., Shenzhen Tianyin Communication
Development  Co., Ltd., and Guangzhou  Yingtai Data Power  Technology  Co., Ltd.
These wholesalers  contract,  through local branches,  with  sub-wholesalers  to
distribute  each model in a defined area. We have contracts with Shanghai branch
offices of the three main  first-tier  wholesalers,  making us a  sub-wholesaler
distributor of nine Samsung mobile phone models in the Shanghai region.

     We have rebate  programs with Shanghai Taili  Communication  Equipment Co.,
Ltd. and Shenzhen  Tianyin  Communication  Development  Co., Ltd. whereby we are
credited  a  certain  portion  of the  sales  price  we paid  to the  first-tier
wholesaler  if we are able to fulfill  certain  sales volume  prescribed by that
first-tier  wholesaler.  As a result, we are entitled to receive certain rebates
and credits for the inventory  held and sold by us within a specified  period of
time as set by the first-tier wholesaler offering the rebate program.

     Digital  Advertising.  We launched a new digital media project to move into
the media market in China in 2005. In conjunction with charitable organizations,
we have installed  donation boxes with digital TV incorporated on top of them in
the main lobbies of commercial banks,  hotels,  malls and other public locations



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to  call  the  public's  attention  to  the  charity  and  broadcast  commercial
advertisements.

     We have an agreement  with China  Charity  Foundation  ("CCF"),  a national
non-profit charitable  organization,  which enables us to install donation boxes
for CCF in banks and other commercial  locations throughout China that will also
have the Company's  out-of-home  digital  television  advertising media platform
attached.  The  completion  of  this  agreement  enables  us to  accelerate  the
placement of out-of-home  digital  television  platforms,  particularly in banks
across  China.  We  negotiate  placement  of  the  donation  boxes  and  digital
television media platform with banks and other commercial  entities that wish to
support the national charity.  The China Banking Regulatory  Commission ("CBRC")
has previously agreed,  pending completion of the agreement with CCF, to support
and coordinate  this effort with respect to approvals of donation box placements
in banks throughout China. This agreement facilitates the continued placement of
platforms  with  little or no  direct  costs.  We  believe  that such  costs may
constitute  as much as 30% of the  direct  costs of  competitors  based  upon an
analysis of publicly available information.

     We have placed more than 850 multimedia  donation boxes in the inbound area
of Shanghai  and other  arranged  spots will be rolled out in the public  places
with high traffic flow. Based on Shanghai, our strategy is to expand our network
to penetrate other large and mid-sized  developed  cities  throughout  China. We
believe the earnings potential from the advertising service will be a new source
of profit in view of the upcoming Special Olympic World Summer Games in 2007 and
World Exposition in 2010 to be held in Shanghai.

     During  the year  ended  December  31,  2005,  TCH  rendered  advertisement
designing  and  producing  services  to  Shanghai  Tianci  Real  Estate Co. Ltd.
("Tianci  Real  Estate")  for  publicity  and  promoting  its   apartment.   Net
advertising  service  revenue of $1,738,878  was derived from this service.  TCH
performed such services via an agent,  Shanghai Sifang Media Co., Ltd.  ("Sifang
Media"),  which is a  related  company  that  granted  the  license  to  provide
advertising in China.

     In January  2005,  Sifang Media and TCH entered into the "Bank Digital TV's
Cooperation  Agreement",  where TCH will assist in the  promotion  of TV ads for
various  customers,  including  Tianci Real  Estate.  TCH  received a net fee of
$2,620,044 for providing the service from January 2005 to December  2005.  There
was an  "Advertisement  Agency  Contract"  between Tianci Real Estate and Sifang
Media, which expired in November 2005. In June and September 2005, Sifang Media,
TCH and two unrelated customers, entered into certain agreements, where TCH will
assist in the promotion of TV ads for these customers.

     In the third quarter of 2006, the Ministry of  Information  Industry of the
People's Republic of China initiated a nation-wide  management  specific plan as
well as  introduced a series of policies and measures to regulate the SP market.
With the  introduction of these policies and measures that set very strict rules
on the  provisions  of  information  services  provided by  value-added  service
providers, our advertising service business was seriously affected. We generated
only $ 334,844 revenue from the above-mentioned advertising services in 2006.

Energy Saving Products.

     In December  2005,  TCH entered into a series of agreements to purchase (i)
95% of the equity  interests  of  Shanghai  Kena Energy  Saving  Electric Co Ltd
("Kena")  for an  aggregate  purchase  price  of RMB  28,500,000  (approximately
$3,532,000);  (ii) a related patent from one of the shareholders of Kena for RMB
11,000,000 (approximately $1,363,000); and (iii) related rights to make a patent
application   from  one  of  the   shareholders   of  Kena  for  RMB  11,000,000



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(approximately $1,363,000).  The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February  10, 2006,  these  agreements  were amended to impose an  additional
condition on Mr. Zhang  Naiyao,  the  transferor of the patent and holder of the
right to make the patent application,  that if he fails to provide the necessary
technical  assistance  services to enable TCH to use the patented  technology in
producing  products on a large scale that meet the  standards set by the Company
within one year,  TCH shall have the right to demand the return of the  relevant
payment  received  by him in  full  and  to  terminate  the  agreement  for  the
assignment of the patent and the right to apply for  registration of the patent.
The amendments  also set forth the arrangement for payment of the purchase price
between  TCH and  Sifang  Information.  The  purchase  price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for  registration of the patent shall be paid by Sifang  Information on
behalf of TCH. According to the amended  agreements,  the amount of the purchase
consideration  paid by Sifang  Information  on behalf of TCH will be  applied to
offset the trade and other receivables owed to TCH by Sifang Information.

     Kena was  established on April 26, 2005 and it specializes in the research,
development and manufacture of energy-saving  products,  as well as illumination
projects in China. The patent and patent application mentioned above relate to a
"three phase transformer" which is used in connection with a power supply system
and utilizes technology that allows  manufacturers to produce  transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.

     Mr. Zhang Naiyao  failed to meet the condition  mentioned-above  within the
period  prescribed.  In 2006,  we  decided  not to  pursue  the  above-mentioned
acquisition of Kena. All the agreements in connection with the Kena  acquisition
were  terminated by TCH and Kena. We also reviewed the future  economic value of
the deposit for the anticipated business acquisition of Kena and determined that
future  undiscounted  cash flows associated with this deposit were uncertain and
may not be sufficient to recover their carrying  values and so was fully written
down as of December 31, 2006.

Other Energy Recycling and Saving Products.

     In December  2006,  TCH began to engage in other  activities  in the energy
saving and recycling industry, including purchasing certain equipments, devices,
hardware and software for the  construction and installation of top gas recovery
turbine  system  ("TRT")  and  other  renewable  energy  products.   TRT  is  an
electricity  generating  system  that  utilizes  the exhaust  pressure  and heat
produced  in the blast  furnace of steel mill to  generate  electricity.  It has
significant commercial value for the steel mills. TCH plans to use the purchased
properties as investment in several TRT projects that TCH expects to pursue with
several large Chinese steel companies in year 2007.

     On April 08, 2007,  our Board of Directors  approves and makes  effective a
TRT Project  Joint-Operation  Agreement  ("Joint-Operation  Agreement") which is
conditionally  entered on February 01, 2007 between Shanghai TCH Data Technology
Co.,   Ltd.   ("TCH")   and  Xi'an   Yingfeng   Science  and   Technology   Co.,
Ltd.("Yingfeng").  Yingfeng  is a  Chinese  company  that is  located  in Xi'an,
Shaanxi Province, China, and is engaging in the business of designing,  selling,
installing, and operating TRT systems and other renewable energy products.

     Under the Joint-Operation Agreement, TCH and Yingfeng will jointly pursue a
top gas recovery  turbine  project  ("Project")  which is to design,  construct,
install  and  operate a TRT  system in  Xingtai  Iron and  Steel  Company,  Ltd.
("Xingtai").  This project was originally  initiated by a Contract to Design and
Construct  TRT System  ("Project  Contract")  entered by Yingfeng and Xingtai on
September 26, 2006.  Due to Yingfeng's  lack of capital in pursuing this Project
alone,  Yingfeng  sought TCH's  cooperation.  After  intensive  and  substantial



                                     Page 8
<PAGE>

inquiry and  assessment,  TCH agreed to pursue this project with Yingfeng in the
joint-operation  mode.  Under the terms of the  Joint-Operation  Agreement,  TCH
provides various forms of investments and properties into the Project  including
cash, hardware,  software,  equipments, major components and devices. In return,
TCH becomes  entitled to all the rights,  titles,  benefits and  interests  that
Yingfeng originally had under the Project Contract, including but not limited to
the cash payment made by Xingtai on regular basis and other property  rights and
interests.

     Yingfeng  remains  liable for  providing  all the  manpower,  expertise and
skills to design, construct,  install, maintain and operate the TRT system under
the terms of the Project  Contract and also takes  responsibility  to manage the
properties that TCH possesses in this Project.  As for  consideration,  TCH will
make monthly payment of 30,000 RMB Yuan  (approximately  US $ 3,900) to Yingfeng
as compensation for their effort in managing TCH's properties.

     Prior to the approval by the Board of  Registrant,  TCH and  Yingfeng  have
taken several  preliminary  actions in first quarter of 2007 in preparation  for
the full pursuit of the Project,  including  selecting and purchasing  necessary
components  and software for TRT system,  organizing and training the technician
team for the Project and developing the construction  and installation  plan for
the TRT system.


Financial Services.

     Our primary focus with regard to  value-added  information  services is the
provision  of  financial   information  services  utilizing  our  Sifang  Gutong
software.  This  software,  developed  by  Chengao,  utilizes  the JAVA and BREW
platforms.  JAVA and BREW utilize the more  advanced 2.5G  technology  standard,
which enables high-capacity wireless data transmissions.  As a result,  services
offered  over these  platforms  are more  sophisticated  and offer users  higher
quality  graphics  and richer  content and  interactivity,  commanding a premium
price over our other  services.  Our Sifang Gutong  software  enables our mobile
phone  and  pager   customers   to  access   quotes  and   retrieve   customized
investment-related   information,  as  well  as  access  our  currency  exchange
information.

     Sifang  Gutong  provides  our  mobile  phone and pager  customers  with the
ability to receive  streaming  real-time quotes,  including stocks,  most active
issues,  largest gainers and losers,  and mutual funds for securities trading on
the Shenzhen and Shanghai stock exchanges.  Our Sifang Gutong software available
to mobile phone users includes a stock trading  function that enables our mobile
phone  customers to directly place orders to buy and sell  securities  listed on
the two aforementioned stock exchanges.  Our trading window corresponds with the
hours that  securities  markets are open from 9:30 a.m. to 11:30 a.m.,  and from
1:00 p.m. to 3:00 p.m., Beijing Time.

     We  receive  a  continuous  direct  feed of  detailed  quote  data,  market
information  and news. Our customers can create  customized  lists of stocks for
quick access to current  trading  information.  Through our  relationships  with
financial  information  companies such as Shanghai Stock Information Company, we
also provide access to breaking news, charts, market commentary and analysis.

     The  value-added  financial  information we offer can only be accessed by a
customer  on whose  mobile  phone or pager the  end-user  portion  of our Sifang
Gutong software has been installed.  We plan to pre-install the end-user portion
of our Sifang  Gutong  software  in all of the  Samsung  mobile  phones  that we
distribute.  With regard to mobile phones and pagers not  distributed  by us, we
will provide  installation  of our Sifang  Gutong  software  free of charge upon
request.

     Pursuant to the request of a Beijing retailer, we entered into an agreement
with  Chengao and Sifang  Information  whereby  Chengao  installs  the  end-user



                                     Page 9
<PAGE>

portion of our Sifang Gutong  software into mobile phones owned by the retailer.
The retailer  sells these phones at a premium price to consumers.  In return for
the premium price, the consumers  receive our value-added  information  services
for six months free of charge.  The retailer passes the premium back to Chengao,
who retains a small  installation  fee and then passes the  remainder  on to us.
This  relationship  helps us market our  value-added  information  services  and
enables us to establish relationships with new customers.

     Other  Services.   We  also  provide  icons  and  screen  savers,   Western
horoscopes, jokes and event-driven or entertainment news updates. These services
represent only a small portion of our value-added  information services revenues
at the present time.  However, we believe that providing wireless receiver users
in China  access to  entertainment-related  services  increases  our  ability to
retain our financial information subscribers and expand our subscriber base, and
we  expect  the  entertainment-related   services  portion  of  our  value-added
information services business will grow over time.

o    Horoscopes.  With this service,  users can obtain daily Western  horoscopes
     via their mobile phones or pagers.

o    Jokes.  We send  users of this  service a variety of jokes on demand or via
     automatic daily messages.

o    News. We  automatically  send periodic SMS messages on recent  event-driven
     news, sports (especially soccer), or entertainment events to subscribers of
     this service.  Mobile phone users can also download desired  information on
     demand.  We  obtain  our news  content  from  government  affiliated  media
     companies and other local media.

     Content Relationships. Our content collaborators authorize the inclusion of
their content in one or more of our value-added information services for a fixed
fee which we pay  directly  to the  provider.  Our  agreements  with our content
collaborators  usually have a one-year term, and are  non-exclusive.  Currently,
our key content collaborators are:

o    Shanghai Stock Information Company.

o    Shanghai Wanguo Stock Information Company.

o    Shanghai Yibang Stock Information Company.

o    Shanghai Shiji Stock Information Company.

     Marketing  Relationships.  Sifang  Information  and Tianci,  our affiliated
value-added  mobile phone service providers,  have marketing  relationships with
China  Mobile and China  Unicom.  We sell and market  our  services  principally
through China Mobile and China Unicom.  We also sell and market  through  Sifang
Information's  Web  site,   www.sifang.net,   and  promotional  events,   direct
marketing, media advertising and other activities.

     We sell all of our paging  value-added  information  services  through  our
affiliated  value-added paging service provider,  Sifang Information.  We market
our paging value-added  information  services through traditional media outlets,
including newspapers and magazines, and directly to end-users.

     Operator  Channels.  General.  All of our  paging  value-added  information
services are provided through the paging network owned by Sifang Information. We
contract  directly with the pager users to collect all fees  generated  from our
value-added information services. We have an information service and cooperation
agreement  with Sifang  Information  that provides us exclusive  access to their
paging  network for ten years.  This  agreement is  automatically  renewable for
additional one year terms unless we decide to terminate. All of our mobile phone
value-added  information  services  are provided to mobile phone users by Sifang
Information  through the networks of China Mobile and China Unicom.  Previously,



                                    Page 10
<PAGE>

mobile phone users paid for our services by purchasing  pre-paid services cards.
Now, our services are billed to mobile phone  customers in one of two ways:  (1)
certain of our  customers pay for our services in advance when they purchase our
services  and  a  mobile  phone  together  in a  premium  package  (through  our
relationship with Chengao and Sifang  Information),  and (2) our other customers
(who do not  purchase  our  services as part of any such  premium  package)  are
billed by the mobile operators, who collect the fees for our services, including
both our data  access  and short  message  services,  from  their  mobile  phone
subscribers.  The mobile  operators then pass those fees (net of fees charged by
the mobile operator) to our affiliated  value-added  service  providers,  Sifang
Information and Tianci,  who in turn pass those fees to us in return for a small
fee  pursuant to the terms of  information  service and  cooperation  agreements
between us and each of them.

     Our management  team utilizes our experience in China to develop close ties
with the key  personnel of the mobile  operators  at the central and  provincial
levels.  As of December 31, 2006, we had ten sales  professionals  strategically
located in provinces and municipalities concentrated in the eastern and southern
regions of China to work closely  with the mobile  operators at the local level,
where pricing and important  marketing and  operational  decisions are made. Our
sales  network  enables us to work closely  with  operators  to  facilitate  the
approval required for new service offerings and for related pricing and to enjoy
enhanced  marketing and  promotional  support.  We are also able to gain insight
into developments in the local markets and the competitive landscape, as well as
new market opportunities. Our sales professionals are well-incentivized; most of
their compensation is tied to usage of our services in the applicable region.

     Coordinated Marketing Campaigns.  Our affiliated wireless service providers
cooperate  in marketing  campaigns  with China  Mobile and China  Unicom.  These
network operators distribute literature marketing us and our affiliates.

     Non-Operator  Channels.  We also  focus on  non-mobile  operator  sales and
marketing activities, such as:

o    promoting Sifang Information's Web site, www.sifang.net, to potential users
     as a  fun,  easy-to-access  place  to  request  our  wireless  content  and
     applications,

o    engaging  in direct  marketing  to mobile  phone  users  by,  for  example,
     including  advertising  inserts in users'  bills from  Shanghai  Mobile and
     Shanghai Unicom,
     o    engaging  in  direct  marketing  to stock  market  investors  by,  for
          example,  including  advertising  inserts  in  investors'  bills  from
          brokerage  companies  such as GF Securities  Co.,  Ltd.,  Guotai Junan
          Securities  Co.,  Ltd.,  Everbright  Securities  Co.,  Ltd. and Guoxin
          Securities Co., Ltd.,

o    utilizing our database of users to create targeted marketing campaigns,

o    advertising in traditional  media outlets such as newspapers and magazines,
     and

o    we plan to  pre-install  the Samsung  mobile phones we distribute  with the
     end-user portion of our Sifang Gutong software, and place brochures touting
     our stock information,  stock trading and currency exchange services in the
     packaging of those phones, before distributing them to retailers.

     Customer Research.  Our sales, marketing and product development activities
are supported by our five-member customer research  department.  This department
focuses our sales efforts in the following three distinct phases:



                                    Page 11
<PAGE>


     Customer Acquisition. Our customer research department analyzes the success
rates  of  various  national  and  local  marketing  campaigns  in  which we are
involved,  including  by user  segment and cost per user,  in order to determine
which  campaigns are the most effective.  Using phone surveys,  focus groups and
analyses of usage patterns,  the department also considers demographic and other
market  factors to  identify  product  mixes and  product  categories  which are
suitable for the current market environment.

     Customer  Conversion.  To  enhance  our  ability  to  convert  one-time  or
occasional  customers into regular users of our services,  our customer research
department analyzes customer and product churn rates across the market,  average
revenue  per user  data and other  information.  In this  way,  it can  identify
different customer segments and develop targeted  marketing  campaigns for those
segments, including cross-selling and up-selling marketing campaigns.

     Customer  Retention.  Our customer  research  department  evaluates ways to
maximize user interest in our services through, for example,  providing feedback
to our  product  developers  to  improve  product  features  based  on  customer
information  and bundling older services with newly launched  services.  It also
creates various reward programs designed to enhance customer loyalty.

     Customer  Services.  We pride ourselves in providing high quality  customer
service.  Our dedicated  customer service center based in Shanghai  provides our
users real-time support and is staffed by 20 full-time professionals. The center
currently  operates  everyday  from 7:00 a.m. to 10:00 p.m. We strive to achieve
the fastest  response  times and  highest  customer  satisfaction  levels in the
industry.

Competitive Landscape

     There are currently three broad categories of wireless service providers in
China:

o    Portal  service  providers,  which have  established  expertise in Internet
     content and have subsequently branched into mobile space. The portals serve
     as content aggregators offering a variety of wireless value-added services.
     These national portal operators include Sohu, NetEase, Sina, and Tom.com.

o    Dedicated service  providers,  whose businesses focus on offering a variety
     of wireless  content  directly to mobile  users.  These  providers  include
     Linktone, Newpalm and Mtone Wireless.

o    Niche  service  providers,  which focus on a particular  market  segment or
     application that often builds on a pre-existing  sector  competency.  These
     providers include Tencent,  Enorbus, and Solute. We belong in this category
     because of our focus on financial information services.

We may also face competition from international wireless service providers.

     As the mobile  operators  are becoming  more  selective  in choosing  their
service  providers  to promote  high  quality  content,  ensure  high  levels of
customer service and limit the number of providers with which they have to deal,
scale is  becoming  more  important,  and we believe  the  industry  will likely
experience  consolidation  with the leading  nationwide  providers  gaining more
market share at the expense of smaller local providers. Nationwide providers may
also  acquire  some of  their  smaller  competitors  to  gain  access  to  local
relationships with the mobile operators in China or new product expertise.

     We  estimate   that  we  compete   with   between   ten  to  twenty   other
sub-wholesalers  for the rights to  distribute  Samsung  phones in the  Shanghai
region. The three main competitive factors the wholesalers  consider in granting
a sub-wholesaler the rights to distribute a particular model include:



                                    Page 12
<PAGE>

     Available  Cash  Flow.  Sub-wholesalers  must be able to pay for the mobile
phones  they  desire  to  purchase  from  first-tier   wholesalers.   First-tier
wholesalers will be hesitant to grant rights to distribute a particular model to
a sub-wholesaler if that sub-wholesaler does not have sufficient capital to make
large  purchases.  We  believe  that  having  adequate  cash  flow  gives  us  a
competitive advantage.

     Relationships  with  Retailers.  The  wholesalers  look  to  the  types  of
relationships  sub-wholesalers  have with large  retailers  when deciding  which
sub-wholesaler  to  utilize.  We have  strong  relationships  with  three  large
retailers in Shanghai and sell  approximately  65% of our mobile phones to these
three retailers.

     Relationships with Wholesalers.  We have relationships with the three major
wholesalers of Samsung phones in China and have been  sub-wholesalers  for those
three wholesalers for more than a year.

Our Business Strategy

     Our main objective is to maintain and strengthen our position as a provider
of wireless value-added information services in the Shanghai region. In order to
achieve this objective,  we plan to, among other things,  increase the number of
subscribers to our value-added  information services by increasing the number of
mobile phones we distribute  and  pre-installing  those phones with the end-user
portion of our Sifang Gutong software.

     We launched an "out-of-home"  digital  television  advertising  business in
January 2005.  However, we have decided to shift our focus away from the digital
advertising  business  in light of the lack of demand  for  out-of-home  digital
advertising  in China.  We believe  that the lack of demand is caused by several
factors,  including  the  availability  of other  more  traditional  advertising
outlets  such  as  television,  radio  and  newspapers,  and  the  reduction  of
advertising fees due to the merger of media companies. In addition, there are an
increasing  number of  competitors in the media  industry,  resulting in intense
market competition. Key strategies for achieving our goals are to:

o    Continue to expand and  diversify  our  portfolio  of wireless  value-added
     information  services,  including new SMS,  2.5G and other next  generation
     services such as those compatible with 3G;

o    Increase investment in sales,  marketing and branding,  both in conjunction
     with network  operators  and through  independent  activities,  in order to
     promote  customer  awareness of our wireless  value-added  information  and
     advertising services in China;

o    Continue to strengthen our relationships with China Mobile and China Unicom
     by  increasing  our sales  presence at the  national  and local  levels and
     through joint marketing and promotion activities;

o    Expand our marketing channels by continuing to develop integrated marketing
     campaigns with traditional media outlets and other media companies; and


Employees

     The following table summarizes the functional distribution of our employees
as of December 31, 2005 and 2006:



                                    Page 13
<PAGE>


                                                  December 31
                                          2005                  2006
Business Development                       10                    10
Customer                                   20                    20
Human Resources                             2                     2
Legal and Administrative                    2                     2
Products Development                       25                    25
Customer Research                           5                     5
Finance                                     3                     3
Investor Relations                          2                     1
Sales and Marketing                        25                    20
Technical Support                          10                     5
Total                                     109                    93


All of our  personnel are employed  full-time  and none of them are  represented
under  collective  bargaining  agreements.  We consider our  relations  with our
employees to be good.

Wireless Technology Standards in China

     Several different wireless  technology  standards have been developed which
operate at different  frequencies  with both analog and digital  radio  signals.
First generation  wireless  telephone  systems employ analog  technology,  while
newer systems employ digital technology.  Digital wireless technology,  commonly
referred to as second  generation  technology,  or 2G,  multiplies the number of
users that can be served by the same band of spectrum  using analog  technology.
The wireless technologies most relevant in China currently include:

o    Global System for Mobile  Communications,  or GSM -- initially developed in
     order to  facilitate  unification  and  integration  of  telecommunications
     within the  European  Union has  become  widespread  throughout  most Asian
     countries.  GSM technology  breaks audio signals into sequential  pieces of
     data of a defined length,  places each piece into an information conduit at
     specific  intervals  and then  reconstructs  the  pieces  at the end of the
     conduit.  A key component of the GSM system is the SIM card. Data stored on
     the card  identifies  the  subscriber to the mobile  network as well as the
     service  authorized  for  that  subscriber.   Since  the  identity  of  the
     subscriber is held on the card, any mobile phone can be used in conjunction
     with the SIM card.

o    Code Division  Multiple Access,  or CDMA -- a digital  technology  standard
     which has been used in commercial operation by several operators in certain
     countries such as the United States and Korea.  Unlike GSM, CDMA technology
     is a continuous  transmission  technology which uses a coding system to mix
     discrete  audio signals  together  during  transmission  and then separates
     those signals at the end of transmission.

     Prior to the commercial rollout of third generation,  or 3G, networks, 2.5G
technology  standards have been developed for both the GSM and CDMA technologies
to  offer  higher  data  transmission  speeds,  enabling  the use of  more  data
intensive products. Current 2.5G wireless technologies include:

o    General  Packet-Switched  Radio  Service,  or GPRS --  offers  faster  data
     transmission  with speeds ranging from 56 kilobits per second,  or Kbps, to
     114 Kbps via a GSM network. GPRS supports a wide range of bandwidths and is
     particularly suited for sending and receiving small bursts of data, such as
     e-mail and Web browsing,  as well as large volumes of data. GPRS also makes
     it  possible  for  users  to  make   telephone   calls  and  transmit  data
     simultaneously.



                                    Page 14
<PAGE>


o    CDMA 1x RTT -- an advanced CDMA-based  technology which allows transmission
     of data at speeds of up to 144 Kbps,  compared  to a maximum of 64 Kbps for
     second generation CDMA networks.

     3G represents several technology  standards  developed by The International
Telecommunications  Union.  Third  generation  technology has been developed for
both the GSM standard and CDMA standard.

     Wireless   value-added  services  can  be  offered  through  all  of  these
technology standards and most commonly include:

o    Short Messaging  Services,  or SMS -- a service that enables a user to send
     and receive text messages  comprised of words or numbers or an alphanumeric
     combination.  SMS  was  created  when  it was  incorporated  into  the  GSM
     standard.

o    Wireless Application  Protocol, or WAP -- a software protocol standard that
     defines a standardized  means of  transmitting  Internet-based  content and
     data to  handheld  devices  such as mobile  phones and pagers  with  secure
     access to e-mail and  text-based  Web pages.  WAP  supports  most  wireless
     networks including GSM and CDMA.

o    Multimedia Messaging Services, or MMS -- a method of transmitting graphics,
     video clips,  sound files and short text messages  over  wireless  networks
     using the WAP protocol. MMS, however, is not the same as e-mail in that MMS
     is based on the concept of multimedia messaging. An MMS message is coded so
     that the images,  sounds and text are displayed in a predetermined order as
     one singular  message.  Furthermore,  MMS does not support  attachments  as
     e-mail does.

o    JAVA -- a general programming environment that creates applications for the
     Internet or any other distributed networks.  JAVA applications are intended
     to be independent of the hardware platform.

Market Overview

Wireless Value-Added Services as a Revenue Driver for the Mobile Operators

     As the wireless market in China continues to develop, an increasing portion
of the mobile  operators'  users have relatively low per capita  incomes.  These
subscribers  generally  yield lower levels of average revenue per user, or ARPU,
because they are  primarily  users of pre-paid  services.  In addition,  China's
wireless  market is becoming  increasingly  competitive,  as demonstrated by the
recent CDMA  promotions  by China  Unicom,  as well as the  intra-city  wireless
offerings by China's two fixed-line  operators,  China Telecom and China Netcom,
which  offer  users  limited  mobile  services  within a city based on  Personal
Handyphone  Service or Personal  Access System  technology.  In addition,  China
Telecom,  China Netcom and possibly other parties are expected to be awarded two
wireless  licenses,  although  the timing of such grants is unclear.  Both China
Telecom  and China  Netcom are large,  established  companies  with  significant
assets and the entry by them or other companies into the Chinese wireless market
could  lead to further  competition  among the  mobile  operators.  Due to these
pressures on the traditional  voice-related  businesses of the mobile operators,
SMS and other wireless value-added services have become a key differentiator and
increasingly important driver for the growth prospects of China Mobile and China
Unicom.  We believe  wireless  value-added  services will play a key role in the
mobile operators' competitive positioning when attracting and retaining users as
well as in their efforts to reverse declining ARPU levels.

     Against this  competitive  backdrop,  the market for  wireless  value-added
services in China has expanded significantly and is expected to continue to grow



                                    Page 15
<PAGE>

at a fast pace.  Currently,  SMS services  continue to represent the bulk of the
wireless  value-added  services  market in China.  This  market is  increasingly
shifting towards next generation  technologies,  with mobile operators upgrading
their  networks to GPRS and CDMA 1x RTT and users  upgrading to next  generation
mobile  phones that can operate  with  technologies  such as MMS and WAP.  China
Mobile and China Unicom have recognized this  opportunity and are  collaborating
with  select  service   providers,   including  us,  to  further   develop  2.5G
applications and services.

Operators' Wireless Value-Added Services Initiatives in China

     China  Mobile  was the first to enter the market by  introducing  a popular
trial SMS program in  connection  with the Sydney  Olympic Games in August 2000.
China Mobile later  established  its  Monternet(TM)  platform in November  2000.
China  Unicom  started  its  Uni-Info  platform in May 2001.  Monternet(TM)  and
Uni-Info  offer  mobile  phone users a single  access point to order and pay for
wireless value-added services.

     From the inception of  Monternet(TM)  and Uni-Info,  China Mobile and China
Unicom have outsourced  almost all content and applications for their platforms,
meaning that these operators,  much like NTT DoCoMo and SK Telecom,  rely almost
entirely upon  third-party  service  providers to drive their  network  traffic,
supply  attractive  wireless  services and increase  revenue from their wireless
value-added  services.  In turn,  the operators  focus on the operation of their
networks.  For their part, wireless  value-added service providers in China rely
on  the  two  operators,   China  Mobile  and  China  Unicom,  for  the  network
distribution  of  their  content  and  services,  billing  and  collection,  and
remittance  of  revenues.   Both   operators   have   established   similar  fee
arrangements.

     In  addition  to  their  working  relationships  with  third-party  service
providers,  China's  mobile  operators  will likely form closer  alliances  with
mobile  phone  vendors  in order to  standardize  user  friendly  access  to and
functionality for wireless value-added services in all mobile phones.

Government Regulation

     The  following  is  a  summary  of  the  principal  governmental  laws  and
regulations that are or may be applicable to wireless service  providers like us
in  China.  The  scope  and  enforcement  of many of the  laws  and  regulations
described  below  are  uncertain.  We  cannot  predict  the  effect  of  further
developments  in the Chinese legal system,  including  the  promulgation  of new
laws,  changes to existing laws or the  interpretation  or  enforcement of laws,
particularly with regard to wireless value-added services,  which is an emerging
industry in China.

Regulation of Telecommunication Services

     The  telecommunications  industry,  including certain wireless  value-added
services, is highly-regulated in China. Regulations issued or implemented by the
State  Council,  the  Ministry of  Information  Industries,  and other  relevant
government   authorities  cover  many  aspects  of  telecommunications   network
operation,  including entry into the  telecommunications  industry, the scope of
permissible   business   activities,   interconnection   and  transmission  line
arrangements, tariff policy and foreign investment.

     The  principal  regulations  governing  the   telecommunications   services
business in China include:

o    Telecommunications  Regulations  (2000),  or the Telecom  Regulations.  The
     Telecom Regulations categorize all  telecommunications  businesses in China
     as  either  infrastructure  telecommunications  businesses  or  value-added
     telecommunications  businesses.  The latter category includes SMS and other



                                    Page 16
<PAGE>

     wireless  value-added  services.  Under the  Telecom  Regulations,  certain
     services are  classified as being of a  value-added  nature and require the
     commercial  operator  of such  services  to  obtain an  operating  license,
     including  telecommunication  information services,  online data processing
     and translation  processing,  call centers and Internet access. The Telecom
     Regulations  also set forth extensive  guidelines with respect to different
     aspects of telecommunications operations in China.

o    Regulations for the Administration of  Foreign-Invested  Telecommunications
     Enterprises  (2002),  or  the  FI  Telecom  Regulations.   The  FI  Telecom
     Regulations set forth detailed requirements with respect to capitalization,
     investor  qualifications and application  procedures in connection with the
     establishment  of a  foreign-invested  telecom  enterprise.  Under  the  FI
     Telecom  Regulations,  a foreign entity is prohibited from owning more than
     50% of the total equity in any value-added  telecommunications  business in
     China, subject to certain geographic limitations.

o    Administrative  Measures for Telecommunications  Business Operating License
     (2001),  or  the  Telecom  License  Measures.  Under  the  Telecom  License
     Measures, an approved value-added  telecommunications service provider must
     conduct its business in accordance with the specifications  recorded on its
     Telecom Business Operating License.

o    In the third quarter of 2006, the Ministry of  Information  Industry of the
     People's Republic of China initiated a nation-wide management specific plan
     as well as  introduced a series of policies and measures to regulate the SP
     market.  With the introduction of these policies and measures that set very
     strict  rules  on  the  provisions  of  information  services  provided  by
     value-added  service  providers,   our  advertising  service  business  was
     seriously   affected.   We  generated  only  $  334,844  revenue  from  the
     above-mentioned advertising services in 2006.

     In addition to regulations promulgated at the national level by the Chinese
government, the Shanghai municipal government has issued provisional regulations
requiring  SMS service  providers to obtain  licenses  from or register with the
local  Ministry of  Information  Industries  branch office before  providing SMS
service  within  the  city.  At  this  time,  it  is  unclear  whether  national
regulations will be promulgated regulating SMS services.

     Our  affiliates,  Sifang  Information  and Tianci,  each have a value-added
telecommunication   services   license   issued   by  the   Shanghai   Municipal
Telecommunications  Administration  Bureau,  which is the  local  office  of the
Ministry   of   Information   Industries.   Each  has  also  been   granted   an
inter-provincial  value-added  telecommunication  license  by  the  Ministry  of
Information Industries.

Other Laws and Their Application

     Regulation  of  Internet  Content  Services.   As  a  wireless  value-added
information services provider,  we do not engage in the Internet portal business
which typically  involves the provision of extensive  Internet content services,
including  Chinese language Web navigational  and search  capabilities,  content
channels,  web-based  communications  and community  services and a platform for
e-commerce,  such as auction  houses.  Sifang  Information  registered  with the
Shanghai  Telecommunication  Administration  Bureau in  January  2001 to provide
commercial services at the www.sifang.net web site.

     As a commercial ICP provider, Sifang Information is prohibited from posting
or displaying any content that:
o    opposes the fundamental principles determined in China's Constitution;
o    compromises state security, divulges state secrets, subverts state power or
     damages national unity;
o    harms the dignity or interests of the state;
o    incites  ethnic  hatred or racial  discrimination  or damages  inter-ethnic
     unity;



                                    Page 17
<PAGE>

o    sabotages  China's  religious policy or propagates  heretical  teachings or
     feudal superstitions;
o    disseminates rumors, disturbs social order or disrupts social stability;
o    propagates obscenity,  pornography,  gambling,  violence, murder or fear or
     incites the commission of crimes;
o    insults or slanders a third party or infringes  upon the lawful  rights and
     interests of a third party; or
o    includes other content prohibited by laws or administrative regulations.

     Failure to comply  with  these  prohibitions  may result in the  closing of
Sifang Information's Web site.

     Regulation  of News  Dissemination  through  SMS  Services.  Pursuant  to a
circular issued by the Shanghai Communications  Administration,  distribution of
news content through wireless applications like SMS must be approved by relevant
government  agencies.  Both Sifang  Information  and Tianci  have all  necessary
approvals.

     Regulation  of  Advertisements.  The State  Administration  of Industry and
Commerce,  or the SAIC, is the  government  agency  responsible  for  regulating
advertising  activities  in  China.  The  SAIC has not  promulgated  regulations
specifically  aimed at  wireless  advertising  through  a media  other  than the
Internet,  such as through SMS services.  One provisional  regulation  issued by
Shanghai  municipal  government  prohibits  service  providers  from sending SMS
advertisements without the client's consent.

     As part of our non-mobile operator marketing activities,  we have developed
integrated  marketing campaigns with traditional media outlets such as magazines
and newspapers and  multinational  corporations  through  certain  cross-selling
efforts with  companies,  including  Motorola  and Samsung.  If the SAIC were to
treat  our  integrated   marketing   campaigns  or  other  activities  as  being
advertising  activities,  we  would  need to  apply  to the  local  SAIC  for an
advertising license to conduct wireless  advertising business (through SMSs, for
example).  We can give no assurance that such  application  would be approved by
the SAIC.  Failure to obtain such approval  could result in penalties  including
being banned from engaging in online  advertising  activities,  confiscation  of
illegal earnings and fines.

     Foreign Exchange  Controls.  The principal  regulations  governing  foreign
exchange in China are the Foreign  Exchange Control  Regulations  (1996) and the
Administration of Settlement,  Sale and Payment of Foreign Exchange  Regulations
(1996),  or  the  Foreign  Exchange  Regulations.  Under  the  Foreign  Exchange
Regulations,  Renminbi is freely  convertible  into foreign currency for current
account items,  including the distribution of dividends.  Conversion of Renminbi
for  capital  account  items,  such as direct  investment,  loans  and  security
investment,   however,   is  still   subject  to  the   approval  of  the  State
Administration of Foreign Exchange, or SAFE.

     Under the Foreign Exchange  Regulations,  foreign-invested  enterprises are
required to open and maintain  separate  foreign  exchange  accounts for capital
account  items  (but  not  for  other  items).  In  addition,   foreign-invested
enterprises  may only buy, sell and/or remit  foreign  currencies at those banks
authorized to conduct foreign exchange business after providing valid commercial
documents  and,  in the case of capital  account  item  transactions,  obtaining
approval from SAFE.

Intellectual Property and Proprietary Rights

     We rely  primarily  on a  combination  of  copyright  laws and  contractual
restrictions  to establish  and protect our  intellectual  property  rights.  We
require  our  employees  to  enter  into  agreements   requiring  them  to  keep
confidential all information  relating to our customers,  methods,  business and
trade  secrets  during and after their  employment  with us. Our  employees  are
required to acknowledge and recognize that all inventions,  trade secrets, works
of authorship,  developments and other  processes,  whether or not patentable or
copyrightable,  made by them during their employment are our property. They also



                                    Page 18
<PAGE>

sign agreements to substantiate  our sole and exclusive right to those works and
to transfer any ownership that they may claim in those works to us.

     While we actively take steps to protect our proprietary  rights, such steps
may not be adequate  to prevent  the  infringement  or  misappropriation  of our
intellectual property. This is particularly the case in China where the laws may
not  protect  our  proprietary   rights  as  fully  as  in  the  United  States.
Infringement or misappropriation  of our intellectual  property could materially
harm our business.  Sifang Information has registered the following Internet and
WAP domain name www.sifang.net.

     Shanghai  Sifang   Communication   Company  ("Sifang   Communication")  has
registered one trademark with China's  Trademark  Office.  That trademark is our
logo,  a square (the  English  translation  of "Sifang"  is  "square").  China's
trademark law utilizes a "first-to-file"  system for obtaining trademark rights.
As a result,  the first applicant to file an application  for  registration of a
mark will preempt all other applicants.  Prior use of unregistered marks, except
"well known" marks,  is generally not a basis for legal action in China.  We may
not be able to  successfully  defend or claim any legal rights in any trademarks
for which we apply in the future.

     Pursuant   to  a  license   agreement   between   our   affiliate,   Sifang
Communication,  and us, we have the right to use our registered  trademark,  our
square logo,  whenever necessary.  We also acquired all of Sifang  Information's
interest in the Sifang Gutong software  pursuant to the terms of the spin-off of
Sifang  Information's  business  divisions  focusing on value-added  information
services and  distribution  of mobile phones.  We have the right to use the word
"Sifang" and to market ourselves through  www.sifang.net  with regard to both of
the spun-off divisions.

     Many parties are actively  developing  and seeking  patent  protection  for
wireless services-related  technologies.  We expect these parties to continue to
take steps to protect these  technologies,  including seeking patent protection.
There may be patents  issued or  pending  that are held by others and that cover
significant parts of our technology, business methods or services. Disputes over
rights to these  technologies  are likely to arise in the  future.  We cannot be
certain that our products do not or will not infringe valid patents,  copyrights
or other intellectual  property rights held by third parties.  We may be subject
to legal  proceedings and claims from time to time relating to the  intellectual
property of others.

Terminated 2006 Acquisition

     In December  2005,  TCH entered into a series of agreements to purchase (i)
95% of the equity  interests  of  Shanghai  Kena Energy  Saving  Electric Co Ltd
("Kena")  for an  aggregate  purchase  price  of RMB  28,500,000  (approximately
$3,532,000);  (ii) a related patent from one of the shareholders of Kena for RMB
11,000,000 (approximately $1,363,000); and (iii) related rights to make a patent
application   from  one  of  the   shareholders   of  Kena  for  RMB  11,000,000
(approximately $1,363,000).  The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February  10, 2006,  these  agreements  were amended to impose an  additional
condition on Mr. Zhang  Naiyao,  the  transferor of the patent and holder of the
right to make the patent application,  that if he fails to provide the necessary
technical  assistance  services to enable TCH to use the patented  technology in
producing  products on a large scale that meet the  standards set by the Company
within one year,  TCH shall have the right to demand the return of the  relevant
payment  received  by him in  full  and  to  terminate  the  agreement  for  the
assignment of the patent and the right to apply for  registration of the patent.
The amendments  also set forth the arrangement for payment of the purchase price
between  TCH and  Sifang  Information.  The  purchase  price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for  registration of the patent shall be paid by Sifang  Information on
behalf of TCH. According to the amended  agreements,  the amount of the purchase



                                    Page 19
<PAGE>

consideration  paid by Sifang  Information  on behalf of TCH will be  applied to
offset the trade and other receivables owed to TCH by Sifang Information.

     Kena was  established on April 26, 2005 and it specializes in the research,
development and manufacture of energy-saving  products,  as well as illumination
projects in China. The patent and patent application mentioned above relate to a
"three phase transformer" which is used in connection with a power supply system
and utilizes technology that allows  manufacturers to produce  transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.

     Mr. Zhang Naiyao  failed to meet the condition  mentioned-above  within the
period  prescribed.  In 2006,  we  decided  not to  pursue  the  above-mentioned
acquisition of Kena. All the agreements in connection with the Kena  acquisition
were  terminated by TCH and Kena. We also reviewed the future  economic value of
the deposit for the anticipated business acquisition of Kena and determined that
future  undiscounted  cash flows associated with this deposit were uncertain and
may not be sufficient to recover their carrying  values and so was fully written
down as of December 31, 2006.


 RISK FACTORS

     In  addition to the other  information  contained  in this  annual  report,
including the documents we  incorporate  by reference,  you should  consider the
following  factors that may affect our future  results and  financial  condition
before  investing in our securities.  Although we believe that the  expectations
reflected in the forward-looking  statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We are under no
duty to  update  any of the  forward-looking  statements  after the date of this
report to  conform  such  statements  to actual  results  or to  changes  in our
expectations.

Risks Related to Our Business

We depend upon contractual  arrangements with our affiliated  value-added mobile
phone service  providers,  Sifang Information and Tianci, for the success of our
business.  These  arrangements may not be as effective in providing  operational
control as direct ownership of these businesses and may be difficult to enforce.

     Because  we  conduct  our  business  only  in  China,  and  because  we are
restricted by the Chinese government from owning  telecommunications or Internet
operations  in China,  we  depend on our  affiliated  value-added  mobile  phone
service  providers,  Sifang  Information and Tianci,  in which we have no direct
ownership interest,  but with which we have entered into information service and
cooperation agreements, to provide those services to mobile phone users in China
through contractual agreements with the mobile operators, China Mobile and China
Unicom. These arrangements may not be as effective in providing control over our
value-added  information  services  to mobile  phone  users in China as would be
direct ownership of these businesses.  For example, Sifang Information or Tianci
could fail to take actions  required to operate our  business,  such as entering
into service contracts with China Mobile or China Unicom. Moreover, a portion of
the fees for our  services are paid by the mobile  operators  directly to Sifang
Information  and Tianci,  which are then obligated to transfer all of those fees
to us, in return  for a small  fee.  If Sifang  Information  or Tianci  fails to
perform their obligations  under these agreements,  we may have to rely on legal
remedies  under  Chinese law,  which we cannot  assure you would be effective or
sufficient.



                                    Page 20
<PAGE>

     In the opinion of our Chinese counsel,  Sifang  Information and Tianci each
possess such licenses, permits, certificates,  authorities and approvals, issued
by  appropriate  governmental  agencies  or bodies in the  People's  Republic of
China,  as are necessary to conduct its business as presently  conducted as well
as to perform its  obligations  under any contracts  between it and China Mobile
and China  Unicom,  respectively.  In addition,  in the opinion of Chinese Legal
Group  (Shanghai),  TCH is not in breach of or in default  under any laws of the
People's  Republic of China or any  approval,  consent,  waiver,  authorization,
exemption,  permission,  endorsement or license granted by any People's Republic
of China governmental agencies.  There are, however,  substantial  uncertainties
regarding the  interpretation and application of current and future Chinese laws
and regulations, as discussed below.

We depend on one software  developer for a  significant  portion of our software
development, as well as for important marketing relationships.

     We rely on Shanghai Chengao Industrial Co., Ltd., or Chengao,  to develop a
significant  portion of our software,  including our Sifang Gutong software.  We
also rely on  Chengao to provide  us with an  important  marketing  relationship
regarding the mobile phone version of our Sifang Gutong software. If we lose our
relationship  with  Chengao,  we could have a difficult  time finding a suitable
replacement in the short term. Our corporate  structure could be deemed to be in
violation  of  current  or  future  Chinese  laws and  regulations  which  could
adversely affect our ability to operate our business effectively or at all.

     In connection with China's entry into the World Trade Organization, or WTO,
foreign  investment  in  telecommunications  and Internet  services in China was
liberalized   to   allow   for   30.0%   foreign    ownership   in   value-added
telecommunication  and  Internet  services  in 2002,  49.0% in 2003,  and  50.0%
thereafter. In order to meet these ownership requirements,  we have entered into
information  service and  cooperation  agreements  with Sifang  Information  and
Tianci.  We do not have any direct ownership  interest in Sifang  Information or
Tianci. The original  shareholder  structure of Sifang Holdings was identical to
the current  shareholder  structure  of Sifang  Information,  and each of Sifang
Information and Tianci are beneficially  owned 69% by Tai Caihua,  our president
and the  chairman of our board of  directors.  It is possible  that the relevant
Chinese authorities could, at any time, assert that any portion or all of TCH's,
Sifang  Information's,  or Tianci's  existing or future ownership  structure and
businesses violate existing or future Chinese laws,  regulations or policies. It
is  also   possible   that   the  new   laws  or   regulations   governing   the
telecommunication  or Internet sectors in China that have been adopted or may be
adopted in the future will prohibit or restrict foreign  investment in, or other
aspects  of,  TCH's,  Sifang  Information's  or  Tianci's  current  or  proposed
businesses and  operations.  In addition,  these new laws and regulations may be
retroactively applied. In any such case, we could be required to restructure our
operations,  which could  adversely  affect our ability to operate our  business
effectively or at all.

We depend on China  Mobile and China  Unicom  for  delivery  of our  value-added
information  services to mobile  phone users in China,  and the  termination  or
alteration of Sifang Information's and Tianci's various contracts with either of
them or their  provincial or local  affiliates  could  materially  and adversely
impact our business.

     Our  affiliated   value-added  mobile  phone  service   providers,   Sifang
Information and Tianci,  contract with the two principal  mobile phone operators
in China,  China  Mobile and China  Unicom,  to offer our  wireless  value-added
information services to mobile phone users through these mobile phone operators,
which  service  nearly all of China's  approximately  282 million  mobile  phone
subscribers.  Given their dominant market position,  our affiliated  value-added
mobile phone service  providers'  negotiating  leverage with these  operators is
limited.  If our affiliated  value-added mobile phone service providers' various
contracts with either  operator are terminated or adversely  altered,  it may be
impossible for our affiliated value-added mobile phone service providers to find
appropriate  replacement  operators  with the  requisite  licenses  and permits,



                                    Page 21
<PAGE>

infrastructure  and customer base to offer our services,  and our business would
be significantly impaired.

     Our value-added  information services are provided to mobile phone users in
China pursuant to contracts Sifang Information and Tianci have with China Mobile
and  China  Unicom  and  their  provincial  or local  affiliates.  Each of these
contracts is  non-exclusive,  and has a limited term  (generally one year).  Our
affiliates  usually renew these  contracts or enter into new ones when the prior
contracts expire,  but on occasion the renewal or new contract can be delayed by
periods  of one  month or more.  The  terms of  these  contracts  vary,  but the
operators are generally  entitled to terminate  them in advance for a variety of
reasons  or, in some  cases,  for no reason in their  discretion.  For  example,
several of our affiliates'  contracts with the mobile operators can generally be
terminated if:

o    our affiliate fails to achieve performance  standards which are established
     by the applicable operator from time to time,

o    our affiliate breaches its obligations under the contracts,  which include,
     in many cases,  the  obligation  not to deliver  content that  violates the
     operator's policies and applicable law,

o    the  operator  receives  high  levels  of  customer  complaints  about  our
     affiliate's services, or

o    the  operator  sends  written  notice  to our  affiliate  that it wishes to
     terminate the contract at the end of the applicable notice period.

     Our affiliates may also be compelled to alter their arrangements with these
mobile operators in ways which adversely  affect our business.  China Mobile and
China Unicom have unilaterally  changed their policies as applied to third-party
service  providers in the past, and may do so again in the future. We may not be
able  to  adequately  respond  to  negative   developments  in  the  contractual
relationships  between our  affiliates  and China  Mobile or China Unicom in the
future  because we do not have a contractual  relationship  with China Mobile or
China Unicom.

Our business could be adversely affected if China Mobile or China Unicom or both
begin providing their own wireless value-added services.

     Our wireless  value-added  information  services  business may be adversely
affected if China Mobile or China Unicom or both decide to begin providing their
own wireless  value-added services to mobile phone users. In that case, we would
face enhanced  competition,  and our services could be fully or partially denied
access to their networks.

We depend in part on China Mobile and China Unicom to maintain  accurate records
and to continue to pay our affiliated value-added wireless service providers.

     We depend in part on China  Mobile and China  Unicom to  maintain  accurate
records  of the  fees  paid by  mobile  phone  users  and to pay our  affiliated
value-added  wireless  service  providers.  Specifically,  the mobile  operators
provide our  affiliates  with monthly  statements  that do not provide  itemized
information regarding which of our services are being paid for. Our business and
results of operation could be adversely affected if these mobile phone companies
miscalculate the revenue generated from our services and our affiliates' portion
of that revenue, or refuse to pay our affiliates altogether.

Our  revenues  and cost of services  are  affected  by billing and  transmission
failures which are often beyond our control.



                                    Page 22
<PAGE>

     Our  affiliates  do not collect fees for our services owed to them by China
Mobile and China Unicom in a number of circumstances, including if:

o    the delivery of our service to a customer is  prevented  because his or her
     phone is turned off for an extended period of time, the customer's  prepaid
     phone card has run out of value or the customer has ceased to be a customer
     of the applicable operator,

o    China  Mobile or China Unicom  experiences  technical  problems  with their
     networks which prevent the delivery of our services to the customer,

o    we experience  technical problems with our technology platform that prevent
     delivery of our services,

o    our  affiliates   experience   technical  problems  with  their  technology
     platforms that prevent delivery of our services, or

o    the  customer  refuses  to pay for our  service  due to  quality  or  other
     problems.

     These  situations  are known in the  industry as billing  and  transmission
failures,   and  we  do  not  recognize  any  revenue  for  services  which  are
characterized  as billing and transmission  failures.  The failure rate can vary
among the operators,  and by province, and also has fluctuated  significantly in
the past. If actual billing and transmission failures exceed our estimates,  our
revenues could be materially adversely affected.

China Mobile and China Unicom may impose  higher  service or network fees on our
affiliated  value-added  service  providers if we are unable to satisfy customer
usage and other performance criteria.

     Fees for our  wireless  value-added  information  services are charged on a
monthly subscription or per use basis. Based on our contractual  arrangement and
those of our wireless value-added service providers, we rely on China Mobile and
China Unicom to bill and collect fees for our services from mobile phone users.

     China Mobile and China Unicom generally  charge our affiliated  value-added
service providers service fees of 15% and 30% of the revenues generated by their
services, respectively. To the extent that the number of messages sent by Sifang
Information  over China  Mobile's  network  exceeds the number of messages their
customers  send to it,  Sifang  Information  must pay per message  network fees,
which  decrease  in several  provinces  as the volume of  customer  usage of our
services  increases.  The number of  messages  sent by Sifang  Information  will
exceed those sent by end-users,  for example, if a user sends Sifang Information
a single  message to order a game but Sifang  Information in turn must send that
user  several  messages to confirm his or her order and deliver the game itself.
Tianci's  service  fees owed to China  Unicom could also rise if Tianci fails to
meet certain customer usage, revenue and other performance  criteria.  We cannot
be  certain  that our  affiliates  will be able to  continue  to  satisfy  these
criteria in the future or that the mobile  operators  will keep the  criteria at
their current levels.  Any increase in China Mobile's or China Unicom's  network
fees and service charges could reduce our gross margins.

China  Mobile  and China  Unicom  may  terminate  their  relationships  with our
affiliates if our affiliates fail to achieve minimum customer usage, revenue and
other criteria.

     Our business  could be  adversely  affected if our  affiliated  value-added
mobile phone service  providers fail to achieve minimum customer usage,  revenue



                                    Page 23
<PAGE>

and other criteria  imposed or revised by China Mobile and China Unicom at their
discretion  from time to time.  China  Mobile and China  Unicom,  through  their
national  and local  offices,  have  historically  preferred to work only with a
small group of the best performing wireless value-added service providers, based
upon the  uniqueness of the service  offered by each  provider,  total number of
users,  usage and revenue generated in the applicable  province or municipality,
the rate of customer  complaints,  and marketing  expenditures in the applicable
province or municipality.

The services our affiliated value-added mobile phone service providers offer and
the prices they charge are subject to approval by China Mobile and China Unicom,
and if  requested  approvals  are not granted in a timely  manner,  our business
could be adversely affected.

     Our  affiliated  value-added  mobile phone  service  providers  must obtain
approval  from China  Mobile and China  Unicom with respect to each service that
they propose to offer to their  customers and the pricing for each such service.
In addition,  any changes in the pricing of our  affiliates'  existing  services
must be approved in advance by these  operators.  There can be no assurance that
such  approvals  will be granted in a timely manner or at all.  Moreover,  under
some of our affiliates'  contracts with the operators,  prices cannot be changed
more than once  every six months and  prices  must be within  fixed  parameters,
depending on the service.  Any failure of our affiliates to obtain, or any delay
in obtaining, such approvals could place us at a competitive disadvantage in the
market and adversely affect our business.

We  operate  in a  rapidly  evolving  industry,  which  makes it  difficult  for
investors to evaluate our business.

     We began commercially offering wireless value-added information services to
mobile phone and pager users in China in January 2002,  and since that time, the
technologies and services used in the wireless value-added  information services
industry  in China  have  developed  rapidly.  As a  result  of this  rapid  and
continual change in the industry,  the prospects of our value-added  information
service  business  should be considered  in light of the risks and  difficulties
frequently  encountered  by businesses in an early stage of  development.  These
risks include our ability to:

o    attract and retain users for our wireless value-added information services,

o    expand the content and services that we offer and, in  particular,  develop
     and aggregate innovative new content and service offerings,

o    respond effectively to rapidly evolving competitive and market dynamics and
     address the effects of mergers and acquisitions among our competitors,

o    build relationships with strategic partners, and

o    increase awareness of our brand and user loyalty.

     Due to these  factors,  there can be no certainty  that we will maintain or
increase  our  current  share of the  highly  competitive  wireless  value-added
information services market in which we operate.

The  success  of  much  of our  wireless  value-added  information  services  is
significantly  dependent on our ability to obtain and reformat desirable content
and technology from third parties.

     We obtain much of our  content,  including  financial  information,  games,
logos, music, news and other information,  from third parties.  Furthermore,  we
expect that we will  develop and  purchase  technology  in  connection  with our
development  of next  generation  services  such as MMS,  JAVA and BREW.  As the



                                    Page 24
<PAGE>

market for  wireless  value-added  information  services  develops,  content and
technology  providers may attempt to increase  their  profits from  distribution
arrangements  by  demanding  greater  fees or a share of  revenues,  which would
adversely  affect  our  financial  performance.  Many of our  arrangements  with
content and technology providers are non-exclusive, have a term of one year, and
are subject to renewal.  If our competitors are able to obtain such content in a
similar  or  superior  manner  or to  develop,  purchase  or  license  the  same
technologies,  it could adversely  affect the popularity of our services and our
negotiating leverage with third-party providers.

     If we fail to establish and maintain economically attractive  relationships
with content and technology  providers and to thereafter  successfully  reformat
their products,  we may not be able to attract and retain  customers or maintain
or improve our financial performance.

We depend on our Sifang Gutong  software  continuing  to be compatible  with new
mobile phone models.

     There  can  be no  assurance  that  our  Sifang  Gutong  software  will  be
compatible with new mobile phones developed by manufacturers such as Samsung. If
the software is no longer compatible,  we will be forced to engage Chengao or an
alternative  software  developer to develop software that is compatible with the
new mobile phones or we will have to develop the software  ourselves.  If we are
unable to either engage a software  developer or develop  software in house that
is compatible with new mobile phones, we will lose a significant  portion of our
value-added  information  services  revenue,  including  all of the  pre-charged
subscription  fee revenues we receive  pursuant to our information  services and
cooperation agreement among us, Chengao, and Sifang Information.

We face intense competition from other service providers.

     The Chinese markets for wireless  value-added and advertising  services are
intensely competitive.  We believe there were more than 800 wireless value-added
service  providers  (including the three groups  discussed below) as of June 30,
2004.  We  compete   directly  or  indirectly  with  three  groups  of  wireless
value-added service providers in China:

o    portal  service  providers,  which have  established  expertise in Internet
     content and have subsequently branched into mobile space. The portals serve
     as content aggregators offering a variety of wireless value-added services,

o    dedicated service  providers,  whose businesses focus on offering a variety
     of wireless content directly to mobile phone users, and

o    niche  service  providers,  which focus  primarily on a  particular  market
     segment  or  application  that  often  builds  on  a  pre-existing   sector
     competency.

     We have faced  direct or indirect  competition  from all three groups since
our entry into this  market.  Moreover,  there are low barriers to entry for new
competitors  in the  wireless  value-added  services  market.  As a result,  our
existing or  potential  competitors  may in the future  achieve  greater  market
acceptance  and gain  additional  market  share,  which in turn could reduce our
revenues.  There is increasing  number of  competitors in the media industry and
the reduction of advertising fees, resulting in intense market competition.  Our
advertising services have also facing direct or indirect competitions from other
more traditional advertising outlets such as television, radio and newspapers.

Most of our  value-added  information  services  revenues  are derived  from the
Shanghai  municipal  area and  surrounding  provinces,  and the  termination  or



                                    Page 25
<PAGE>

alteration of our affiliates' contracts with the mobile operators,  or a general
economic  downturn in those areas,  could have a particularly  adverse effect on
our business.

     Per capita  income  levels and mobile phone  penetration  rates (i.e.,  the
number of mobile  subscribers  divided by the  population of China) in China are
generally higher in the coastal and southern provinces, and most of our revenues
are derived from those areas,  including  the  municipality  of Shanghai and the
provinces of Beijing and Jiangsu.  If our affiliates'  contracts with the mobile
operators with respect to those areas are terminated or adversely  modified,  or
if  there  is a  general  economic  downturn  in those  areas,  it could  have a
particularly adverse effect on our business.

Rapid growth and a rapidly  changing  operating  environment  strain our limited
resources.

     As our value-added  information  services customer base increases,  we will
need to increase our investment in our technology infrastructure, facilities and
other areas of  operations,  in  particular  our product  development,  customer
service and sales and marketing  departments,  which are important to our future
success.  If we are unable to manage our growth and expansion  effectively,  the
quality of our services  and our  customer  support  could  deteriorate  and our
business may suffer.  Our future success will depend on, among other things, our
ability to:

o    develop and quickly introduce new services, adapt our existing services and
     maintain and improve the quality of all of our  services,  particularly  as
     new mobile technologies such as 3G are introduced,

o    expand the  percentage of our  value-added  information  services  revenues
     which  are  recurring  and are  derived  from  monthly  subscription  based
     services,

o    continue to enter into and maintain  relationships  with desirable  content
     providers,

o    continue  training,  motivating  and retaining  our existing  employees and
     attract and integrate new employees,  including our senior management, most
     of whom have been with our company for less than one year,

o    develop  and  improve  our  operational,  financial,  accounting  and other
     internal systems and controls, and

o    maintain  adequate  controls  and  procedures  to ensure that our  periodic
     public disclosure under applicable laws, including U.S. securities laws, is
     complete and accurate.

Any  failures  of the mobile  telecommunications  network,  the  Internet or our
technology platform may reduce use of our services.

     Both the  continual  accessibility  of China  Mobile's  and China  Unicom's
mobile  networks  and  the  performance  and  reliability  of  China's  Internet
infrastructure are critical to our ability to attract and retain our value-added
information services customers. Moreover, our business depends on our ability to
maintain the  satisfactory  performance,  reliability  and  availability  of our
technology platform.  The servers which constitute the principal system hardware
for  our  operations  are  located  in one  location  in  Shanghai.  Any  server
interruptions,  break-downs or system  failures,  including  failures  caused by
sustained power shutdowns,  floods or fire causing loss or corruption of data or
malfunctions  of software or hardware  equipment,  or other  events  outside our
control that could result in a sustained  shutdown of all or a material  portion
of the mobile networks, the Internet or our technology platform, could adversely
impact our  ability to  provide  our  services  to our  value-added  information
services customers and decrease our revenues.



                                    Page 26
<PAGE>


Computer  viruses and hacking may cause delays or  interruptions  on our systems
and may reduce use of our services and harm our reputation.

     Computer   viruses  and  hacking   may  cause   delays  or  other   service
interruptions on our systems.  "Hacking"  involves efforts to gain  unauthorized
access to information or systems or to cause intentional malfunctions or loss or
corruption of data, software, hardware or other computer equipment. In addition,
the inadvertent  transmission of computer  viruses could expose us to a material
risk of loss or litigation and possible liability.  We may be required to expend
significant  capital and other  resources  to protect  our  systems  against the
threat of such  computer  viruses  and  hacking and to rectify any damage to our
systems.  Moreover,  if a computer virus or hacking which affects our systems is
highly  publicized,  our reputation could be materially damaged and usage of our
services may decrease.

We may be held liable for information we purchase and reformat.

     We may face  liability for  defamation,  negligence,  copyright,  patent or
trademark  infringement  and other  claims based on the  reformatted  content to
which we provide access through our wireless value-added  information  services.
For example, SMS news updates provided by us could possibly be deemed to contain
state secrets in violation of applicable Chinese law. In addition, third parties
could assert claims  against us for losses  incurred in reliance on  information
distributed by us. We may incur significant costs in investigating and defending
these claims, even if they do not result in liability.

We may not be able to adequately protect our intellectual  property,  and we may
be exposed to infringement claims by third parties.

     We  rely  on  contractual   restrictions   on  disclosure  to  protect  our
intellectual  property  rights.  Monitoring  unauthorized use of our information
services is  difficult  and costly,  and we cannot be certain  that the steps we
take will effectively  prevent  misappropriation  of our technology and content.
Our  management may determine in the future to make  application  for copyright,
trademark  or  trade  secret  protection  if  management  determines  that  such
protection would be beneficial and cost-effective.

     From time to time,  we may have to  resort to  litigation  to  enforce  our
intellectual  property  rights,  which  could  result in  substantial  costs and
diversion of our resources.  In addition,  third parties may initiate litigation
against us for alleged infringement of their proprietary rights. In the event of
a  successful  claim of  infringement  and our failure or  inability  to develop
non-infringing  technology  or  content  or  license  the  infringed  or similar
technology or content on a timely basis,  our business  could suffer.  Moreover,
even if we are able to license the  infringed or similar  technology or content,
license fees that we pay to licensors could be substantial or uneconomical.

Our ability to generate revenues could suffer if the Chinese market for wireless
value-added services does not develop as anticipated.

     The wireless  value-added services market in China has evolved rapidly over
the last four years,  with the  introduction  of new  services,  development  of
consumer  preferences,  market  entry  by  new  competitors  and  adaptation  of
strategies by existing competitors.  We expect each of these trends to continue,
and we must  continue  to adapt our  strategy  to  successfully  compete  in our
market.

     In  particular,  we  currently  offer a wide range of wireless  value-added
information services for mobile phones using 2.5G technologies.  There can be no
assurance,  however,  that these 2.5G  technologies and any services  compatible
with them will be accepted  by  consumers  or promoted by the mobile  operators.



                                    Page 27
<PAGE>

Moreover,   there  are  numerous  other   technologies   in  varying  stages  of
development, such as third generation mobile technologies, which could radically
alter or eliminate the market for SMS or 2.5G services.

     Accordingly,  it is extremely  difficult  to  accurately  predict  consumer
acceptance  and demand for various  existing and  potential  new  offerings  and
services,   and  the  future  size,  composition  and  growth  of  this  market.
Furthermore,  given the  limited  history  and  rapidly  evolving  nature of our
market, we cannot predict the price that wireless subscribers will be willing to
pay for our  services or the  services  of our  affiliated  value-added  service
providers or whether subscribers will have concerns about security, reliability,
cost and quality of service associated with wireless services.  If acceptance of
our wireless value-added information services is different than anticipated, our
ability to maintain or increase our revenue and profits could be materially  and
adversely affected.

The popularity of our services which operate with next generation technology
standards are necessarily dependent on the market penetration of mobile phones
that are compatible with those standards, which is beyond our control.

     Mobile phone users can access our MMS, WAP,  JAVA,  BREW and other services
which operate with next  generation  technology  standards only if they purchase
mobile phones that are compatible with those  standards.  In particular,  mobile
phones  that are  2.5G-compatible  have  historically  been  significantly  more
expensive  in China than  mobile  phones  using  older  technology  such as GSM.
Although the prices of 2.5G-compatible  mobile phones have been dropping rapidly
in recent quarters, we cannot be certain whether this trend will continue or the
extent to which existing users will be willing to upgrade their mobile phones to
obtain the latest  technology.  The pricing,  marketing  and other factors which
affect the sales of more  sophisticated  mobile  phones  are all  outside of our
control,  and weak sales of mobile phones for which we have  developed  services
could adversely affect our business.

The telecommunication  laws and regulations in China are evolving and subject to
interpretation  and will likely change in the near future. If we are found to be
in  violation  of current or future  Chinese  laws or  regulations,  we could be
subject to severe penalties.

     Although wireless  value-added  services are subject to general regulations
regarding  telecommunication  services,  we believe that currently  there are no
Chinese laws at the national level  explicitly  governing  wireless  value-added
services,  such as our services  related to MMS,  WAP,  JAVA,  and BREW,  and no
Chinese government authority has been specifically  designated to regulate these
services.  Many providers of wireless value-added services have obtained various
value-added  telecommunication services licenses, such as the licenses possessed
by our Chinese  affiliates,  Sifang  Information and Tianci.  These  value-added
telecommunication   licenses  were  issued  by  the  local  Shanghai   Municipal
Telecommunications  Administration  Bureau,  and may not be  sufficient to offer
wireless value-added services on a national basis. Sifang Information and Tianci
are in the process of applying with the Ministry of  Information  Industries for
an inter-provincial value-added telecommunication license in accordance with the
Ministry's general regulations regarding telecommunication services. However, we
cannot predict whether either will be granted that license.  Moreover, we cannot
be certain  that any local or  national  value-added  telecommunication  license
requirements  will not conflict  with one another or that any given license will
be deemed sufficient by the relevant governmental  authorities for the provision
of this category of service.  It is also possible that new national  legislation
might be adopted to regulate such services.

     If we or our  affiliates  are found to be in  violation  of any existing or
future Chinese laws or regulations  regarding wireless  value-added  services or
Internet access, the relevant Chinese authorities have the power to, among other
things:



                                    Page 28
<PAGE>


o    levy fines;

o    confiscate our income or the income of our affiliated  value-added  service
     providers;

o    revoke our  business  license or the  business  licenses of our  affiliated
     value-added service providers;

o    shut down our servers or the servers of our affiliated  value-added service
     providers  or block any Web  sites  that we or our  affiliated  value-added
     service providers may operate;

o    require us to  discontinue  any portion or all of our wireless  value-added
     information services business; or

o    require our affiliated  value-added  service  providers to discontinue  any
     portion or all of their wireless value-added services business.

The  Chinese  government,  China  Mobile or China  Unicom  may  prevent  us from
distributing,  and we may be subject to liability for,  content that any of them
believe is inappropriate.

     China  has  enacted   regulations   governing   telecommunication   service
providers,  Internet access and the distribution of news and other  information.
In the past, the Chinese  government has stopped the distribution of information
over the Internet that it believes violates Chinese law,  including content that
is obscene,  incites violence,  endangers national security,  is contrary to the
national interest,  or is defamatory.  In addition,  our affiliated  value-added
service  providers may not publish certain news items,  such as news relating to
national security, without permission from the Chinese government.  Furthermore,
the Ministry of Public  Security has the  authority to cause any local  Internet
service  provider  to block any Web site  maintained  outside  China at its sole
discretion.

     China Mobile and China Unicom also have their own  policies  regarding  the
distribution of inappropriate  content by wireless value-added service providers
and have recently punished certain providers for distributing  content deemed by
them to be  obscene.  Such  punishments  have  included  censoring  of  content,
delaying  payments  of fees by the mobile  operators  to the  offending  service
provider,  forfeiture  of fees owed by the  mobile  operators  to the  offending
service  provider  and  suspension  of  the  service  on the  mobile  operators'
networks.  Accordingly,  even if our  affiliated  wireless  value-added  service
providers comply with Chinese governmental regulations relating to licensing and
foreign  investment  prohibitions,  if the Chinese  government,  China Mobile or
China  Unicom were to take any action to limit or prohibit the  distribution  of
information  or to limit or regulate  any current or future  content or services
available to users, our revenues could be reduced and our reputation harmed.

     The Chinese  government  is expected  to grant  licenses to offer  wireless
services in China to China Telecom, China Netcom and possibly other parties with
which  our  affiliated  wireless  value-added  service  providers  have  not yet
developed  close  relationships.  If  those  parties  receive  licenses  and are
successful in the market but our  affiliates  are unable to develop  cooperative
relationships with them, our business could be adversely affected.

     It is also possible that China Telecom,  China Netcom and any other parties
receiving  wireless licenses may decide to offer wireless  value-added  services
created  by them,  rather  than by  third-party  service  providers  such as our
affiliated wireless  value-added  service providers.  In that case, our business
could be adversely affected.




                                    Page 29
<PAGE>

Government regulation of the telecommunications and Internet industries may
become more complex.

     Government regulation of the  telecommunications and Internet industries is
highly complex.  New regulations  could increase our costs of doing business and
prevent us from efficiently delivering our services.  These regulations may stop
or slow down the  expansion of our  wireless  value-added  information  services
customer  base and limit access to our  services.  In the third quarter of 2006,
the Ministry of Information Industry of the People's Republic of China initiated
a  nation-wide  management  specific  plan as well as  introduced  a  series  of
policies and measures to regulate the SP market.  With the introduction of these
policies  and  measures  that  set  very  strict  rules  on  the  provisions  of
information services provided by value-added service providers,  the advertising
service business of us was seriously affected.  We generated very little revenue
from the  value-added  advertising  services in 2006 and determined  that future
undiscounted cash flows associated with the assets involved in the advertisement
services  provided  to  Tianci  Real  Estate  were  uncertain,  and  may  not be
sufficient  to recover  their  carrying  values and so these assets were written
down to zero as of December 31, 2006.

     Also in 2006,  we  decided  not to pursue the  acquisition  of Kena under a
series of agreements  signed in 2005. All the agreements in connection  with the
Kena  acquisition  were  terminated by TCH and Kena. We also reviewed the future
economic value of the deposit for the anticipated  business  acquisition of Kena
and determined that future  undiscounted cash flows associated with this deposit
were uncertain and may not be sufficient to recover their carrying values and so
was fully written down as of December 31, 2006.

     The  above-mentioned  situation  forced  us to  take  certain  actions  and
continues  to  implement  changes  designed to improve the  Company's  financial
results  and  operating  cash  flows.  The action  involves  change of  business
operations  from  the  mobile  phone  distribution  business  and  provision  of
information  value-added services to sales of energy-saving  products. The place
of business is also going to reallocate from Shanghai to Shaanxi Province.

We are  dependent  on three  main  first-tier  wholesalers  to supply all of our
mobile phones.

     Our performance depends on whether we can continue to secure contracts with
the three  first-tier  wholesalers  of Samsung mobile phones on whom we rely. We
have no long-term  purchase  contracts or other contracts that provide continued
supply,  pricing or access to new mobile phone models and any of the  first-tier
wholesalers on whom we rely could discontinue  selling to us at any time. We may
not be able to acquire new Samsung and Nokia models in the future and we may not
be able to acquire the models that we need in sufficient  quantities or on terms
that are acceptable to us in the future. As a result, our revenues may decrease.

Our  performance  is dependent on the popularity of Samsung's and Nokia's mobile
phone models.

     We primarily  distribute  mobile phones  manufactured by Samsung and Nokia.
Thus we are  dependant  on Samsung's  and Nokia's  ability to create and deliver
high quality mobile phone models in a cost effective and timely manner. Nokia is
the market leader in worldwide  mobile phone industry and rapidly growing mobile
phone market in China.  Samsung is a leading  world-class  competitor  of mobile
phones based on both the CDMA network and the GSM network in China. There can be
no assurance  that Samsung and Nokia will continue to create high quality mobile
phone  models that are popular  with  consumers.  As a result,  our revenues may
decrease.  In addition,  our success  depends on our ability to  anticipate  and
respond to changing  mobile phone model trends and consumer  demands in a timely
manner. The models we distribute must appeal to a broad range of consumers whose
preferences  cannot always be predicted  with  certainty and may change  between
sales  seasons.  If we misjudge which mobile phone models will be popular or the
market for the models we distribute, our sales may decline or we may be required
to sell our models at lower prices.



                                    Page 30
<PAGE>


We  rely on cash  flow to  purchase  mobile  phones  from  wholesalers,  and any
significant decrease in cash flow could have a negative impact on our ability to
meet customer demand.

     It is important that we have sufficient cash flow to purchase enough mobile
phones  from  the  first-tier  wholesalers  on whom we rely.  If our  cash  flow
decreases  significantly,  we will not be able to purchase a sufficient quantity
of inventory to meet our customers' demands,  which would have a negative impact
on our sales,  and may cause the first-tier  wholesalers on whom we rely to look
to other  sub-wholesalers  to distribute  their mobile phones.  This development
would have a negative impact on our revenues.

Our  customers  are under no  obligation  to do  business  with us,  and if they
terminate or materially  reduce their  relationship  with us it would  adversely
impact our business.

     One of the factors the first-tier wholesalers on whom we rely consider when
determining  who  they  will  use as a  sub-wholesaler  is the  sub-wholesaler's
relationship  with retailers.  Currently  approximately  72% of our mobile phone
sales are made to five retailers.  We have no long-term sales contracts or other
contracts that provide  continued selling or pricing and any of the retailers we
supply  could  discontinue   buying  from  us  at  any  time.  If  we  lose  our
relationships  with our five largest  retailers,  we will have a difficult  time
finding new large  retailers to purchase our Samsung and Nokia mobile phones and
may lose our relationships with the first-tier wholesalers on whom we rely. This
would have a negative impact on our business.

We face certain risks relating to customer service,  and any resulting  problems
could adversely affect our sales.

     Any  material  disruption  or  slowdown  in our  order  processing  systems
resulting from labor disputes,  mechanical  problems,  human error or accidents,
fire, natural disasters,  or comparable events could cause delays in our ability
to  receive  and  distribute  orders  and may  cause  orders to be lost or to be
shipped or delivered late. As a result, customers may cancel orders or refuse to
receive goods on account of late shipments, which would result in a reduction in
our net sales and could result in increased administrative and shipping costs.

We face risks associated with the  concentration of our distribution  operations
in one location.

     We  conduct  all  of our  distribution  operations  from  one  facility  in
Shanghai,  China.  Any disruption in the operations at our  distribution  center
could have a negative impact on our business.

We face competition from distributors selling other mobile phone models.

     Despite the fact that we  distribute  nine Samsung  mobile phone models and
two  Nokia's  mobile  phone  models  in the  Shanghai,  China  region,  we  face
competition from distributors of different models of mobile phones  manufactured
by Samsung  and Nokia in the  Shanghai  region and from  distributors  of phones
manufactured  by companies  other than these two brands that  distribute  in the
Shanghai region.

     Competition  is based on a variety  of  factors  including  maintenance  of
product quality, competitive pricing, delivery efficiency,  customer service and
satisfaction  levels and the  ability to  anticipate  technological  changes and
changes in customer preferences.  The first-tier  wholesalers on whom we rely or
Samsung and/ or Nokia may  acquire,  startup,  or expand their own  distribution
systems to sell directly to our customers.



                                    Page 31
<PAGE>


We are  dependent on  advertising  contracts,  some of which are short term.  If
these contracts are terminated or completed without replacement,  our results of
operations would be materially adversely affected.

     We are dependent  upon "Bank Digital TV's  Cooperation  Agreement"  and the
Advertisement Agency Contract,  where TCH will assist in the promotion of TV ads
for various  customers,  including Tianci Real Estate, a related party. With the
introduction  of the  policies  and  measures  adopted  by China's  Ministry  of
Information  Industry in 2006 that set very strict  rules on the  provisions  of
information services provided by value-added service providers,  our advertising
services was seriously  affected.  The  Advertisement  Agency  Contract  between
Tianci Real Estate and Sifang Media was not renewed  after it was  terminated in
November 2005. As the result,  the Company  determined that future  undiscounted
cash flows  associated  with the assets involved in the  advertisement  services
were  uncertain,  and may not be sufficient to recover their carrying values and
so these assets were written down to zero as of December 31, 2006.  TCH received
a net fee of [$NIL] from Tianci Real Estate during the years ended  December 31,
2006,  which was a  significant  decrease  compare to the net fee of  $1,879,965
received from Tianci Real Estate during the year ended December 31, 2005.

     As to the services that TCH provided  through Sifang Media to assist in the
promotion  of TV ads for the  customers  of Sifang  Media,  for the same  reason
described  above,  TCH received a net fee of $334,844 for  providing the service
via Sifang  Media  during the fiscal year of 2006,  which is also a  significant
decease   compared  to  $881,633   received  during  the  fiscal  year  of  2005
respectively.

We depend on key personnel for the success of our business.  Our business may be
severely  disrupted if we lose the services of our key  executives and employees
or fail to add new senior and middle managers to our management.

     Our future success is heavily  dependent upon the continued  service of our
key executives, particularly Tai Caihua, our president and chairman of our board
of directors,  Fu Sixing,  our chief  executive  officer,  Qian Fang,  our chief
financial officer,  and Huang Tianqi, our chief technology officer.  Each of our
executive  officers has entered into a  non-competition  agreement  with TCH. We
also rely on a number of key technology  staff for the operation of our company.
Our future  success is also  dependent  upon our  ability to attract  and retain
qualified  senior and middle managers to our management  team. If one or more of
our current or future key  executives  or  employees  are unable or unwilling to
continue in their present positions,  we may not be able to easily replace them,
and our business  may be severely  disrupted.  In addition,  if any of these key
executives  or employees  joins a competitor  or forms a competing  company,  we
could lose customers and suppliers and incur additional  expenses to recruit and
train personnel. Each of our executive officers has entered into non-competition
agreements  with TCH. We do not maintain  key-man life  insurance for any of our
key executives.

     We also rely on a number of key  technology  staff for the operation of our
company.  Given  the  competitive  nature  of  our  industry,  the  risk  of key
technology staff leaving our company is high and could disrupt our operations.

Our  management  does  not  devote  full-time  efforts  to the  Company  and our
management may have potential conflicts of interest.

     Our  executive  officers  spend  approximately  30% of their time  managing
Sifang Information. Thus, they do not devote full-time effort to the Company. In
addition,   as  discussed  in  Item  12,  "Certain   Relationships  and  Related
Transactions",  the  Company  has had  numerous  significant  transactions  with
businesses  controlled  by, and with people who are related to, the officers and
directors of the Company.  Our management  may thus have potential  conflicts of
interest.



                                    Page 32
<PAGE>


We have limited business insurance coverage.

     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.

A downturn in the Chinese economy may slow down our growth and profitability.

     The growth of the Chinese economy has been uneven across geographic regions
and  economic  sectors.  There can be no  assurance  that  growth of the Chinese
economy will be steady or that any downturn  will not have a negative  effect on
our business.  Our  profitability,  will decrease if  expenditures  for wireless
value-added  services  decrease due to a downturn in the Chinese  economy.  More
specifically, increased penetration of wireless value-added services in the less
economically  developed  central and western  provinces  of China will depend on
those  provinces  achieving  certain  income  levels so that  mobile  phones and
related services become affordable to a significant portion of the population.

The  uncertain  legal  environment  in China could  limit the legal  protections
available to you.

     The Chinese  legal system is a civil law system based on written  statutes.
Unlike  common law  systems,  it is a system in which  decided  legal cases have
little  precedential  value. In the late 1970s, the Chinese  government began to
promulgate a  comprehensive  system of laws and regulations  governing  economic
matters.  The overall effect of  legislation  enacted over the past 20 years has
significantly  enhanced the protections afforded to foreign invested enterprises
in China. However, these laws, regulations and legal requirements are relatively
recent  and are  evolving  rapidly,  and their  interpretation  and  enforcement
involve  uncertainties.  These  uncertainties  could limit the legal protections
available  to  foreign  investors,   such  as  the  right  of  foreign  invested
enterprises to hold licenses and permits such as requisite business licenses.

Any recurrence of Avian influenza,  or another widespread public health problem,
could adversely affect our business and results of operations.

     A renewed outbreak of Avian influenza or another  widespread  public health
problem in China,  where all of our revenue is derived,  and in Shanghai,  where
our  operations  are  headquartered,   could  have  a  negative  effect  on  our
operations.  Our  operations  may be  impacted  by a  number  of  health-related
factors, including the following:

o    quarantines or closures of some of our offices which would severely disrupt
     our operations,

o    the sickness or death of our key officers and employees, and

o    a general slowdown in the Chinese economy.

Any of the foregoing  events or other  unforeseen  consequences of public health
problems could adversely affect our business and results of operations.

Changes in China's political and economic policies could harm our business.



                                    Page 33
<PAGE>


     The economy of China has  historically  been a planned  economy  subject to
governmental plans and quotas and has, in certain aspects, been transitioning to
a more market-oriented economy. Although we believe that the economic reform and
the macroeconomic measures adopted by the Chinese government have had a positive
effect on the  economic  development  of China,  we cannot  predict  the  future
direction of these  economic  reforms or the effects these  measures may have on
our business,  financial  position or results of  operations.  In addition,  the
Chinese  economy  differs from the economies of most countries  belonging to the
Organization  for  Economic   Cooperation  and   Development,   or  OECD.  These
differences include:

o    economic structure;

o    level of government involvement in the economy;

o    level of development,

o    level of capital reinvestment;

o    control of foreign exchange;

o    methods of allocating resources; and

o    balance of payments position.

     As a result of these differences,  our business may not develop in the same
way or at the same rate as might be expected if the Chinese economy were similar
to those of the OECD member countries.

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

     Because  almost all of our future  revenues may be in the form of Renminbi,
any future  restrictions  on  currency  exchanges  may limit our  ability to use
revenue  generated in Renminbi to fund any future  business  activities  outside
China or to make  dividend  or other  payments  in U.S.  dollars.  Although  the
Chinese   government   introduced   regulations   in  1996  to   allow   greater
convertibility  of the Renminbi for current  account  transactions,  significant
restrictions   still   remain,   including   primarily  the   restriction   that
foreign-invested  enterprises  may only buy, sell or remit  foreign  currencies,
after providing valid commercial documents, at those banks authorized to conduct
foreign  exchange  business.  In  addition,  conversion  of Renminbi for capital
account items, including direct investment and loans, is subject to governmental
approval in China,  and  companies  are required to open and  maintain  separate
foreign  exchange  accounts for capital account items. We cannot be certain that
the Chinese regulatory  authorities will not impose more stringent  restrictions
on the  convertibility  of the  Renminbi,  especially  with  respect  to foreign
exchange transactions.

The value of our  securities  will be  affected  by the  foreign  exchange  rate
between U.S. dollars and Renminbi.

     The value of our common stock will be affected by the foreign exchange rate
between U.S.  dollars and Renminbi.  For example,  to the extent that we need to
convert U.S.  dollars into  Renminbi  for our  operational  needs and should the
Renminbi appreciate against the U.S. dollar at that time, our financial position
and the price of our common stock may be adversely affected.  Conversely,  if we
decide to convert our  Renminbi  into U.S.  dollars for the purpose of declaring



                                    Page 34
<PAGE>

dividends on our common stock or for other business purposes and the U.S. dollar
appreciates  against the Renminbi,  the U.S.  dollar  equivalent of our earnings
from our subsidiaries in China would be reduced.

Risks Related to our Common Stock

The market price for our common stock may be volatile.

     The market price for our common  stock is likely to be highly  volatile and
subject to wide fluctuations in response to factors including the following:

o    actual or anticipated fluctuations in our quarterly operating results,

o    announcements of new services by us or our competitors,

o    changes in financial estimates by securities analysts,

o    conditions in the wireless value-added services market,

o    changes in the economic performance or market valuations of other companies
     involved in wireless value-added services or distribution of mobile phones,

o    announcements  by our  competitors of significant  acquisitions,  strategic
     partnerships, joint ventures or capital commitments,

o    additions or departures of key personnel,

o    potential litigation, or

o    conditions in the mobile phone market.

     In addition,  the  securities  markets  have from time to time  experienced
significant price and volume  fluctuations that are not related to the operating
performance  of  particular  companies.   These  market  fluctuations  may  also
materially and adversely affect the market price of our common stock.

Shareholders could experience substantial dilution.

     We may issue additional shares of our capital stock to raise additional
cash for working capital. If we issue additional shares of our capital stock,
our shareholders will experience dilution in their respective percentage
ownership in the company.

We have no present intention to pay dividends.

     Neither  during the  preceding  two fiscal  years nor during the year ended
December 31, 2005 did we pay dividends or make other cash  distributions  on our
common  stock,  and we do not  expect to  declare  or pay any  dividends  in the
foreseeable  future. We intend to retain any future earnings for working capital
and to finance current operations and expansion of our business.

A  large  portion  of our  common  stock  is  controlled  by a small  number  of
shareholders.

     A  large  portion  of our  common  stock  is  held  by a  small  number  of
shareholders.  As a result, these shareholders are able to influence the outcome
of shareholder votes on various matters, including the election of directors and



                                    Page 35
<PAGE>

extraordinary   corporate  transactions  including  business  combinations.   In
addition,  the  occurrence  of sales of a large  number of shares of our  common
stock,  or the  perception  that these sales could  occur,  may affect our stock
price and could  impair our  ability to obtain  capital  through an  offering of
equity  securities.  Furthermore,  the current ratios of ownership of our common
stock  reduce the public  float and  liquidity  of our common stock which can in
turn affect the market price of our common stock.

We may be subject to "penny stock" regulations.

     The  Securities  and Exchange  Commission,  or SEC, has adopted  rules that
regulate  broker-dealer  practices in  connection  with  transactions  in "penny
stocks." Penny stocks generally are equity  securities with a price of less than
$5.00 (other than securities registered on certain national securities exchanges
or  quoted  on the  NASDAQ  system,  provided  that  current  price  and  volume
information  with respect to  transactions in such securities is provided by the
exchange or  system).  Penny stock  rules  require a  broker-dealer,  prior to a
transaction in a penny stock not otherwise exempt from those rules, to deliver a
standardized  risk  disclosure  document  prepared by the SEC,  which  specifies
information  about penny stocks and the nature and  significance of risks of the
penny stock market. A broker-dealer  must also provide the customer with bid and
offer quotations for the penny stock, the compensation of the broker-dealer, and
our sales person in the transaction,  and monthly account statements  indicating
the  market  value  of each  penny  stock  held in the  customer's  account.  In
addition,  the penny stock rules require that, prior to a transaction in a penny
stock not  otherwise  exempt from those  rules,  the  broker-dealer  must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's  written agreement to the transaction.
These  disclosure  requirements  may have the  effect of  reducing  the  trading
activity in the secondary  market for stock that becomes  subject to those penny
stock rules.  These additional sales practice and disclosure  requirements could
impede the sale of our securities. Whenever any of our securities become subject
to the penny stock rules,  holders of those  securities  may have  difficulty in
selling those securities.

Where You Can Find More Information

     We file annual,  quarterly and special reports,  proxy statements and other
information  with the SEC. Our SEC filings are  available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any  document we file at the SEC's public  reference  room in  Washington,  D.C.
Please  call the SEC at  1-800-SEC-0330  for further  information  on the public
reference rooms.

ITEM 2. DESCRIPTION OF PROPERTY

     We currently occupy two office spaces in the Shanghai region.  We lease the
first office space, located at 429 Guangdong Road,  Shanghai,  People's Republic
of China 200001,  for  approximately  $50,000 a year. This office space contains
our corporate  headquarters,  and is approximately 250 square meters. We own the
second  office  space,  located  at 689  Laoshandong  Road,  Shanghai,  People's
Republic of China 200120,  which houses our  administration,  technical team and
servers,  and is  approximately  800 square  meters.  We believe  that these two
properties are adequately covered by insurance.  In addition, we believe that we
will be able to obtain adequate  facilities,  principally through the leasing of
appropriate properties, to accommodate our future expansion plans.

ITEM 3. LEGAL PROCEEDINGS

     The  Company  is not  currently  involved  in any  material  pending  legal
proceedings

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



                                    Page 36
<PAGE>

     None.


PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Our common stock is traded on the NASD's  Over-the-Counter  Bulletin  Board
under the symbol  "CHDW."  ("CREG"  after March 8,  2007).  On August 6, 2004 we
changed our name from Boulder Acquisitions, Inc. to China Digital Wireless, Inc.
and changed  our symbol from "BAQI" to "CHDW." On March 8, 2007,  we changed our
name from China Digital  Wireless,  Inc. to China Recycling Energy  Corporation,
and  changed  our symbol  from  "CHDW" to "CREG".  On March 31,  2007,  the last
reported sales price for our common stock was $0.20 per share.

The following  table sets forth,  for quarters  indicated,  the range of closing
high  and  low  bid   prices  for  our  common   stock  as   reported   by  NADS
Over-the-Counter  Bulletin Board, as adjusted for all previously  effected stock
splits.

Common Stock

By Quarter Ended                       High           Low

Fiscal 2005

March 31, 2005                         $5.50          $3.42
June 30, 2005                          $5.20          $1.40
September 30, 2005                     $3.01          $1.41
December 31, 2005                      $2.49          $1.60

Fiscal 2006

March 31, 2006                         $0.80          $0.70
June 30, 2006                          $0.29          $0.22
September 30, 2006                     $0.14          $0.12
December 31, 2006                      $0.27          $0.25

Fiscal 2007

March 31, 2007                         $0.20          $0.20



     As of March 31,  2007,  there were  17,147,268  shares of our common  stock
outstanding held by approximately 2,553 shareholders of record.

     We did not pay any cash dividends on our common stock in fiscal 2004,  2005
or 2006. We do not  anticipate  paying any cash dividends on our common stock in
the foreseeable  future. We currently intend to retain future earnings,  if any,
to finance operations and the expansion of our business.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



                                    Page 37
<PAGE>


Overview of Business Background

     Sifang Holdings was formed under the laws of the Cayman Islands on February
9, 2004 for the  purpose  of holding a 100%  equity  interests  in TCH.  TCH was
established as a foreign investment enterprise in Shanghai under the laws of the
PRC on May 25, 2004, with a registered capital of $7.2 million.

     Sifang   Information  is  a   Shanghai-based   privately  owned  enterprise
established under the laws of the PRC on August 14, 1998. Sifang  Information is
engaged in the  business of pager and mobile  phone  distribution  and  provides
value added information  services to the customers in the Shanghai  metropolitan
area. In March 2004, Sifang  Information spun off its mobile phone  distribution
business and the majority of its value added  information  services  business by
presenting a set of carve-out financial  statements for the years ended December
31,  2002 and 2003 and three  months  ended  March 31,  2004 as if the  spun-off
business had been a stand-alone  company for two years and one quarter. On March
31, 2004, Sifang Information transferred the spun-off business into TCH. Being a
receiving entity under common control,  TCH initially  recognized all the assets
and liabilities  transferred at their carrying amounts in the accounts of Sifang
Information at the date of transfer under the guidance of SFAS No. 141, Appendix
D. On May 26, 2004 Sifang  Information  exchanged 100% of equity interest in TCH
for a 100% equity interest in Sifang Holdings.  Since the ultimate owners of the
three entities were the same owners and the three entities remained under common
control,  the  ownership  exchange  transaction  was accounted for at historical
costs under the  guidance of SFAS No.  141,  Appendix D. Prior to May 26,  2004,
there were no  activities  in Sifang  Holdings.  As a result of  exchanging  the
ownership between TCH and Sifang Holdings, TCH's historical financial statements
become the historical financial statements of Sifang Holdings.

     Sifang  Information  operates  in a  business  segment  that is  subject to
certain restrictions  imposed by the government of the PRC. For example,  paging
facilities,  radio  transmitting  stations and  transmitting  equipment owned by
Sifang Information are not allowed to be owned by foreign investment enterprises
in accordance with PRC government  regulations.  Therefore,  Sifang  Information
still  maintains a small part of its business and paging  facilities in order to
stay in compliance with relevant regulations and laws in the PRC.

     As a result of the  spin-off,  TCH engages in the  business of mobile phone
distribution  and provides access to certain  information  reformatted by TCH to
pager and mobile phone (collectively  "wireless  receiver") users. TCH purchases
mobile phones from the first tier  distributors and sells them to retailers with
a mark-up. In the process of providing value-added  information services through
entering into monthly subscription  agreements with various users, TCH purchases
trading activity information from stock exchanges,  comments and analysis on PRC
stock markets provided by certain reputable  security and investment  companies,
lottery  information,  weather  forecast,  and other  value-added  products  and
reformats the aforementioned  information through decoding and recoding and then
has the reformatted information  transmitted by Sifang Information,  via service
contracts,  to pager users.  The information is constantly saved in TCH's server
in order for mobile phone users to dial in via China Mobile or China Unicom.  By
signing a monthly subscription  agreement,  wireless users agree to make advance
payments for either three or six-month subscription periods.

     We launched a new digital  media  project to move into the media  market in
China in 2005. In conjunction with charitable  organizations,  we have installed
donation boxes with digital TV  incorporated  on top of them in the main lobbies
of  commercial  banks,  hotels,  malls and other  public  locations  to call the
public's attention to the charity and broadcast commercial advertisements.



                                    Page 38
<PAGE>


Discussion and Analysis of Operating Results

Fiscal Year Ended  December 31, 2006 Compared to the Fiscal Year Ended  December
31, 2005

Revenue

Total Revenues

     Total revenue consists of product sales,  product sales to related parties,
and net information and advertising service revenue.  Total revenue for the 2006
fiscal year decreased by $17,529,586,  representing a decrease of  approximately
85.8%,  to  $2,889,436,  as compared to  $20,419,022  for the same period of the
prior  year.  The  decrease  was  mainly due to (1) the  significant  decline of
products  sales to  non-related  and related  third  parties and (2) the serious
negative  effect on our  advertising  services  imposed by China's  more  strict
national ruling on advertisement services adopted in 2006. The market for mobile
phones in China is also gradually becoming saturated.

Product Sales

     In the year ended  December 31,  2005,  Samsung and Nokia's  mobile  phones
accounted for 89% and 8% of our total  product sales and other brands  accounted
for the balance,  compared to the 2004 fiscal year,  in which  Samsung's  mobile
phones  accounted for about 97% of our total product sales and other name brands
mobile phones accounted for the remaining 3%. During 2005 market competition for
mobile phone sales intensified, causing us to decrease our overall mark-up ratio
to 2.1% in order to maintain our market  position,  in comparison with a mark-up
ratio of 6.4% for the same period the prior year.

     Revenue  from  product  sales  for  our  2006  fiscal  year   decreased  by
$5,725,793,  representing  a decrease of  approximately  99.1%,  to $ 49, 276 as
compared to $5,775,069 for the prior year. The decrease was mainly due to market
factors.  The market for mobile phones in China is becoming saturated along with
intensified competition developing among mobile phone distributors.

     We  entered  an  agreement  to   distribute   select  Nokia  mobile  phones
exclusively  in the Shanghai  region of China in May 2005 and obtained the right
to  distribute  two  popular  models of Nokia's  mobile  phones.  Initially,  we
believed  that  this   agreement   would  enhance  both  our  market  share  and
profitability.  However,  as a result of the sudden change in the market factors
during the latter half of 2005 and 2006,  the sales  mark-up of the Nokia mobile
phones to our customers dropped  significantly.  As a result,  the management of
the  Company  continued  to cease the  mobile  phone  distribution  business  in
December 2006. The continued cease of the said business also  contributed to the
significant decline of our product sales.

Product Sales to a Related Party

     We  distributed  Samsung  mobile  phones  to our  related  party,  Shanghai
Shantian  Telecommunication Co. Ltd.  ("Shantian"),  in which Sifang Information
holds a 51% equity interest, for its retail market channel and facility. Revenue
from product sales to related  third parties for our 2006 fiscal year  decreased
by $ 9,894,763,  representing a decrease of approximately 93.2%, to $ 713,524 as
compared to $10,608,287 for the prior year.  Accounts  receivable  includes $nil
and $1,583,512 due from Shantian as of December 31, 2006 and 2005  respectively.
The decrease was also mainly due to market factors. The market for mobile phones
in China is becoming  saturated along with  intensified  competition  developing
among mobile phone distributors.



                                    Page 39
<PAGE>


     There were no mobile phone sales to Tianci Industry and Tianci Group during
the year ended December 31, 2005 and During the year ended December 31, 2006.

Information Service Revenue, Net

     Total  information  service revenue net of related business tax and service
fee for the 2006 fiscal year  increased by $517,724,  representing a increase of
approximately  40.6%,  to $1,791,792  compared to  $1,274,068  for the the prior
year.


Advertising Service Revenue, Net

     Revenue  from  advertisement  services,  net of  related  business  tax and
service fee, for our 2006 fiscal year  decreased by $ 2,426,754,  representing a
decrease of approximately  87.9%, to $ 334,844 as compared to $2,761,598 for the
prior year.  The decrease was mainly  because  there was no service fee received
from  Tianci  Real  Estate  during  the  year  ended  December  31,  2006 as the
Advertisement  Agency  Contract  between Tianci Real Estate and Sifang Media was
terminated in November  2005.The  decrease was mainly due to the introduction of
the policies and measures adopted by China's Ministry of Information Industry in
2006  that set very  strict  rules on the  provisions  of  information  services
provided by value-added service providers.

     In 2005,  We  launched a new digital  media  project to move into the media
market. In conjunction with charitable organizations, we have installed donation
boxes  with  digital  TV  incorporated  on top of them in the  main  lobbies  of
commercial banks,  hotels, malls and other public locations to call the public's
attention  to the  charity  and  broadcast  commercial  advertisements.  We also
reached an agreement with CCF, a national  non-profit  charitable  organization,
which enables the Company to install  donation  boxes for CCF in banks and other
commercial  locations  throughout  China  that  will  also  have  the  Company's
out-of-home digital television  advertising media platform attached. We believed
the  earnings  potential  from the  advertising  service will be a new source of
profit in view of the upcoming  Special  Olympic  World Summer Games in 2007 and
World  Exposition in 2010 to be held in Shanghai.  In addition,  during the 2006
fiscal year,  TCH rendered  advertisement  designing and  producing  services to
Tianci Real Estate, a related party, for publicity and promoting its apartment.

     However, in the third quarter of 2006, the Ministry of Information Industry
of the People's  Republic of China initiated a nation-wide  management  specific
plan as well as  introduced a series of policies and measures to regulate the SP
market.  These  policies and measures set very strict rules on the provisions of
information  services  provided by value-added  service providers and started to
show their effects on the industry in December  2006.  Our  advertising  service
business was seriously affected. We generated very little revenue from the above
mentioned  projects  we  launched  in  2005.  We  also  determined  that  future
undiscounted cash flows associated with the assets involved in the advertisement
services  provided  to  Tianci  Real  Estate  were  uncertain,  and  may  not be
sufficient  to recover  their  carrying  values and so these assets were written
down to zero as of December 31, 2006.

Cost of Goods Sold

     The cost of goods sold for the 20065 fiscal year  decreased by  $15,061,459
to $963,500, compared to $16,024,959 for the prior year, representing a decrease
of  approximately  94%. The  percentage  of  decrease,  which was lower than the
decrease in revenue from product  sales,  resulted  from the  declining  product
markup as the Chinese market is gradually becoming saturated.

Cost of Service



                                    Page 40
<PAGE>
<TABLE>
<CAPTION>

     The cost of service  for the 2005  fiscal  year  increased  by  $519,724 to
$1,342,902  compared to $823,178 for the prior year,  representing a increase of
approximately  63.1%. The increase was mainly due to the increase of information
fees paid to content  providers  for the  value-added  service.  During the 2006
fiscal year, we continued to maintain  current fee  structures  and to establish
collaborative  relationships  or partnerships  with mobile operators and certain
information content providers in China.

Gross Profit

     After taking into  account the cost of goods sold and cost of service,  our
gross  profit for the 2006 fiscal year  decreased  by  $2,987,851  to  $583,034,
representing  a decrease of  approximately  83.7%,  compared to gross  profit of
$3,570,885  for the prior  year.  The  decrease  in gross  profit was  primarily
attributable to the continuing  decline in mobile phone sales to non-related and
related parties and decline in advertising services during the 2006 fiscal year.

     The following table summarizes certain  information  related to the various
components of revenue.


                          Advertising        Sales of         Mobile         Beep
                              service         mobile          phone         pagers
2006                          revenue         phones         service        service      Corporate            Total
----                          -------         ------         -------        -------      ---------            -----
<S>                           <C>             <C>            <C>            <C>          <C>                  <C>

Revenue, net                $  334,844     $  762,800    $ 1,430,252      $  361,540     $        -     $  2,889,436
Cost of revenue                110,876        963,500      1,043,204         188,822              -        2,306,402
Gross profit                   223,968       (200,700)       387,048         172,718              -          583,034
Gross Profit Ratio
Depreciation                         -              -        110,924               -         78,442          189,366
Interest expense                     -             --              -               -              -                -
Net income (loss)              224,745       (509,518)       102,293         (45,895)   (10,349,043)     (10,577,418)
Total assets                         -              -              -               -      4,464,612        4,464,612
Expenditure for
   long-lived assets                 -              -              -               -              -                -

</TABLE>

Sales and Marketing Expenses

     Sales and marketing  expenses for the 2006 fiscal year increased by $20,088
to  $154,727  compared to $134,639  the prior year,  representing  a increase of
approximately  14.9%.  The  increase  was  primarily  due  to  the  increase  in
commission fees paid to the salesmen for mobile phones and advertising expenses.

General and Administrative Expenses

     General and  administrative  expenses for the 2006 fiscal year decreased by
$283,  209 to $967,957  compared to $1,251,166  for the same period of the prior
year, representing a 22.6% decrease.

Impairment Costs

     In 2006,  during the course of our strategic  review of the assets involved
in the mobile phone sales and information service operations, we determined that
future  undiscounted  cash flows associated with these assets were uncertain and



                                    Page 41
<PAGE>

may not be sufficient to recover their carrying  values and so these assets were
written down to zero as of December 31,  2006.  Also in 2006,  we decided not to
pursue the acquisition of Kena under a series of agreements  signed in 2005. All
the agreements in connection  with the Kena  acquisition  were terminated by TCH
and Kena.  We also  reviewed  the future  economic  value of the deposit for the
anticipated business acquisition of Kena and determined that future undiscounted
cash flows associated with this deposit were uncertain and may not be sufficient
to recover  their  carrying  values and so was fully written down as of December
31, 2006. As the result,  the total amount of  impairment  costs for Fiscal 2006
are $ 7,114,047,  including $ 856,457 for property and equipment and $ 6,257,590
for deposit for business acquisition.

Due From Related Parties

     The amount due from Sifang  Information and Sifang Media as of December 31,
2006 are trade related and relating to the mobile phone distribution business.

     During  January  2006,  the Company  entered into an agreement  with Sifang
Information  for the  establishment  of a new joint venture  entity with a third
party.  The purpose of the joint venture entity is to act as a sole  advertising
agent of TCH. The Company  advanced a total of $2,499,969 to Sifang  Information
to contribute to the joint venture.  This,  together with the trade  receivables
related to the mobile phone  distribution  business,  made up a total balance of
$6,446,275  receivable  from Sifang  Information  as of December 31, 2006. As of
December 31, 2006, the Company  decided to provide a provision of $3,000,000 for
1) the full  amount  advance to the joint  venture  and 2) the long  outstanding
portion of the receivable from Sifang Information.

Governmental subsidy

     During the year ended  December  31, 2006,  the Company  received a general
government  subsidy from the local  bureau,  which is  equivalent to 3.5% of the
taxable  income of TCH throughout the period from January 2005 to December 2005.
The subsidy is non-recurring and subject to government  approval.  The amount of
such  government  subsidy  for the years  ended  December  31, 2006 and 2005 was
$118,262 and $108,476 respectively.

Interest income (expense)

     During our 2006 fiscal year, the interest income derived from bank deposits
was $ 5,135.


Income Tax

     The Company's  PRC  subsidiary,  TCH, is  registered at Pudong  District in
Shanghai and subject to a favorable  income tax rate of 15% compared to a normal
income  tax rate of 33% (30% for the  central  government  and 3% for the  local
government) under current PRC tax laws. Sifang  Information is registered in the
Shanghai  downtown  area  and  has  been  treated  by  the  Shanghai   Municipal
Administration   of  Labor  as  an  enterprise  that  provides   unemployed  and
handicapped people with jobs.  Accordingly,  Sifang Information is also entitled
to a favorable  income tax rate of 15% and qualified for an income tax exemption
for three years from January 1, 2000 to December 31, 2002,  and a 50% income tax
reduction for three years from January 1, 2003 to December 31, 2005.  The income
tax provisions  presented in the Company's financial statements are based on the
actual income tax rates of TCH at 15% for both years ended December 31, 2006 and
2005.  The  deferred  tax  assets are  determined  based on the income tax rates
applicable at the TCH level.


     There is no income  tax for  companies  domiciled  in the  Cayman  Islands.



                                    Page 42
<PAGE>

Accordingly,  the Company's consolidated financial statements do not present any
income tax provisions related to Cayman Islands tax jurisdiction.

     The total income tax for our fiscal 2006 was $ 36,633, compared to $481,743
for the same period of the prior year


Comprehensive Income (Loss)

     We recorded  comprehensive  loss of $ 9,825,415 for the 2006 fiscal year, a
$11,921,918  decrease  compared to  comprehensive  income of $2,096,503  for the
prior year,  representing a decrease of approximately  568.7%. The comprehensive
loss was  attributable to (i) the decrease in the gross profit  generated in the
2006 fiscal year,  (ii) the impairment  cost in 2006 (iii) the  appreciation  of
Chinese RMB to US dollars.


Net Earning (Loss) Per Share

     We  recorded  a net loss per share in 2006  fiscal  year.  The net loss per
share for the 2006 fiscal  year was $ 0.62,  a $ 0.73  decrease  compared to the
$0.10 net earning per share for the prior year. The loss was attributable to (i)
the  decrease in the gross profit  generated  in the 2006 fiscal year,  (ii) the
impairment cost in 2006 (iii) the appreciation of Chinese RMB to US dollars.


Liquidity and Capital Resources

     Our cash  balance  decreased  from  $3,578,367  as of December  31, 2005 to
$252,000 as of December 31, 2006. This decrease in cash and cash equivalents was
primarily  due to the  decrease in the  collection  of accounts  receivable.  At
December  31,  2006  and  2005,  our net  working  capital  was  $9,877,040  and
$3,346,637 respectively.

     Net cash used in  operating  activities  was $  4,079,333  during  our 2006
fiscal year,  compared to net cash  generated  from  operating  activities  of $
5,290,767  during  the prior  year.  The loss of net cash  flow  from  operating
activities  was due mainly to the  adjustment  of $ 10,577,418  to reconcile net
earnings  to net cash from  operating  activities  and the  non-collection  of $
3,351,306 due from related parties in 2006 fiscal year.

     Net  cash  generated  in  investing  activities  for the 2006  fiscal  year
decreased  to  $963,  compared  to net  cash  used in  investing  activities  of
$3,551,569 for the same period of the prior year.

     Net cash provided by financing  activities for the 2006 fiscal year was $ 0
compared  to  $1,500,000  for the same  period  of the  prior  year.  We did not
generate any cash from financing activities in 2006 fiscal year.


Recent Accounting Pronouncements

     In May 2005,  the FASB issued SFAS No. 154,  "Accounting  Changes and Error
Corrections" ("SFAS 154"), which replaces  Accounting  Principles Board Opinions
No. 20,  "Accounting  Changes" and SFAS No. 3, "Reporting  Accounting changes in
Interim  Financial  Statements--An  Amendment  of APB Opinion No. 28".  SFAS 154
provides guidance on the accounting for and reporting of accounting  changes. It
establishes  retrospective  application,  or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error.  SFAS 154 is effective for  accounting  changes and



                                    Page 43
<PAGE>

corrections  of errors made in fiscal years  beginning  after December 15, 2005.
The adoption of this  statement did not have a material  effect on the Company's
financial position or results of operations.

     In September 2005, the FASB's Emerging Issues Task Force ("EITF") reached a
final consensus on Issue 04-13, "Accounting for Purchases and Sales of Inventory
with the Same Counterparty" ("EITF 04-13"). EITF 04-13 requires that two or more
legally separate  exchange  transactions  with the same counterparty be combined
and considered a single arrangement for purposes of applying APB Opinion No. 29,
"Accounting for Nonmonetary  Transactions",  when the  transactions  are entered
into  in  contemplation  of  one  another.  EITF  04-13  is  effective  for  new
arrangements   entered   into,   or   modifications   or  renewals  of  existing
arrangements,  in interim or annual periods  beginning after March 15, 2006. The
Company  does not  expect  that the  adoption  of this  statement  would  have a
material effect on the Company's financial position or results of operations.

     In February  2006,  the FASB issued SFAS No. 155,  "Accounting  for Certain
Hybrid  Instruments-an  amendment  of FASB  Statements  133 and  140",  which is
effective for all financial  instruments  acquired or issued after the beginning
of an entity's  first fiscal year that begins  after  September  15,  2006.  The
statement  improves  financial  reporting  by  eliminating  the  exemption  from
applying  SFAS No. 133 to  interests  in  securitized  financial  assets so that
similar  instruments  are accounted for similarly  regardless of the form of the
instruments.  The  Statement  also  improves  financial  reporting by allowing a
preparer to elect fair value measurement at acquisition,  at issuance, or when a
previously  recognized  have to bifurcated,  if the holder elects to account for
the whole  instrument-by-instrument  basis, in cases in which a derivative would
otherwise  have to  bifurcated,  if the holder  elects to account  for the whole
instrument on a fair value basis.  The Company does not expect that the adoption
of this  statement  would  have a  material  effect on the  Company's  financial
position or results of operations.

     In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income
Taxes--an  Interpretation  of FASB  Statement  No.  109",  which  clarifies  the
accounting for uncertainty in tax positions.  This Interpretation  requires that
the Company recognizes in its consolidated  financial statements the impact of a
tax  position if that  position is more  likely than not of being  sustained  on
audit,  based on the technical merits of the position.  The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative  effect of
the change in accounting principle, if any, recorded as an adjustment to opening
retained  earnings.  The Company is currently  evaluating the impact of adopting
FIN 48 on its consolidated financial statements.

     In September 2006, the SEC released SAB No. 108,  "Considering  the Effects
of Prior Year  Misstatements  when  Quantifying  Misstatements  in Current  Year
Financial Statements" ("SAB 108"). SAB 108 provides interpretive guidance on the
SEC's  views on how the  effects  of the  carryover  or  reversal  of prior year
misstatements  should be considered in quantifying a current year  misstatement.
The provision of SAB 108 is effective for the Company in the current fiscal year
ended December 31, 2006.  The Company is currently  evaluating the impact of SAB
108 but does not believe that the  application  of SAB 108 would have a material
effect on its financial position, cash flows nor results of operations.

     In September 2006, the FASB issued SFAS No.157,  "Fair Value  Measurements"
("SFAS 157"),  which defines fair value,  establishes  guidelines  for measuring
fair value and expands disclosures  regarding fair value measurements.  SFAS 157
does  not  require  any  new  fair  value  measurements  but  rather  eliminates
inconsistencies  in guidance found in various prior  accounting  pronouncements.
SFAS 157 will be effective  for the Company  starting  January 1, 2008.  Earlier
adoption  is  permitted,  provided  the  company  has not yet  issued  financial
statements,  including for interim periods, for that fiscal year. The Company is
currently  evaluating  the  impact  of SFAS  157 on its  consolidated  financial
position, cash flows and results of operations.



                                    Page 44
<PAGE>


     Other recent  accounting  pronouncements  issued by the FASB (including its
Emerging Issues Task Force),  the AICPA, and the SEC did not or are not believed
by  management to have a material  impact on our present or future  consolidated
financial statements.

ITEM 7. FINANCIAL STATEMENTS

     The consolidated  financial statements of China Digital Wireless,  Inc. and
its subsidiaries  including the notes thereto,  together with the report thereon
of Zhong Yi (Hong Kong ) C.P.A.  Company,  Ltd. are presented  beginning at page
F-1.

ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     None

ITEM 8A. CONTROLS AND PROCEDURES

     Prior to the  conclusion of the period  covered by this report,  we carried
out an  evaluation,  under the  supervision  and with the  participation  of our
management,  including our Chief Executive Officer and Chief Financial  Officer,
of the effectiveness of the design and operation of our disclosure  controls and
procedures pursuant to Exchange Act Rule 13a-15(e).  Based upon that evaluation,
our Chief  Executive  Officer and Chief  Financial  Officer  concluded  that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating to us (including  our  consolidated  subsidiary)
required to be included in our periodic SEC filings.

     There were no changes in our internal  controls  over  financial  reporting
that  materially  affected,  or are reasonably  likely to materially  affect our
internal  control  over  financial  reporting  during the fiscal  quarter  ended
December 31, 2006.

ITEM 8B. OTHER INFORMATION

     Not applicable


PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

     The following table provides  information about our executive  officers and
directors  and their  respective  ages and positions as of December 31, 2006 and
March 30, 2007:

As of December 31, 2006
Name                       Age      Title
Tai Caihua                 49       Director, President, Chairman of the Board
Huang Tianqi               34       Director, Chief Technology Officer
Jing Weiping               42       Director
Mao Ming                   44       Director
Song Jing                  30       Director
Fu Sixing                  45       Director, Chief Executive Officer



                                    Page 45
<PAGE>

Yu Ruijie                  43       Director
Zhang Xiaodong             38       Director
Huang Wei                  43       Director
Qian Fang                  47       Chief Financial Officer

As of March 31, 2007
Name              Age               Title
Ku Guohua         45       Director, President, Chairman of the Board,
                           Chief Technology Officer
Wu Guangyu        35       Chief Executive Officer
Zheng Hanqiao     49       Director
Mingda Rong       39       Director, Chief Financial Officer

     The  change  of the  Board  incurred  on  January  24,  2007,  a  group  of
individuals  ("Purchasers")  entered a share purchase  agreement with a group of
shareholders ("Sellers") of China Digital Wireless, Inc. ("Company") to purchase
12,911,835  shares of  Company's  common  stocks  owned by Sellers,  $ 0.001 par
value, for an aggregate  purchase price of $ 490, 000.00.  Purchasers are Guohua
Ku, Hanqiao Zheng,  Ping Sun,  Qianping  Huang,  Xiaohong Zhang and Lixia Zhang.
Sellers are Caihua Tai, Ming Mao, Ying Shi, Sixing Fu,  Xiaodong  Zhang,  Tianqi
Huang,  Wei Huang,  Jing Song,  Ruijie Yu,  and  Weiping  Jing,  all of whom are
shareholders of Company.

     In connection  with the share purchase  agreement date on January 24, 2007,
Caihhua Tai  (Chiarman  of the Board and  President  of the  Company),  Ming Mao
(Director),    Sixing   Fu(Director,    Chief   Executive   Officer),   Xiaodong
Zhang(Director),  Tianqi  Huang(Director,  Chief Technology Officer),  Wei Huang
(Director),  Jing  Song  (Director),  Ruijie Yu  (Director),  and  Weiping  Jing
(Director)  resigned  from  their  positions  in the  Board and the  offices  of
Company.  Fang Qian  also  resigned  from her  position  as the Chief  Financial
Officer of the Company.

     Guohua Ku, Hanqiao  Zheng,  Guangyu Wu and Mingda Rong become the Directors
of the  Board.  The  Board  also  appointed  the  following  individuals  to the
following offices:  Guohua Ku, President and Chairman of the Board of Directors,
Chief Technology Officer Guangyu Wu, Chief Executive  Officer,  Secretary Mingda
Rong, Chief Financial Officer

     Tai Caihua has served as our president,  chairman of our board of directors
and a member of our board of directors since June 23, 2004. Mr. Tai has been (i)
the president and sole director of our wholly owned subsidiary, Sifang Holdings,
since February 2004; (ii) chairman of the board of directors of Sifang Holdings'
wholly owned  subsidiary,  TCH, since our inception in May 2004;  (iii) director
and general manager of Shanghai  Tianci  Industry  (Group) Co., Ltd., one of our
affiliates, since January 1994 and (iv) a director of Sifang Information, one of
our  affiliates,  since  December  2001.  Mr.  Tai holds a Masters  of  Business
Administration from the Macau University of Science and Technology.

     Huang Tianqi has served as our chief technology officer since June 23, 2004
and a member of our board of directors since June 24, 2004. Mr. Huang has served
as chief technology officer of Sifang Holdings and vice-general  manager,  chief
technology  officer and a director of TCH since their inception in February 2004
and May 2004,  respectively.  Mr. Huang also serves as the vice-general  manager
and a member of the board of directors of Sifang  Information.  Before  becoming
vice-general  manager,  Mr.  Huang was the chief  technology  officer  at Sifang
Information  for seven years.  Mr. Huang  graduated  from Nanjing  University of
Posts and Telecommunications with a Bachelors Degree and from Shanghai Jiao Tong
University with a Masters of Science Degree.



                                    Page 46
<PAGE>


     Jing  Weiping has served as a member of our board of  directors  since June
24, 2004. Mr. Jing has served as a member of the board of directors of TCH since
our  inception in May 2004 and as a Director of Sifang  Information  since 2001.
Mr. Jing has served as the manager of the  technology  assurance  department  of
Sifang  Information  for the past nine years.  Mr. Jing  received his  Bachelors
Degree from Dong Hua University.

     Mao Ming  serves as a member of our board of  directors.  He was elected to
our board of directors June 24, 2004. He has been (i) the general  manager and a
member of the board of  directors of TCH since our  inception  in May 2004;  and
(ii) the  general  manager and a director of Sifang  Information  since  January
1998.  Mr. Mao  graduated  from China PLA  Measurement  College with a Bachelors
Degree and from the Macau University of Science and Technology with a Masters of
Business Administration.

     Song Jing has served as a member of our board of  directors  since June 24,
2004. Mr. Song has served as  vice-general  manager and a member of the board of
directors  of TCH since our  inception  in May 2004 and as  general  manager  of
Shanghai Shan Tian  Telecommunication  Co.,  Ltd.,  an affiliate of ours,  since
November 2003.  Previously,  Mr. Song served as director and general  manager of
Shanghai Zhong Si Hua Hao Co., Ltd. for one year and assistant  general  manager
of both  Shanghai Hua Si Trading Co.,  Ltd. and Shanghai Qi Shi Trading Co., Ltd
for five years. Mr. Song holds a Masters of Business  Administration from Joseph
L. Rotman School of Management, University of Toronto.

     Fu Sixing has served as our chief executive officer since June 23, 2004 and
a member of our board of  directors  since June 24,  2004.  Mr. Fu has served as
executive  manager  of  Sifang  Holdings  and as the  head of the  research  and
development  department and a director of TCH since their  inception in February
2004 and May 2004, respectively.  During the past seven years, Mr. Fu has served
as (i) the assistant to general manager of Shanghai Tianci Industry (Group) Co.,
Ltd.;  (ii) a  director  and the  general  manager  of  Shanghai  Sifang  Health
Technology Co., Ltd. and (iii) directorate secretary of Sifang Information.  Mr.
Fu received a Bachelors of Science in Physics from Nanjing University, a Masters
of Social Science in Economics from Huadong Normal University and a Doctorate of
Business Administration from the University of Southern California.

     Yu Ruijie has served as a member of our board of  directors  since June 24,
2004. Mr. Yu has served (i) as head of the Systems  Department and a director of
TCH  since  our  inception  in May  2004  and  (ii) as the  head of the  Systems
Department of Sifang Information since January 1994. Mr. Yu received a Bachelors
Degree in Computer Science from Shanghai University of Engineering Science.

     Zhang Xiaodong has served as a member of our board of directors  since June
24, 2004. Mr. Zhang has served as the head of the  projection  department of TCH
since our  inception  in May 2004.  Mr.  Zhang also serves as a director and the
head of the  projection  department  of  Sifang  Information.  For the past nine
years,  Mr. Zhang has served as head of the wireless  engineering  department at
Sifang Information.  Mr. Zhang graduated from Shanghai Jiao Tong University with
a Bachelors  Degree and received a Masters  Degree from the Macao  University of
Science and Technology.

     Huang Wei has served as a member of our board of  directors  since June 24,
2004.  Mr.  Huang has  served as (i) the  vice-general  manager of TCH since our
inception  in May 2004 and (ii)  vice-general  manager  and a director of Sifang
Information since 1993. Mr. Huang graduated from Nanjing University of Air Force
and Politics with a Bachelors Degree in Logistics.

     Qian Fang has served as our Chief Financial  Officer since January 1, 2005.
Ms.  Fang has  served as Manager  of  Accounting  of TCH since  1999.  Ms.  Fang
graduated from China Cable-TV  University with a Bachelors  Degree in Accounting
and is a Certified Public Accountant.



                                    Page 47
<PAGE>

     Guohua Ku, aged 45, graduated from Northwestern University (China) with the
Master of Business  Administration.  He had served as the senior  technology and
marketing  officer for several large Chinese  state-owned  companies.  He gained
tremendous  experiences and developed  exceptional  expertise on the development
and operation of TRT programs and energy recycling systems.

     Hanqiao  Zheng,  aged  49,  graduated  from   Northwestern   University  of
Agricultural  and  Forestry  Technologies.  He  worked in the  Weinan  Municipal
Government from 1982 to 1996 and afterwards  served at a management  position in
Shaanxi Province Machinery Import/Export Co., Ltd.

     Guangyu Wu, aged 35,  graduated from the  International  Finance Program of
Heilongjiang Harbin Investment Institute.  He owns the title of Senior Economist
and had worked in several large financial and commercial  institutions including
China  Construction Bank, SEG Trust, and Sunark Pegasus Group. He is specialized
in financial investment, business administration and strategic planning.

     Mingda  Rong,  aged  39,  is a  Chinese  certified  public  accountant.  He
graduated  from the Open  University  of Hong Kong with the  Master of  Business
Administration.  He served as the  accountant in Xi'an  Institute of Finance and
Economics from 1989 to 2000. After that he worked in Xi'an Sigma CPA firm.

Family Relationships

     Except as set forth  herein,  there are no family  relationships  among our
directors or officers.  The spouse of Mr. Tai Caihua (the President and Chairman
of our Board of Directors), Ms. Shi Ying, is a sibling of Huang Wei, a member of
our Board of Directors.

Audit Committee and Audit Committee Financial Expert

     Our board of directors  established  our audit committee in April 2005. The
audit committee reviews and recommends to the directors the independent auditors
to be selected to audit our  financial  statements;  meets with the  independent
auditors and  financial  management  to review the scope of the  proposed  audit
procedures  to be utilized;  reviews  with the  independent  auditors,  internal
auditor, and our financial and accounting personnel, the internal accounting and
financial controls, and elicits any recommendations for the improvement thereof;
reviews our financial  statements and reports the results of the annual audit to
the board of directors.

Section 16(a) Beneficial Ownership Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires our officers,
directors  and certain  other  shareholders  to file  reports of  ownership  and
changes in ownership  with the  Securities  and Exchange  Commission.  Officers,
directors and certain other  shareholders  are required by regulation to furnish
us with copies of all Section 16(a) forms they file.  During 2006, our President
and  Chairman  Tai  Caihua  filed a Form 4 . As of March  31,  2007,  two of our
directors, Guohua Ku and Hanqiao Zheng have filed a Form 3.


ITEM 10. EXECUTIVE COMPENSATION

None of the executive  officers received salary and bonus compensation in excess
of $100,000 during the 2006 fiscal year.



                                    Page 48
<PAGE>


ITEM 11.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

     The following table sets forth, as of December 31, 2006 and March 31, 2007,
the number and percentage of our 17,147,268  outstanding  shares of common stock
that were beneficially owned by (i) each director and executive officer of China
Digital,  (ii) each person known to China Digital to be the beneficial  owner of
five percent or more of the outstanding shares of common stock of China Digital,
and (iii)  all  directors  and  officers  of China  Digital  as a group.  Unless
otherwise indicated,  the person or entity listed in the table is the beneficial
owner of, and has sole voting and  investment  power with respect to, the shares
indicated.

 As of December 31, 2006


              Name                      Amount of Shares         Percent of
                                                                Voting Shares

Caihua Tai                                          8,639,220            40.3%
Ying Shi                                            1,791,743            10.5%
Jing Song                                             413,480             2.4%
Ming Mao                                              413,480             2.4%
Ruijie Yu                                             275,652             1.6%
Tianqi Huang                                          275,652             1.6%
Sixing Fu                                             275,652             1.6%
Wei Huang                                             275,652             1.6%
Weiping Jing                                          275,652             1.6%
Xiaodong Zhang                                        275,652             1.6%
Directors  and  Executive
officers  as a group                               12,911,835            75.2%


As of March 31, 2007


              Name                      Amount of Shares          Percent of
                                                                Voting Shares

Guohua Ku                                           9,073,700             52.9%
Hanqiao Zheng                                       2,406,365             14.0%
Ping Sun                                              745,880              4.3%
Qianping Huang                                        157,755              0.9%
Xiaohong Zhang                                         72,018              0.4%
Lixia Zhang                                           456,117              2.7%
Directors  and  Executive
officers  as a group                               12,911,835             75.2%


(1) Under  applicable  rules  promulgated  by the SEC pursuant to the Securities
Exchange Act of 1934,  as amended,  or the Exchange  Act, a person is deemed the



                                    Page 49
<PAGE>

"beneficial  owner" of a security  with regard to which the person,  directly or
indirectly, has or shares (a) the voting power, which includes the power to vote
or direct  the  voting  of the  security,  or (b) the  investment  power,  which
includes the power to dispose or direct the disposition of the security, in each
case irrespective of the person's economic interest in the security. Under these
SEC rules, a person is deemed to  beneficially  own securities  which the person
has the right to acquire  within 60 days  through (x) the exercise of any option
or warrant or (y) the conversion of another  security.  (2) In  determining  the
percent of our common stock owned by a person (a) the numerator is the number of
shares of our common stock  beneficially  owned by the person,  including shares
the  beneficial  ownership  of which  may be  acquired  within  60 days upon the
exercise of options or warrants or conversion of convertible securities, and (b)
the  denominator is the total of (i) the  17,147,268  shares of our common stock
outstanding  on March 31, 2007 and (ii) any shares of our common stock which the
person has the right to acquire  within 60 days upon the  exercise of options or
warrants or conversion of convertible securities.  Neither the numerator nor the
denominator  include  shares  which may be issued upon the exercise of any other
options or warrants or the conversion of any other convertible securities.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following  related  parties are related  through  common  ownership with the
major shareholder of the Company:

     Shanghai Sifang Information  Technology Co. ("Sifang Information") Shanghai
Tianci Industry Co. Ltd. ("Tianci  Industry") Shanghai Tianci Industry Group Co.
Ltd. ("Tianci Group") Shanghai Shantian  Telecommunication Co. Ltd. ("Shantian")
Shanghai Sifang  Telecommunication  Co. Ltd. ("Sifang  Telecom") Shanghai Tianci
Real Estate Co. Ltd.  ("Tianci  Real  Estate")  Shanghai  Sifang Media Co., Ltd.
("Sifang Media").

     During the year ended December 31, 2006, TCH sold Samsung GSM mobile phones
valued at  $713,524  at a gross  profit  margin  of 4% or  $26,531  to  Shanghai
Shantian  Telecommunication Co. Ltd. ("Shantian"),  compared to $10,608,287 at a
gross  profit  margin of 4% or $382,371  for the year ended  December  31, 2005.
Accounts  receivable  includes  $nil  and  $1,583,512  due from  Shantian  as of
December 31, 2006 and 2005 respectively.

     In January  2005,  Sifang Media and TCH entered into the "Bank Digital TV's
Cooperation  Agreement",  where TCH will assist in the  promotion  of TV ads for
various  customers,  including  Tianci Real  Estate.  TCH  received a net fee of
$332,239 and $1,879,965 from Tianci Real Estate for providing the service during
the years ended  December  31,  2006 and 2005  respectively.  The  Advertisement
Agency  Contract  between  Tianci Real Estate and Sifang Media was terminated in
November 2005.

     TCH, through Sifang Media,  entered into certain agreements with customers,
where  TCH will  assist in the  promotion  of TV ads for  these  customers.  TCH
received a net fee of $334,844 and $881,633 for providing the service via Sifang
Media during the fiscal year of 2006 and 2005 respectively.

     Pursuant to the service agreements between TCH and Sifang Information,  TCH
was  allowed to use  Sifang  Information's  facility  (which may not be owned by
foreign  investors at the present time) to transmit the reformatted  information
and Sifang  Information  also provided  other  management  support and marketing
services to TCH.

     Sifang  Information  signed a leasing agreement with the Tianci Real Estate
for leasing its  apartment for office use.  During the years ended  December 31,
2006 and 2005,  TCH paid rental expense of $50,378 and $49,565  respectively  to
Tianci Real Estate.



                                    Page 50
<PAGE>


     The amount due from Sifang  Information and Sifang Media as of December 31,
2005 are trade related and relating to the mobile phone distribution business.

     During  January  2006,  the Company  entered into an agreement  with Sifang
Information  for the  establishment  of a new joint venture  entity with a third
party.  The purpose of the joint venture entity is to act as a sole  advertising
agent of TCH. The Company  advanced a total of $2,499,969 to Sifang  Information
to contribute to the joint venture.  This,  together with the trade  receivables
related to the mobile phone  distribution  business,  made up a total balance of
$6,446,275  receivable  from Sifang  Information  as of December 31, 2006. As of
December 31, 2006, the Company  decided to provide a provision of $3,000,000 for
1) the full  amount  advance to the joint  venture  and 2) the long  outstanding
portion of the receivable from Sifang Information.

     On February 23, 2004, we sold 987,915 shares of restricted common stock for
gross  proceeds of $300,000,  pursuant to a  subscription  agreement,  to Halter
Financial Group,  Inc., an entity owned by Timothy P. Halter, a former member of
the  Board of  Directors  and the  Company's  former  Chief  Executive  Officer.
Additionally,  in consideration for agreeing to serve as an officer and director
of the  Company,  Timothy P.  Halter was  granted a warrant  to  purchase  up to
131,722 shares of common stock of the Company. The warrant was exercised on June
14, 2004, and we received gross proceeds of $40,000 upon exercise.

     On  February  23,  2004,  we agreed to pay  Little and  Company  Investment
Securities,  an  entity  owned  by  Glenn  A.  Little,  our  former  controlling
shareholder,  officer and director,  $30,000 in  consulting  fees related to the
transaction  discussed  in  the  previous  paragraph  and in  consideration  for
maintaining  the corporate  entity.  To formalize this  obligation,  we issued a
$30,000  non-interest  bearing  promissory  note  maturing on February 23, 2005.
Concurrent  with the  transaction  discussed in the previous  paragraph,  we and
Little and Company Investment  Securities executed an Exchange Agreement whereby
we issued  98,792  shares of common  stock in  satisfaction  of the  outstanding
promissory note.

     On June 23, 2004, we entered into a Stock  Purchase  Agreement  with Halter
Financial Group,  Inc.  pursuant to which we sold 166,667 shares of common stock
of the  Company  in  exchange  for  $190,000.  Timothy  P.  Halter  is the  sole
shareholder and President of Halter Financial Group,  Inc. Pursuant to the Stock
Purchase  Agreement,  we granted to Halter  Financial  Group,  Inc. an option to
require  the Company to  purchase  up to 166,667  shares of common  stock of the
Company at a price of $1.14 per share, such option being exercisable at any time
after  the date  that is six  months  after  the  Company  files a  registration
statement on Form SB-2 with the SEC,  registering the shares purchased by Halter
Financial Group, Inc., up to and including the earlier of (i) the date that such
registration statement is declared effective by the SEC or (ii) Halter Financial
Group, Inc.'s shares are eligible for resale under Rule 144 under the Securities
Act of 1933.

 ITEM 13.  EXHIBITS

Exhibit  Number  Description

3.1  Articles of Incorporation of the Registrant. (1)

3.2  Second Amended and Restated Bylaws of the Registrant. (2)

4.1  Common Stock Specimen. (4)



                                    Page 51
<PAGE>


10.1 Securities  Exchange  Agreement by and among  Boulder  Acquisitions,  Inc.,
     Sifang Holdings Co., Ltd. and the stockholders of Sifang Holdings Co., Ltd.
     dated effective as of June 23, 2004. (2)

10.2 Information Service and Cooperation  Agreement by and among Shanghai Sifang
     Information  Technology Co. Ltd. and Shanghai TCH Data  Technology Co. Ltd.
     dated as of June 1, 2004. (3)

10.3 Information Service and Cooperation  Agreement by and among Shanghai Sifang
     Information  Technology Co. Ltd. and Shanghai TCH Data  Technology Co. Ltd.
     dated as of June 1, 2004. (3)

10.4 Information Service and Cooperation  Agreement by and among Shanghai Sifang
     Information  Technology Co. Ltd.,  Shanghai Chengao Industrial Co. Ltd. and
     Shanghai TCH Data Technology Co. Ltd. dated as of June 1, 2004. (3)

10.5 Information Service and Cooperation  Agreement by and among Shanghai Tianci
     Industrial  (Group),  Co. Ltd. and Shanghai  TCH Data  Technology  Co. Ltd.
     dated as of June 1, 2004. (3)

10.6 Business and Related Assets  Transfer  Agreement  between  Shanghai  Sifang
     Information  Technology Co. Ltd. and Shanghai TCH Data  Technology Co. Ltd.
     dated as of May 26, 2004. (3)

10.7 Stock Purchase  Agreement by and between Halter Financial  Group,  Inc. and
     Boulder Acquisitions, Inc. dated as of June 23, 2004. (2)

10.8 Stock Purchase  Agreement by and between  Chinamerica  Fund, LP and Boulder
     Acquisitions, Inc. dated as of June 28, 2004. (2)

10.9 Stock Purchase Agreement by and between  Chinamerica  Acquisition,  LLC and
     Boulder Acquisitions, Inc. dated as of June 28, 2004. (2)

10.10 Stock   Purchase   Agreement   by  and  between  Gary  Evans  and  Boulder
     Acquisitions, Inc. dated as of June 28, 2004. (2)

10.11 Selling Stockholders Agreement by and among Boulder Acquisitions, Inc. and
     the Selling  Stockholders listed on Schedule A thereto dated as of June 28,
     2004. (5)

10.12 English Summary of the Equity Transfer  Termsheet for Shanghai Kena Energy
     Saving  Electric Co., Ltd. by and among  Shanghai TCH Data  Technology  Co.
     Ltd.,  Mr.  Zhang  Naiyao,  Mr. Tai Yi,  and Ms.  Zheng  Chang  dated as of
     December 29, 2005. (6)

10.13 English Summary of the Agreement  relating to the assignment of debt under
     the Equity Transfer Agreement by and among Shanghai TCH Data Technology Co.
     Ltd.,  Mr. Zhang  Naiyao,  Mr. Tai Yi, Ms. Zheng Chang and Shanghai  Sifang
     Information Technology Co. Ltd. dated as of December 29, 2005. (6)

10.14 English Summary of an Agreement  relating to transfer of patent  ownership
     by and between  Shanghai TCH Data  Technology Co. Ltd. and Mr. Zhang Naiyao
     dated as of December 29, 2005. (6)

10.15 English  Summary of an  Agreement  relating  to  transfer of right to make
     patent application by and between Shanghai TCH Data Technology Co. Ltd. and
     Mr. Zhang Naiyao dated as of December 29, 2005. (6)

10.16 English  Summary of an Agreement in relation to  assignment  of debt under
     the  Agreements for the transfer of patent rights by and among Shanghai TCH
     Data Technology Co. Ltd., Mr. Zhang Naiyao and Shanghai Sifang  Information
     Technology  Co.  Ltd.  dated as of  December  29,  2005 (as  amended by the
     parties on February 10, 2006). (6)



                                    Page 52
<PAGE>


10.17 Share  Purchase  Agreement  Dated on January 24, 2007  between  individual
     purchasers and shareholders of China Digital Wireless, Inc. (7)

10.18 TRT Joint  Operation  Agreement  between  Shanghai TCH Data Technology Co.
     Ltd. and Xi'an Yingfeng  Science and Technology  Co.Ltd.  dated February 1,
     2007.(8)

14   Code of Ethics.

21.1 Subsidiaries of the Registrant. (4)

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

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

32.1 Chief Executive Officer Certification  furnished pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.

32.2 Chief Financial Officer Certification  furnished pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.


-----------------------------------------
(1)  Previously  filed as an exhibit to the  Registrant's  Annual Report on Form
10-KSB for the fiscal year ended  December  31,  2001,  which was filed with the
Commission on January 28, 2002, and which is incorporated herein by reference.
(2) Previously  filed as an exhibit to the  Registrant's  Current Report on Form
8-K dated July 8, 2004, and which is incorporated herein by reference.
(3) Previously filed as an exhibit to the Registrant's  Quarterly Report on Form
10-QSB for the period ended June 30, 2004 as filed with the Commission on August
23, 2004, and which is incorporated herein by reference
(4) Previously filed as an exhibit to the Registrant's Registration Statement on
Form SB-2 as filed  with the  Commission  on  November  12,  2004,  and which is
incorporated herein by reference.
(5) Previously filed as an exhibit to the Registrant's  Post-Effective Amendment
No. 1 on Form SB-2 as filed with the Commission on September 12, 2005, and which
is incorporated herein by reference.
(6) Previously  filed as an exhibit to the  Registrant's  Current Report on Form
8-K dated February 17, 2006, and which is incorporated herein by reference.
(7) Previously  filed as an exhibit to the  Registrant's  Current Report on Form
8-K dated January 24, 2007.
(8) Previously  filed as an exhibit to the  Registrant's  Current Report on Form
8-K dated April 9, 2007.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Paid to Independent Public Accountants for 2006 and 2005

Audit Fees



                                    Page 53
<PAGE>

     The aggregate  audit fees for 2006 were $114,000.  The amounts include fees
for  professional  services  rendered by  Grobstein,  Horwath & Company,  LLP in
connection with the audit of our consolidated financial statements as of and for
the 2005 fiscal year and reviews of our unaudited consolidated interim financial
statements for the first, second and third quarters of 2006.

     The aggregate  audit fees for 2005 were $236,267.  The amounts include fees
for  professional  services  rendered by  Grobstein,  Horwath & Company,  LLP in
connection with the audit of our consolidated  financial statements for the 2004
fiscal  year  and  reviews  of  our  unaudited  consolidated  interim  financial
statements for the first, second and third quarters of 2005.

Audit-Related Fees

     There was $ 9,000 audit-related fee billed by Grobstein, Horwath & Company,
LLP in connection with this Form 10-KSB for fiscal year 2006.

Tax Fees

     There were $ 8,000 fees for tax  services  billed by  Grobstein,  Horwath &
Company, LLP for tax services rendered to the Company for 2006 fiscal years.

All Other Fees

     There were no  additional  aggregate  fees billed by  Grobstein,  Horwath &
Company,  LLP for other  services  rendered  to the Company for the 2005 or 2006
fiscal years.

Policy  on audit  committee  Pre-Approval  of Audit  and  Permissible  Non-Audit
Services of Independent Auditors

     The audit committee  pre-approves all audit and non-audit services provided
by the independent  auditors prior to the engagement of the independent auditors
with respect to such services. The Company's independent auditors may be engaged
to  provide  non-audit  services  only  after  the  audit  committee  has  first
considered the proposed  engagement and has determined in each instance that the
proposed services are not prohibited by applicable regulations and the auditors'
independence  will not be  materially  impaired  as a result of having  provided
these  services.  In making this  determination,  the audit committee takes into
consideration  whether a reasonable  investor,  knowing all  relevant  facts and
circumstances,  would  conclude  that the  auditors'  exercise of objective  and
impartial  judgment on all issues  encompassed  within the auditors'  engagement
would be  materially  impaired.  The audit  committee  may delegate its approval
authority to pre-approve services provided by the independent auditors to one or
more of the members of the audit committee, provided that any such approvals are
presented to the audit committee at its next scheduled meeting.


SIGNATURES

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



                                    Page 54
<PAGE>






By
                          /s/Guohua Ku
-----------------------------------------------------------------
                            Guohu Ku
               President and Chairman of the Board
                  (Principal Executive Officer)

                      Date: April 12, 2007

By
                          /s/Guangyu Wu
-----------------------------------------------------------------
                           Guangyu Wu
                     Chief Executive Officer
                  (Principal Executive Officer)

                      Date: April 12, 2007
By
                          /sMingda Rong
-----------------------------------------------------------------
                           Mingda Romg
                     Chief Financial Officer
                  (Principal Executive Officer)

                      Date: April 12, 2007
By
                        /s/Hanqiao Zheng
-----------------------------------------------------------------
                          Hanqiao Zheng
                            Director

                      Date: April 12, 2007







                                    Page 55
<PAGE>





                       CHINA RECYCLING ENERGY CORPORATION

        (KNOWN AS "CHINA DIGITAL WIRELESS, INC." PRIOR TO MARCH 8, 2007)

                        Consolidated Financial Statements
                 For The Years Ended December 31, 2006 and 2005

     (With Reports of Independent Registered Public Accounting Firm Thereon)

                   ZHONG YI (HONG KONG) C.P.A. COMPANY LIMITED

                          Certified Public Accountants


                          CHINA DIGITAL WIRELESS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                            Page

Report of Independent  Registered  Public Accounting Firm -
Zhong Yi (Hong Kong)C.P.A. Company Limited                                   F-2
Report of Independent Registered Public Accounting Firm -
Grobstein, Horwath &Company LLP                                              F-3
Consolidated Balance Sheets                                                  F-4
Consolidated Statements of Operations And Comprehensive
Income (Loss)                                                          F-5 - F-6
Consolidated Statements of
Cash Flows                                                             F-7 - F-8
Consolidated Statements of Stockholders' Equity                              F-9
Notesto Consolidated Financial Statements                            F-10 - F-30


















                                      F- 1
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
China Digital Wireless, Inc.

We have audited the  accompanying  consolidated  balance  sheet of China Digital
Wireless,  Inc. and Subsidiaries ("the Company") as of December 31, 2006 and the
related  consolidated   statements  of  operations  and  comprehensive   income,
stockholders'  equity and cash flows for the year ended December 31, 2006. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  an  audit  to  obtain  reasonable   assurance  about  whether  the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor  were we  engaged  to  perform  an audit of the
Company's  internal  control  over  financial  reporting.   Our  audit  includes
consideration  of  internal  control  over  financial  reporting  as a basis for
designing audit  procedures that are appropriate in the  circumstances,  but not
for the purpose of expressing an opinion on the  effectiveness  of the Company's
internal  control  over  financial  reporting.  Accordingly  we  express no such
opinion. An audit includes examining,  on a test basis,  evidence supporting the
amounts and  disclosures  in the  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of the
Company as of December 31, 2006 and the  consolidated  results of operations and
cash flows for the year ended  December 31, 2006 in conformity  with  accounting
principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
consolidated  financial statements,  the Company has incurred substantial losses
which raise  substantial doubt about its ability to continue as a going concern.
Management's  plans in regard to these  matters  are also  described  in Note 2.
These  consolidated  financial  statements do not include any  adjustments  that
might result from the outcome of this uncertainty.



Zhong Yi (Hong Kong) C.P.A. Company Limited
Certified Public Accountants

Hong Kong, China
April 12, 2007




                                      F- 2
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the  Shareholders  and Board of Directors  China Digital  Wireless,  Inc. and
Subsidiary

We have audited the  accompanying  consolidated  balance sheets of China Digital
Wireless,  Inc. and Subsidiary  (the "Company") as of December 31, 2004 and 2005
and the related  consolidated  statements  of income and  comprehensive  income,
shareholders'  equity  and cash flows for each of the years  then  ended.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of China
Digital Wireless,  Inc. and Subsidiary as of December 31, 2004 and 2005, and the
consolidated  results of their  operations  and cash flows for each of the years
then ended in conformity with accounting  principles  generally  accepted in the
United States of America.

As discussed in Note 5 to the consolidated financial statements, the Company has
had numerous  significant  transactions with businesses  controlled by, and with
people who are related to, the officers and directors of the Company.



GROBSTEIN, HORWATH & COMPANY LLP
Sherman Oaks, California
March 31, 2006






                                      F- 3
<PAGE>
<TABLE>
<CAPTION>

                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2006 AND 2005
 (Currency expressed in United States Dollars ("US$"), except for number of shares)

                                                              2006           2005
                                                              ----           ----
<S>                                                           <C>            <C>

ASSETS
Current assets:
  Cash and cash equivalents                             $    252,000    $  3,578,367
  Accounts receivable, net                                      --           844,977
  Inventories, net                                              --            62,386
  Advances and deposits to suppliers                         755,635          19,970
  Deferred tax assets                                           --            12,846
  VAT recoverable                                             10,702            --
  Due from related parties                                 3,446,275       3,094,969
                                                        ------------    ------------
Total current assets                                       4,464,612       7,613,515
                                                        ------------    ------------
Non current assets:
  Property and equipment, net                                   --         1,105,756
  Deposit for business acquisition                              --         6,257,590
                                                        ------------    ------------

                                                                --         7,363,346
                                                        ------------    ------------
                                                        ------------    ------------

                                                        $  4,464,612    $ 14,976,861
TOTAL ASSETS
                                                        ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                      $       --      $    881,218
  Advance from customers                                     141,832           6,399
  Deferred revenue                                            33,299          31,598
  VAT payable                                                   --            92,649
  Income tax payable                                             437         193,586
  Due to related parties                                        --           223,399
  Other current liabilities                                  942,407         375,960
                                                        ------------    ------------
Total current liabilities                                  1,117,975       1,804,809
                                                        ------------    ------------

Stockholders' equity:
  Common stock,
     $0.001 par value; 100,000,000 shares authorized;
     17,147,268 shares issued and outstanding                 17,148          17,148
  Additional paid-in capital                               4,229,845       4,229,845
  Statutory reserves                                         574,666         554,466
  Accumulated other comprehensive income                   1,037,674         285,671
  (Accumulated deficits) retained earnings                (2,512,696)      8,084,922
                                                        ------------    ------------
Total stockholders' equity                                 3,346,637      13,172,052
                                                        ------------    ------------
                                                        ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $  4,464,612    $ 14,976,861
                                                        ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.



                                      F- 4
<PAGE>
<TABLE>
<CAPTION>


                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                        FOR THE YEARS ENDED DECEMBER 31,
               2006 AND 2005 (Currency expressed in United States
                  Dollars ("US$"), except for number of shares)

                                                           2006           2005
                                                           ----           ----
<S>                                                        <C>            <C>
Revenues:
   Product sales                                     $    555,961    $  5,775,069
   Product sales - related parties                        713,524      10,608,287
   Information service, net                             1,285,107       1,274,068
   Advertising service, net                               334,844       2,761,598
                                                     ------------    ------------

Total revenues                                          2,889,436      20,419,022
                                                     ------------    ------------

Cost of revenue
   Cost of revenue                                        504,347       5,800,878
   Cost of revenue - related parties                      686,993      10,224,081
   Cost of information service                          1,004,186         681,624
   Cost of advertising service                            110,876         141,554
                                                     ------------    ------------

Total cost of revenue                                   2,306,402      16,848,137
                                                     ------------    ------------

                                                     ------------    ------------

Gross profit                                              583,034       3,570,885
                                                     ------------    ------------


Operating expenses:
   Sales and marketing                                    154,727         134,639
   Allowance for doubtful accounts                         10,631            --
   Written-off on amounts due from related parties      3,000,000            --
   General and administrative                             967,957       1,251,166
                                                     ------------    ------------

                                                        4,133,315       1,385,805
Total operating expenses
                                                     ------------    ------------

                                                     ------------    ------------

(Loss) income from operations                          (3,550,281)      2,185,080
                                                     ------------    ------------


Other income (expense):
   Interest income                                          5,135            --
   Government subsidy                                     118,202         108,476
   Other income                                               206           8,387
   Interest expense                                          --            (9,093)
                                                     ------------    ------------

(Loss) income before income taxes                      (3,426,738)      2,292,850
Income tax expense                                        (36,633)       (481,743)
                                                     ------------    ------------

Net (loss) income                                    $ (3,463,371)   $  1,811,107
                                                     ============    ============

Other comprehensive income:
   - Foreign currency translation adjustment         $    752,003    $    285,396
                                                     ------------    ------------

Comprehensive (loss) income                          $ (2,711,368)   $  2,096,503
                                                     ============    ============
</TABLE>



                                      F- 5
<PAGE>



                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                  (CONTINUED) FOR THE YEARS ENDED DECEMBER 31,
               2006 AND 2005 (Currency expressed in United States
                  Dollars ("US$"), except for number of shares)

                                                 2006                  2005
                                                 ----                      ----

Net (loss) income per common share -
 Basic and diluted
                                           $     (0.20)      $        0.11
                                           ================= ==================


Weighted average number of common shares
 outstanding - Basic and diluted            17,147,268          17,054,368
                                           ================= ==================

See accompanying notes to consolidated financial statements.




                                      F- 6
<PAGE>
<TABLE>
<CAPTION>

                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
              (Currency expressed in United States Dollars ("US$"))

                                                            2006            2005
                                                            ----            ----
<S>                                                         <C>             <C>
Cash flows from operating activities:
Net (loss) income                                        $(3,463,371)   $ 1,811,107
Adjustments to reconcile net (loss) income to net
cash (used in) provided by  operating activities:
  Depreciation                                               189,366        239,716
  Allowance for doubtful accounts                             10,631         (3,450)

  Written-off on amount due from related parties           3,000,000           --
  Loss (gain) on disposal of property and equipment           58,970         (8,914)
Changes in assets and liabilities:
  Accounts receivable                                        834,346      3,778,282
  Inventories                                                 62,386         39,310
  Advances and deposits to suppliers                        (735,665)       130,442
  Deferred tax assets                                         12,846         15,926
  Due from related parties                                (3,351,306)      (929,345)
  Accounts payable                                          (881,218)       825,379
  Advance from customers                                     135,433          6,399
  Deferred revenue                                             1,701       (586,096)
  VAT payable                                               (103,351)      (120,886)
  Income tax payable                                        (193,149)      (119,177)
  Due to related parties                                    (223,399)       123,139
  Other current liabilities                                  566,447         88,935
                                                         -----------    -----------

Net cash (used in) generated from operating activities    (4,079,333)     5,290,767
                                                         -----------    -----------

Cash flows from investing activities:
 Purchase of property and equipment                             --         (425,525)
 Proceeds on disposal of property and equipment                  963        309,214
 Due from related parties                                       --       (3,435,258)
                                                         -----------    -----------

Net cash generated from (used in) investing activities           963     (3,551,569)
                                                         -----------    -----------

Cash flows from financing activities:
  Common stock proceeds held in escrow                          --        1,500,000
                                                         -----------    -----------

Net cash generated from financing activities                    --        1,500,000
                                                         -----------    -----------

                                                         -----------    -----------

Foreign currency translation adjustment                      752,003        263,658
                                                         -----------    -----------

NET CHANGE IN CASH AND CASH EQUIVALENTS                   (3,326,367)     3,502,856

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR               3,578,367         75,511
                                                         -----------    -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                   $   252,000    $ 3,578,367
                                                         ===========    ===========

</TABLE>


                                      F- 7
<PAGE>
<TABLE>
<CAPTION>


                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
              (Currency expressed in United States Dollars ("US$"))

                                                                               2006            2005
                                                                               ----            ----
<S>                                                                            <C>             <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

   Cash paid for income taxes                                              $    23,582     $   590,481
                                                                         =============== ===============

   Cash paid for interest expenses                                         $         -     $         -
                                                                         =============== ===============

NON-CASH INVESTING AND FINANCING ACTIVITIES

   Impairment on deposit for business acquisition and property and
     equipment to additional paid-in capital                               $ 7,114,047     $         -
                                                                         =============== ===============
   Deposit for business acquisition in exchange for reduction in
     accounts receivable                                                   $         -     $ 6,257,590
                                                                         =============== ===============

</TABLE>


See accompanying notes to consolidated financial statements.




                                      F- 8
<PAGE>
<TABLE>
<CAPTION>

                  CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        FOR THE YEARS ENDED DECEMBER 31,
               2006 AND 2005 (Currency expressed in United States
                  Dollars ("US$"), except for number of shares)

                                                                                                                       Accumulated
                                                                                    Additional                            other
                                                             Common stock            paid-in         Statutory       comprehensive
                                                 No. of share           Amount       capital         reserves             income
                                                 ------------           ------       -------         --------             ------
<S>                                              <C>                    <C>          <C>             <C>                  <C>


Balance as of December 31, 2004                     17,018,692    $      17,019   $    4,229,974   $          -   $            275
Issuance of common stock in exchange for
  lock up agreements                                   128,576              129             (129)             -                  -
Transfer from retained earnings to statutory
  reserves                                                   -                -                -        554,466                  -
Components of comprehensive income
 - Foreign currency translation                              -                -                -              -            285,396
Net income for the year                                      -                -                -              -                  -
                                              ------------------  --------------  ---------------- -------------- ------------------
                                                    17,147,268    $      17,148   $    4,229,845   $    554,466   $        285,671
 Balance as of December 31, 2005

Components of comprehensive income
 - Foreign currency translation                              -                -                -              -            752,003
Transfer from retained earnings to
     additional paid-in capital                              -                -        7,114,047              -                  -
Impairment on deposit for business
     acquisition and property and equipment
     to additional paid-in capital                           -                -       (7,114,047)             -                  -
Transfer from retained earnings to statutory
     reserves                                                -                -                -         20,200                  -
Net loss for the year                                        -                -                -              -                  -
                                              ------------------  --------------  ---------------- -------------- ------------------

Balance as of December 31, 2006                     17,147,268    $       17,148  $    4,229,845   $    574,666   $      1,037,674
                                              ==================  ==============  ================ ============== ==================

</TABLE>
<TABLE>
<CAPTION>
                                                        Retained
                                                        earnings
                                                    (accumulated
                                                        deficits)            Total
                                                        ---------            -----
<S>                                                     <C>                  <C>

Balance as of December 31, 2004                        6,828,281 $      11,075,549
Issuance of common stock in exchange for
  lock up agreements                                           -                 -
Transfer from retained earnings to statutory
  reserves                                              (554,466)                -
Components of comprehensive income
 - Foreign currency translation                                -           285,396
Net income for the year                                1,811,107         1,811,107
                                               ------------------- -----------------
 Balance as of December 31, 2005                       8,084,922 $      13,172,052


Components of comprehensive income
 - Foreign currency translation                                -           752,003
Transfer from retained earnings to
     additional paid-in capital                       (7,114,047)                -
Impairment on deposit for business
     acquisition and property and equipment
     to additional paid-in capital                             -        (7,114,047)
Transfer from retained earnings to statutory
     reserves                                            (20,200)                -
Net loss for the year                                 (3,463,371)       (3,463,371)
                                               ------------------- -----------------

Balance as of December 31, 2006                       (2,512,696)  $       346,637
                                               =================== =================
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F- 9
<PAGE>


1. ORGANIZATION AND BUSINESS BACKGROUND

China Digital Wireless, Inc. ("CHDW") through its subsidiary sells mobile phones
to retailers,  distributors,  and related parties, provides advertising services
and  provides  information  services  to  users of  mobile  phones  and  pagers.
Substantially all of its operations are conducted in Shanghai, People's Republic
of China ("PRC").

In order to meet  ownership  requirements  under  Chinese  law that  restrict  a
foreign  company  from  operating  in  certain  industries  such as  value-added
telecommunication,  advertising service and internet services, CHDW's subsidiary
has entered into  information  service and  cooperation  agreements  with two of
CHDW's  affiliates that are incorporated in China:  Shanghai Sifang  Information
Technology  Co.  ("Sifang  Information")  and Shanghai  Tianci  Industry Co. Ltd
("Tianci  Industry").  CHDW holds no ownership interest in Sifang Information or
Tianci  Industry.  Sifang  Information and Tianci  Industry  contract with China
Mobile   Communications   Corporation   ("China   Mobile"),   and  China  United
Telecommunications Corporation ("China Unicom"), to provide wireless value-added
information  services to wireless  receiver  customers in China via China Mobile
and China Unicom.  Sifang  Information  transmits those services to customers of
China Mobile and China Unicom on behalf of itself and Tianci  Industry  pursuant
to a signed agreement between Sifang Information and Tianci Industry.

Recapitalization and Reorganization

On June 23, 2004, Boulder Acquisitions,  Inc. ("Boulder  Acquisitions")  entered
into  a  stock  exchange  agreement  with  Sifang  Holdings  Co.  Ltd.  ("Sifang
Holdings") and certain  shareholders.  Pursuant to the stock exchange agreement,
Boulder  Acquisitions  issued  13,782,636 shares of its common stock in exchange
for a 100% equity interest in Sifang  Holdings,  making Sifang Holdings a wholly
owned subsidiary of Boulder Acquisitions.

Boulder Acquisitions was incorporated under the laws of the State of Colorado on
May 8, 1980 as Boulder Brewing Company ("Boulder Brewing").  Boulder Brewing was
the  successor  to a  general  partnership  formed  in 1979.  From  the  initial
inception of the original  partnership  through 1990, Boulder Brewing was in the
business of operating a  microbrewery  in Boulder,  Colorado.  During 1990, as a
result of various debt defaults,  Boulder  Brewing's assets were foreclosed upon
and all business operations were ceased.  Boulder Brewing has effectively had no
operations, assets or liabilities since its fiscal year ended December 31, 1990.

In September  2001,  Boulder  Brewing  changed its state of  incorporation  from
Colorado to Nevada by means of a merger with and into  Boulder  Acquisitions,  a
Nevada  corporation  formed on  September  6, 2001  solely  for the  purpose  of
effecting the  reincorporation.  The Articles of Incorporation and Bylaws of the
Nevada corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation eliminated the provision for Boulder
Acquisitions to issue preferred stock.

The above stock exchange  transaction  resulted in those  shareholders of Sifang
Holdings obtaining a majority voting interest in Boulder Acquisitions. Generally
accepted accounting  principles in the United States of America require that the
company whose  shareholders  retain the majority interest in a combined business
be treated as the  acquirer for  accounting  purposes.  Consequently,  the stock
exchange  transaction  has been  accounted for as a  recapitalization  of Sifang
Holdings as Sifang  Holdings  acquired a controlling  equity interest in Boulder
Acquisitions,  as of June 23, 2004. The reverse acquisition process utilizes the
capital  structure of Boulder  Acquisitions  and the assets and  liabilities  of
Sifang Holdings recorded at historical cost.



                                     Page 1
<PAGE>

Sifang  Holdings is the  continuing  operating  entity for  financial  reporting
purposes,  and the financial  statements prior to June 23, 2004 represent Sifang
Holdings'  financial  position and results of  operations.  As of June 23, 2004,
Boulder  Acquisitions  had only cash of $310,051,  and  stockholders'  equity of
$310,051 with 1,585,705  shares of common stock  outstanding,  all of which were
included in the consolidated  financial statements of Sifang Holdings.  Although
Sifang  Holdings  is  deemed  to be  the  acquiring  corporation  for  financial
accounting and reporting purposes,  the legal status of Boulder  Acquisitions as
the surviving  corporation did not change.  Subsequent to June 30, 2004, Boulder
Acquisitions changed its name to China Digital Wireless, Inc.

Business History

CHDW's  business is  primarily  conducted  through its  wholly-owned  subsidiary
Sifang Holdings and Sifang Holdings' wholly-owned subsidiary TCH Data Technology
Co., Ltd. ("TCH"), that collectively with CHDW are referred to as the "Company".
Sifang Holdings was established under the laws of the Cayman Islands on February
9, 2004 for the  purpose  of  holding a 100%  equity  interest  in TCH.  TCH was
established as a foreign investment enterprise in Shanghai under the laws of the
PRC on May 25, 2004, with registered capital of $7.2 million.

CHDW's  current  operations  were  originally  a  business  division  of  Sifang
Information.  Sifang Information is a Shanghai-based  privately owned enterprise
established under the laws of the PRC on August 14, 1998. Sifang  Information is
engaged in the  business of pager and mobile  phone  distribution  and  provides
value added information  services to the customers in the Shanghai  metropolitan
area. In March 2004, Sifang  Information spun off its mobile phone  distribution
business and the majority of its value added  information  services  business to
TCH. As the acquiring entity under common control,  TCH initially recognized all
the assets and liabilities transferred at their carrying amounts in the accounts
of Sifang  Information  at the date of transfer under the guidance of Statements
of Financial  Accounting  Standards  ("SFAS") No. 141,  "Business  Combinations"
Appendix D.

On May 26, 2004, Sifang Information exchanged 100% of its equity interest in TCH
for a 100% equity interest in Sifang Holdings.  Since the ultimate owners of the
three entities were the same owners and the three entities remained under common
control,  the  ownership  exchange  transaction  was accounted for at historical
costs  under the  guidance of SFAS No. 141  Appendix  D. Prior to May 26,  2004,
Sifang Holdings conducted no business activities. As a result of the exchange of
ownership between TCH and Sifang Holdings, TCH's historical financial statements
became the historical financial statements of Sifang Holdings.

As a result of the  spin-off,  the Company now engages in the business of mobile
phone  distribution  and  provides  pager and mobile  phone users with access to
certain value-added  information reformatted by TCH. TCH purchases mobile phones
from first tier distributors and sells them to retailers and distributors with a
mark-up. In the process of providing  value-added  information  services through
entering into monthly subscription  agreements with various users, TCH purchases
trading activity information from stock exchanges,  comments and analysis on PRC
stock markets provided by certain reputable  security and investment  companies,
lottery  information,  weather  forecast,  and other  value-added  products  and
reformats the aforementioned  information through decoding and recoding and then
has the reformatted information  transmitted by Sifang Information,  via service
contracts,  to pager users.  The value-added  information is constantly saved on
TCH's  server in order for  mobile  phone  users to dial in via China  Mobile or
China Unicom.  By signing a monthly  subscription  agreement,  wireless receiver
users  agree to make  advance  payments  for its  services  for either  three or
six-month subscription periods.

In the spin-off process,  the cost of sales included in the Company's  financial
statements is directly  related to the product  revenue and the cost of services
is directly  related to different types of service.  The business taxes (similar



                                     Page 2
<PAGE>

to sales taxes in the U.S.) are related only to service revenue at a tax rate of
approximately 3.3%. The selling expenses are allocated based on the relationship
between  expense and revenue  (such as  commission)  and  payroll  records.  The
general and  administrative  expenses are allocated  based on  management  hours
spent and payroll  records.  The income tax provision  has been  calculated on a
separate  company  basis and is in line with the  historical  actual  income tax
provision at the Sifang  Information  level  assuming  that all income taxes had
been paid by Sifang  Information and no income tax liability was in existence in
the  periods  reported  in the  accompanying  financial  statements.  Management
believes that the costs,  operating expenses,  interest expense,  and income tax
provision  included  in the  Company's  financial  statements  are a  reasonable
representation  of the costs and expenses  that would have been  incurred if the
Company had performed these functions as a stand-alone company.

2. GOING CONCERN UNCERTAINTIES

These consolidated financial statements have been prepared assuming that Company
will continue as a going concern,  which  contemplates the realization of assets
and the  discharge  of  liabilities  in the normal  course of  business  for the
foreseeable future.

As of December  31, 2006,  the Company had a working  capital of  $3,346,637,  a
negative  operating  cash flow of  $4,079,333  and the  accumulated  deficits of
$2,512,696.  Management  has taken  certain  actions and  continues to implement
changes designed to improve the Company's  financial  results and operating cash
flows.  The action involves change of business  operations from the mobile phone
distribution business and provision of information value-added services to sales
of  energy-saving  products,  which is  described  in Note  19(c).  The place of
business is also going to reallocate from Shanghai to Xian Province.  Management
believes  that  these  actions  will  enable  the  Company  to  improve   future
profitability  and cash flow in its continuing  operations  through December 31,
2007. As a result,  the financial  statements do not include any  adjustments to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of the Company's ability to continue as a going concern.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

o Basis of Presentation
These  accompanying  consolidated  financial  statements  have been  prepared in
accordance with generally accepted accounting principles in the United States of
America ("US GAAP") and pursuant to the rules and  regulations of the Securities
and Exchange Commission ("SEC") for annual financial statements.

o Use of Estimates
In preparing these consolidated financial statements, management makes estimates
and  assumptions  that affect the reported  amounts of assets and liabilities in
the balance sheets and revenues and expenses  during the year  reported.  Actual
results may differ from these estimates.

o Basis of Consolidation
The  consolidated  financial  statements  include the accounts  CHDW, its wholly
owned  subsidiary,  Sifang  Holdings,  and  its  wholly  owned  subsidiary  TCH.
Substantially  all of the Company's  revenues are derived from the operations of
TCH, which represents substantially all of the Company's consolidated assets and
liabilities.

Subsidiaries  are those  entities in which the Company,  directly or indirectly,
controls  more than one half of the  voting  power;  has the power to govern the
financial  and  operating  policies;  to appoint or remove the  majority  of the
members of the board of  directors;  or to cast majority of votes at the meeting
of directors.



                                     Page 3
<PAGE>

All significant  inter-company balances and transactions within the Company have
been eliminated on consolidation.

o Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand
deposits placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.

o Accounts Receivable
Accounts  receivable  are  recorded  at the  invoiced  amount  and  do not  bear
interest.  The Company extends unsecured credit to its customers in the ordinary
course of business but  mitigates  the  associated  risks by  performing  credit
checks and  actively  pursuing  past due  accounts.  An  allowance  for doubtful
accounts is established and determined based on managements' assessment of known
requirements,  aging of receivables,  payment  history,  the customer's  current
credit  worthiness  and the economic  environment.  As of December 31, 2006, the
Company recorded an allowance for doubtful accounts of $10,631.

o Inventories
Inventories  consist  primarily of mobile  phones and are stated at the lower of
cost or net realizable  value,  with cost being determined on a weighted average
basis.  Since 2004,  the  Company's  major  vendor began  providing  rebates and
credits if the Company  meets  certain  sales volume  levels  prescribed  by the
vendor.  As a result,  the Company is entitled  to receive  certain  rebates and
credits  for the  inventory  held and sold by the Company  within the  specified
period  of time as  defined  by its  vendor  through  submitting  the  necessary
application  forms. In general,  once the vendor approves these applications the
amounts  of these  rebates  and  credits  will be  deducted  from the  Company's
accounts  payable to its vendor and decrease the cost of goods sold or inventory
held  correspondingly.  As  of  December  31,  2006,  the  Company  recorded  no
inventories.


o Property and Equipment, Net
Property and  equipment  are stated at cost less  accumulated  depreciation  and
accumulated  impairment  losses,  if  any.  Depreciation  is  calculated  on the
straight-line  basis over the following  expected  useful lives from the date on
which they become fully operational:

                                                             Depreciable life
                Buildings                                        20 years
                Software                                       2 - 3 years
                Office and other equipment                     2 - 5 years
                Motor vehicles                                 2 - 5 years

Expenditure  for  maintenance  and  repairs is  expensed  as  incurred,  whereas
betterment and renewals are generally  capitalized in their respective  property
accounts.  The gain or loss on the disposal of property,  plant and equipment is
the  difference  between the net sales  proceeds and the carrying  amount of the
relevant assets and is recognized in the consolidated statement of operations.

o Capitalization of Software Costs
The  Company's  software is  developed by an  independent  third party to enable
pager users to accept certain  recoded  information  which is transmitted by the
Company,  through  affiliates,  and enables  mobile phone users to dial into the
Company's  server.  The  software is  developed  for  internal use and gives the
Company the ability to provide value added information  services.  In accordance
with SOP 98-1  "Accounting  for the  Costs of  Computer  Software  Developed  or
Obtained for Internal Use," the Company  capitalizes  the external cost incurred
to  develop  this  internal-use  software  by  an  engineering  company  at  the



                                     Page 4
<PAGE>

application  development  stage  and  amortizes  that  cost  over the  estimated
economic life of the software (two or three years) which is consistent  with the
expected life of a particular type of mobile phone.

o Impairment of Long-life Assets
In accordance  with SFAS No. 121,  "Account ing for the impairment of Long-Lived
Assets and for  Long-Lived  Assets to be Disposed  of', a long-lived  assets and
certain identifiable intangible assets held and used by the Company are reviewed
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying  amount  of an  asset  may  not be  recoverable.  For the  purposes  of
evaluating the recoverability of long-lived  assets, the recoverability  test is
performed using  undiscounted  net cash flows related to the long-lived  assets.
The Company reviews  long-lived assets, if any, to determine the carrying values
are not impaired, as fully explained in Note 4.

o Revenue Recognition
The  Company  derives  revenues  from the sale of mobile  phones,  advertisement
designing  service and the provision of wireless  information  services that are
used on mobile phones,  pagers and prepaid phone cards. The Company additionally
earns commission income ("Agency Income") from the sale of CDMA mobile phones on
the behalf of a related  party.  The  Company  recognizes  its  revenues  net of
related business taxes and value-added taxes.

Mobile Phone Sales:
Revenues  generated from the sale of mobile phones are recognized  upon delivery
to the distributor or retailer and the transfer of title and risk of loss.

Advertising Servicing Revenue, Net:
Advertising revenues are derived from advertisement designing, masterminding and
producing services. The Company recognizes service revenues over the term of the
noted  agreement at the time of completion of the services.  The Company records
the revenue from Shanghai Sifang Media Co., Ltd. ("Sifang Media") on a net basis
in compliance with EITF 99-19,  "Reporting  Revenue Gross as a Principle  versus
Net  as an  Agent"  because  the  Company  is not  the  primary  obligor  in the
arrangement  and they receive a fixed fee from  Shanghai  Sifang Media Co., Ltd.
and they have no latitude in determining prices.

Information Services:
The Company  recognizes  service  revenues over the term of the noted  agreement
and/or when the services have been provided to the end user.

i) Information Services - TCH:
By signing a  subscription  agreement,  wireless  receiver  users  agree to make
payments  for three to  six-month  subscriptions  in  advance.  TCH  records the
proceeds as  deferred  revenue  and  amortizes  the  deferred  revenue  over the
subscription  period. When customers buy a pre-charged service card, the Company
records the  proceeds as deferred  revenue.  When a customer  starts to use this
card to access  the  Company's  server  and  starts to use a pager to access the
aforementioned  information,  the Company identifies the subscription period and
amortizes the deferred revenue over the subscription period.

ii) Information Services - Installing Agent:
In response to a retailer's  request,  the Company has an  installing  agent who
installs  the  Company's  software  on  mobile  phones,  which  are owned by the
retailer.  The retailer  sells these  phones for a premium  covering a fee to be
paid to the installing agent and pre-charged  six-month  subscription fees to be
paid to the Company.  After a customer  using such a phone dials into the server
to access the desired  information,  the server records a unique  identification
number installed on the mobile phone, which indicates that a specific phone user
starts his or her  subscription  period.  After the Company  receives a detailed



                                     Page 5
<PAGE>

list from the  installing  agent  regarding  the number of phones that have been
installed with the Company's software, the Company matches this information with
a detailed  list from the retailer  setting forth how many such phones have been
sold.  Based on the number of such phones  sold,  the Company  records  accounts
receivable  and deferred  revenue  accordingly.  At the date on which a customer
starts to dial into the server, the six-month subscription period begins and the
Company amortizes deferred revenue accordingly.

iii)  Information   Services  -  China  Mobile  and/or  Unicom:   The  Company's
affiliates,  Sifang  Information and Shanghai Tianci  Industrial Group Co., Ltd.
("Tianci Group"),  contract with China Mobile and/or China Unicom (collectively,
"Mobile   Operators")  for  the   transmission  of  the  Company's   value-added
information  services.  The Mobile Operators bill and collect from customers and
then pass those fees (net of billing and collection  service fees charged by the
Mobile Operators) to Sifang  Information and Tianci Group who in turn pass those
fees to the Company.  The Company  recognizes  net  revenues  based on the total
amount paid by its customers, for which the Mobile Operators bill and collect on
behalf  of the  Company.  There  is a time lag  ranging  from 10 days to 45 days
between the end of the service period and the date the Mobile Operators send out
their billing  statements due to the segregated  billing  systems of each of the
provincial subsidiaries of the Mobile Operators.  The Company has not recognized
service  revenue  based  on the  records  provided  by its  own  server  but has
performed a reconciliation on a monthly basis of the revenues  recognized by the
Company's server to the Mobile Operator's  billing statement.  In addition,  the
Mobile  Operators  charge a network  usage fee based on a fixed per  message fee
multiplied by the excess of messages sent over messages received.  (This type of
service is not covered by a monthly service  subscription and the Company has no
control  over whether it will occur or not.)  Network  usage fees charged by the
Mobile  Operators are reduced for messages  received by the Company  because the
Mobile Operators separately charge the sender a fee for these transmissions.


The Company records the revenue from the Mobile Operators on a net basis in
compliance with EITF 99-19, "Reporting Revenues Gross as a Principle versus Net
as an Agent" because the Company:
-    Is not the  primary  obligor  in the  arrangement,  as it  relies on Sifang
     Information to transmit the information services to the end user,
-    Has limited  ability to adjust the cost of services by adjusting the design
     or marketing of the service,
-    Has limited ability to determine prices,  the Company must follow the price
     policy within ranges prescribed by Mobile Operators, and
-    Has limited ability to assume risk of non-payment by customers.

The Company's  dependence on the substance and timing of the billing  systems of
the mobile  telecommunications  operators  may  require  the Company to estimate
portions of its reported revenue for information  services from time to time. As
a result,  subsequent adjustments may be made to the information service revenue
in the Company's consolidated financial statements. As the Company does not bill
its  information  services users  directly,  the Company  depends on the billing
systems and  records of the mobile  telecommunications  operators  to record the
volume of its information services provided,  to charge its users through mobile
telephone bills, to collect payments from its users, and to pay the Company.

o Cost of Sales
Cost  of  sales   consists   primarily  of  purchase  costs  of  mobile  phones,
subscription costs of certain value-added  information  services such as trading
activity  information  from stock  exchanges,  comments  and analysis on the PRC
stock markets provided by certain reputable  security and investment  companies,
lottery information, and weather forecast.

o Deferred Revenue



                                     Page 6
<PAGE>

Deferred  revenue  consists of  primarily  of payments  received in advance from
customers.

o Value-Added Tax
TCH is subject to value-added  tax ("VAT")  imposed by the PRC on TCH's domestic
product sales. The output VAT is charged to customers who purchase mobile phones
from TCH and the input VAT is paid when TCH  purchases  mobile  phones  from its
vendors.  The VAT rate  applied  for TCH is 17%.  The  input  VAT can be  offset
against the output VAT.

o Advertising Expenses
The  Company  expenses  advertising  costs as incurred  in  accordance  with the
American  Institute  of  Certified  Public  Accountants  ("AICPA")  Statement of
Position 93-7,  "Reporting for Advertising Costs".  Advertising expenses totaled
$353  and  $17,468   during  the  years  ended   December  31,  2006  and  2005,
respectively.

o Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income as defined includes all changes in equity during
a period from non-owner sources. Accumulated comprehensive income, as presented
in the accompanying statement of changes in stockholders' equity consists of
changes in unrealized gains and losses on foreign currency translation. This
comprehensive income is not included in the computation of income tax expense or
benefit.

o Income Taxes
The Company  accounts for income tax using SFAS No. 109  "Accounting  for Income
Taxes", which requires the asset and liability approach for financial accounting
and reporting for income taxes.  Under this approach,  deferred income taxes are
provided  for  the  estimated  future  tax  effects  attributable  to  temporary
differences   between  financial   statement  carrying  amounts  of  assets  and
liabilities  and their  respective  tax bases,  and for the expected  future tax
benefits from loss  carry-forwards  and provisions,  if any. Deferred tax assets
and  liabilities  are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is  recognized
in the statement of operations and comprehensive  (loss) income in the period of
enactment.  A valuation  allowance  is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.

o Net (Loss) Income Per Share
The Company  calculates net (loss) income per share in accordance  with SFAS No.
128,  "Earnings  per  Share".  Basic net (loss)  income per share is computed by
dividing the net (loss) income by the  weighted-average  number of common shares
outstanding.  Diluted net (loss)  income per share is computed  similar to basic
net (loss) income per share except that the  denominator is increased to include
the number of additional  common shares that would have been  outstanding if the
potential common stock  equivalents had been issued and if the additional common
shares were dilutive.  The Company did not have any potentially  dilutive common
share equivalents as of December 31, 2006 and 2005.

o Foreign Currencies Translation
The  functional  and  reporting  currency  of the  Company is the United  States
dollars ("U.S.  dollars").  The accompanying  consolidated  financial statements
have been expressed in U.S. dollars.

The functional  currency of the Company's  foreign  subsidiaries is the Renminbi
Yuan ("RMB").  The balance sheet is translated  into United States dollars based
on the rates of exchange  ruling at the balance  sheet date.  The  statement  of
operations is translated using a weighted average rate for the year. Translation
adjustments are reflected as cumulative translation adjustments in stockholders'
equity.



                                     Page 7
<PAGE>

o Segment Reporting
SFAS  No.  131  "Disclosures   about  Segments  of  an  Enterprise  and  Related
Information"  establishes  standards for reporting  information  about operating
segments  on  a  basis  consistent  with  the  Company's  internal  organization
structure as well as information about geographical areas, business segments and
major customers in financial statements.  The Company operates in four principal
reportable segment, as more fully explained in Note 14.

o Fair Value of Financial Instruments
The carrying value of the Company's  financial  instruments,  which include cash
and cash equivalents,  accounts receivables,  inventories, advances and deposits
to suppliers,  accounts payable,  other current  liabilities,  approximate their
fair values due to the short-term maturity of these instruments.

o Related Parties
Parties, which can be a corporation or individual,  are considered to be related
if the Company has the  ability,  directly or  indirectly,  to control the other
party or exercise significant influence over the other party in making financial
and operating decisions. Companies are also considered to be related if they are
subject to common control or common significant influence.

All material  related party  transactions  have been disclosed in the note 13 to
consolidated financial statements.

o Recently Issued Accounting Standard
In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections" ("SFAS 154"), which replaces  Accounting  Principles Board Opinions
No. 20,  "Accounting  Changes" and SFAS No. 3, "Reporting  Accounting changes in
Interim  Financial  Statements--An  Amendment  of APB Opinion No. 28".  SFAS 154
provides guidance on the accounting for and reporting of accounting  changes. It
establishes  retrospective  application,  or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error.  SFAS 154 is effective for  accounting  changes and
corrections  of errors made in fiscal years  beginning  after December 15, 2005.
The adoption of this  statement did not have a material  effect on the Company's
financial position or results of operations.

In September  2005, the FASB's  Emerging  Issues Task Force  ("EITF")  reached a
final consensus on Issue 04-13, "Accounting for Purchases and Sales of Inventory
with the Same Counterparty" ("EITF 04-13"). EITF 04-13 requires that two or more
legally separate  exchange  transactions  with the same counterparty be combined
and considered a single arrangement for purposes of applying APB Opinion No. 29,
"Accounting for Nonmonetary  Transactions",  when the  transactions  are entered
into  in  contemplation  of  one  another.  EITF  04-13  is  effective  for  new
arrangements   entered   into,   or   modifications   or  renewals  of  existing
arrangements,  in interim or annual periods  beginning after March 15, 2006. The
Company  does not  expect  that the  adoption  of this  statement  would  have a
material effect on the Company's financial position or results of operations.

In February 2006, the FASB issued SFAS No. 155,  "Accounting  for Certain Hybrid
Instruments-an amendment of FASB Statements 133 and 140", which is effective for
all financial  instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after  September 15, 2006. The statement  improves
financial  reporting by eliminating  the exemption from applying SFAS No. 133 to
interests  in  securitized  financial  assets so that  similar  instruments  are
accounted for similarly regardless of the form of the instruments. The Statement
also  improves  financial  reporting  by allowing a preparer to elect fair value
measurement at acquisition, at issuance, or when a previously recognized have to
bifurcated,    if   the    holder    elects   to    account    for   the   whole
instrument-by-instrument  basis, in cases in which a derivative  would otherwise



                                     Page 8
<PAGE>
<TABLE>
<CAPTION>

have to bifurcated,  if the holder elects to account for the whole instrument on
a fair value  basis.  The  Company  does not expect  that the  adoption  of this
statement  would have a material effect on the Company's  financial  position or
results of operations.

In July 2006,  the FASB issued FIN 48,  "Accounting  for  Uncertainty  in Income
Taxes--an  Interpretation  of FASB  Statement  No.  109",  which  clarifies  the
accounting for uncertainty in tax positions.  This Interpretation  requires that
the Company recognizes in its consolidated  financial statements the impact of a
tax  position if that  position is more  likely than not of being  sustained  on
audit,  based on the technical merits of the position.  The provisions of FIN 48
are effective for the Company on January 1, 2007, with the cumulative  effect of
the change in accounting principle, if any, recorded as an adjustment to opening
retained  earnings.  The Company is currently  evaluating the impact of adopting
FIN 48 on its consolidated financial statements.

In September  2006,  the SEC released SAB No. 108,  "Considering  the Effects of
Prior  Year  Misstatements  when  Quantifying   Misstatements  in  Current  Year
Financial Statements" ("SAB 108"). SAB 108 provides interpretive guidance on the
SEC's  views on how the  effects  of the  carryover  or  reversal  of prior year
misstatements  should be considered in quantifying a current year  misstatement.
The provision of SAB 108 is effective for the Company in the current fiscal year
ended December 31, 2006.  The Company is currently  evaluating the impact of SAB
108 but does not believe that the  application  of SAB 108 would have a material
effect on its financial position, cash flows nor results of operations.

In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements" ("SFAS
157"), which defines fair value, establishes guidelines for measuring fair value
and expands  disclosures  regarding fair value  measurements.  SFAS 157 does not
require any new fair value measurements but rather eliminates inconsistencies in
guidance  found in various  prior  accounting  pronouncements.  SFAS 157 will be
effective  for the  Company  starting  January  1,  2008.  Earlier  adoption  is
permitted,  provided  the  company  has not  yet  issued  financial  statements,
including for interim  periods,  for that fiscal year.  The Company is currently
evaluating  the  impact of SFAS 157 on its  financial  position,  cash flows and
results of operations.

4. IMPAIRMENT  WRITE DOWN RECOGNISED AS A RESULT OF STRATEGIC  REVIEW OF CERTAIN
OPERATIONS

In 2006,  during  the  course of the  Company's  strategic  review of the assets
involved  in the mobile  phone sales and  information  service  operations,  the
Company determined that the carrying values of these property and equipment were
impaired after  recoverability  test using future  undiscounted  cash flows. The
carrying  values of these  assets were not  recovered  sufficiently  and so were
fully written down to additional paid-in capital as of December 31, 2006.

Also, the Company reviewed the future economic value of the deposit for business
acquisition,  as more fully mentioned in Note 13(h),  and determined that future
undiscounted  cash flows associated with this deposit were uncertain and may not
be sufficient to recover their carrying  values and so was fully written down to
additional paid-in capital as of December 31, 2006.

                                                                   Impairment charge to
                                          Net book value at                  additional       Net book value after
Assets                                    December 31, 2006             paid-in capital       the impairment charge
------                                    -----------------             ---------------       ---------------------
<S>                                       <C>                           <C>                   <C>
Property and equipment                    $        856,457            $       (856,457)           $             -
Deposit for business acquisition
acquisition                                      6,257,590                  (6,257,590)                         -
                                    ------------------------    ------------------------   -------------------------
                                          $      7,114,047            $     (7,114,047)           $             -
                                    ========================    ========================   =========================
</TABLE>

                                     Page 9
<PAGE>


5. ACCOUNTS RECEIVABLE, NET

                                                    2006                 2005
                                                    ----                 ----

Accounts receivable                         $       10,631      $      844,977
Less: allowance for doubtful accounts              (10,631)                  -
                                          -----------------  -------------------

Accounts receivable, net                     $           -      $      844,977
                                          =================  ===================


6. ADVANCES AND DEPOSITS TO SUPPLIERS

In December 2006, the Company via TCH began to engage in other activities in the
energy saving and recycling industry,  including  purchasing certain equipments,
devices,  hardware and software for the construction and installation of top gas
recovery  turbine  system ("TRT") and other  renewable  energy  products.  As of
December  31,  2006,  TCH paid an amount of  $755,635  as a deposit to  purchase
software for the TRT project.


7. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following:
                                                         2006             2005
                                                         ----             ----
Buildings                                            $   999,997    $   967,507
Software                                                    --          568,704
Office and other equipment                                  --          488,984
Motor vehicles                                            92,225         89,229
                                                     -----------    -----------
                                                       1,092,222      2,114,424
Less: accumulated depreciation                          (235,765)    (1,008,668)

   impairment charge to additional paid-in capital      (856,457)          --

                                                     -----------    -----------
Property and equipment, net                          $      --      $ 1,105,756
                                                     ===========    ===========

Depreciation  expenses  for the  years  ended  December  31,  2006 and 2005 were
$189,366 and $239,716, respectively.

As of December 31, 2005,  in accordance  with the  "Business and Related  Assets
Transfer Agreement" signed by TCH and Sifang  Information,  the ownership of the
building  suite and two motor  vehicles,  (collectively  known as "Assets")  are
recorded on TCH's books of record.  The net book value of the pledged assets was
$829,637.  The property is pledged as security for a $2.5 million line of credit
held under the credit  facility  agreement  between Sifang  Information  and the
bank.  The line of credit is  recorded on Sifang  Information's  books and has a
balance of  $2,478,253  as of December 31, 2005.  However,  the two parties have
declared  that the  ownership of the "Assets"  should be TCH's as of the balance
sheet date and have signed a legal agreement, as noted above. Sifang Information



                                    Page 10
<PAGE>

is  expected  to pay off the line of credit  balance  in April  2008 and at that
point they will transfer the legal title of the property and the motor  vehicles
within one week after the pledge is to be released by the bank.

8. OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

                                              2006                     2005
                                              ----                     ----

Other payables                        $      448,714          $      118,058
Employee welfare payable                     213,870                 206,462
Accruals                                     279,823                  51,440
                                ---------------------   ----------------------
                                ---------------------   ----------------------
                                                              $      375,960
                                      $      942,407
                                =====================   ======================



9. GOVERNMENT SUBSIDY



During  the year  ended  31  December  2006,  the  Company  received  a  general
government  subsidy from the local  bureau,  which is  equivalent to 3.5% of the
taxable  income of TCH throughout the period from January 2005 to December 2005.
The subsidy is non-recurring and subject to government  approval.  The amount of
such  government  subsidy  for the years  ended  December  31, 2006 and 2005 was
$118,202 and $108,476 respectively.



10. INCOME TAXES


The Company's PRC subsidiary,  TCH, is registered at Pudong District in Shanghai
and subject to a favorable  income tax rate of 15%  compared to a normal  income
tax rate of 33% (30% for the central government and 3% for the local government)
under  current PRC tax laws.  Sifang  Information  is registered in the Shanghai
downtown area and has been treated by the Shanghai  Municipal  Administration of
Labor as an enterprise  that provides  unemployed  and  handicapped  people with
jobs. Accordingly, Sifang Information is also entitled to a favorable income tax
rate of 15% and  qualified  for an income  tax  exemption  for three  years from
January 1, 2000 to December 31, 2002,  and a 50% income tax  reduction for three
years from  January 1, 2003 to  December  31,  2005.  The income tax  provisions
presented in the Company's  financial  statements are based on the actual income
tax rates of TCH at 15% for both years ended  December  31,  2006 and 2005.  The
deferred tax assets are determined  based on the income tax rates  applicable at
the TCH level.



There  is  no  income  tax  for  companies  domiciled  in  the  Cayman  Islands.
Accordingly,  the Company's consolidated financial statements do not present any
income tax provisions related to Cayman Islands tax jurisdiction.



                                    Page 11
<PAGE>









The income tax provision for the years ended December 31, 2006 and 2005 are as
follows:

                                                     2006              2005
                                                     ----              ----

Current tax expense                              $  23,787         $ 465,343
Deferred tax                                        12,846            16,400
                                          ----------------- -----------------
                                          ----------------- -----------------
Income tax expense                               $  36,633         $ 481,743
                                          ================= =================

The components of (loss) income before income taxes are as follows:



                                                          2006            2005
                                                          ----            ----

Loss subject to Cayman Islands                      $ (250,995)     $ (737,758)
(Loss) income subject to the PRC                    (3,175,743)       3,030,608
                                                 --------------- ---------------
                                                 --------------- ---------------
(Loss) income before income taxes                  $(3,426,738)     $ 2,292,850
                                                 =============== ===============
                                                 =============== ===============
Income tax expense                                    $  36,633       $ 481,743
                                                 =============== ===============


The  reconciliation of income tax rate to the effective income tax rate based on
(loss)  income  before  income  taxes  stated in the  consolidated  statement of
operations for the years ended December 31, 2006 and 2005 are as follows:



                                          Year ended December 31,
                                       -------------------------------

                                                2006             2005
                                                ----             ----

(Loss) income before income taxes      $  (3,175,743)  $    3,030,608
Statutory income tax rate                         33%              33%
                                       --------------- ----------------

                                          (1,047,995)       1,000,101
Add: Adjustments
Income tax holiday                           (21,964)        (545,509)
Allowance for doubtful accounts              993,508           27,151

Change in deferred tax assets                 12,846                -
Others                                       100,238                -
                                       --------------- ----------------
Income tax expense                     $      36,633    $     481,743
                                       =============== ================



                                    Page 12
<PAGE>


The  following  table sets forth the  significant  components  of the  aggregate
deferred tax assets of the Company as of December 31, 2006 and 2005:



                                                Year ended December 31,
                                       ---------------------------------
                                                 2006             2005
                                                 ----             ----
Deferred tax assets:
 - Allowance for doubtful accounts         $ 451,595         $  6,670
 - Accrued liabilities                             -            6,176
                                       ---------------- ----------------
Total deferred tax assets                    451,595           12,846
Less: valuation allowance                  (451,595)                -
                                       ---------------- ----------------
Deferred tax assets                            $   -        $  12,846
                                       ================ ================


11. NET (LOSS) INCOME PER SHARE

Basic net (loss) income per share is computed using the weighted  average number
of the ordinary shares  outstanding  during the year.  Diluted net (loss) income
per share is computed using the weighted  average number of ordinary  shares and
ordinary share equivalents outstanding during the year.


The following  table sets forth the  computation of basic and diluted net (loss)
income per share for the year indicated:


                                                        Year ended
                                                        December 31,
                                           ------------------------------------
                                                       2006               2005
                                                       ----               ----
Basic and diluted net (loss) income
 per share calculation:
 Numerator:
  Net (loss) income used in computing
  basic net (loss) income per share          $   (3,463,371)     $  1,811,107
                                           ================= ==================

 Denominator:
  Weighted average ordinary shares
  outstanding                                    17,147,268        17,054,368
                                           ================= ==================


Basic and diluted net (loss) income
 per share                                  $        (0.20)     $       0.11
                                           ================= ==================




12. CAPITAL TRANSACTIONS


On June 23, 2004,  the Company  issued  167,895  shares of its common stock to a
consultant  for services  relating to the reverse  merger that was  completed in
fiscal 2004.  The trading price of the  Company's  common stock on June 23, 2004
was $3.60 per share, accordingly, the fair value of 167,895 shares was $604,422.



On June 23,  2004,  the Company  issued  166,667  shares of its common  stock in
exchange for  services  performed by an existing  major  shareholder  of Boulder
Acquisitions  for his consulting  services  involved with the reverse merge. The
common  stock was  issued at a price of $1.14  per share in  exchange  for gross



                                    Page 13
<PAGE>

proceeds of $190,000  based on a stock purchase  agreement.  The $1.14 per share
price was  pre-negotiated  between the Company  and the  shareholder  before the
reverse merger had been completed. Pursuant to the stock purchase agreement, the
Company granted the existing shareholder an option which required the Company to
purchase up to the  aforementioned  166,667 shares of common stock at a price of
$1.14 per share,  such option being  exercisable at any time after the date that
is nine months  after the Company  files a  registration  statement on Form SB-2
with the SEC, registering the shares purchased by the existing  shareholder,  up
to and  including  the earlier of the date that such  registration  statement is
declared effective by the SEC or the existing  shareholder's shares are eligible
for resale under Rule 144 under the Securities  Act of 1933.  According to Topic
D-98 from the SEC,  "Classification  and Measurement of Redeemable  Securities,"
these shares should be presented outside the permanent equity section.  However,
on November 12, 2004,  the Company filed a  Registration  Statement on Form SB-2
with the SEC, for  registration of these  securities to be sold to the public by
small business  issuers.  On February 8, 2005, the SEC approved the registration
filing and  accordingly,  the Company has recorded these shares in stockholders'
equity as the  contingency  surrounding  these shares  expired as of February 8,
2005. On June 23, 2004,  the trading price of the Company's  stock at the end of
the day was $3.60 per share.  Due to the relationship  between the parties,  the
difference between the price of $1.14 per share and the price of $3.60 per share
was  recorded as  compensation  by  presenting  $410,001 in  additional  paid-in
capital and in general and administrative expenses.



     On June 28, 2004, the Company issued, in aggregate, 1,315,789 shares of its
common  stock to three  investors  at a price of $1.14 per share in exchange for
gross proceeds of $1,500,000 based on a stock purchase agreement.  The $1.14 per
share price was pre-negotiated  between the Company and the investors before the
reverse  merger  had been  completed.  Pursuant  to the  signed  stock  purchase
agreement,  the Company  granted to each of the three  investors an option which
requires the Company to purchase up to the  aforementioned  1,315,789 shares, in
aggregate,  of common  stock at a price of $1.14 per share,  such  option  being
exercisable  at any time after the date that is nine  months  after the  Company
files a Registration Statement on Form SB-2 with the SEC, registering the shares
purchased by the existing  shareholder,  up to and  including the earlier of the
date that such  registration  statement is declared  effective by the SEC or the
existing  shareholder's  shares are eligible for resale under Rule 144 under the
Securities  Act of 1933.  As of December 31, 2004,  the proceeds of $1.5 million
were held in an escrow account with an agent who is related to a shareholder. As
of December 31, 2004,  the Company has treated the proceeds  held in escrow as a
current  asset as the entire  amount was released  from escrow in March 2005 and
paid to the  Company.  According  to Topic  D-98 from SEC,  "Classification  and
Measurement of Redeemable  Securities," these shares should be presented outside
the permanent equity section. However, on November 12, 2004, the Company filed a
Registration  Statement  on Form SB-2 with the SEC,  for  registration  of these
securities to be sold to the public by small  business  issuers.  On February 8,
2005, the SEC declared the registration  statement effective.  Accordingly,  the
Company has recorded  these shares in  stockholders'  equity as the  contingency
surrounding these shares expired as of February 8, 2005.



In  connection  with the June 28,  2004  issuance of common  stock,  the Company
incurred  share issue costs of $217,481 and  accounted  for it as a reduction of
additional paid-in capital.



Pursuant to a resolution in December 2006, the Company  transferred its retained
earnings  of  $7,114,047  to  additional  paid-in  capital  for the  purpose  of
impairment  charge  on  deposit  for  business   acquisition  and  property  and
equipment.  Descriptive details of deposit for business acquisition and property
and equipment are mentioned in Note 13(h) and Note 7 and the Company  determined
that both items are  non-trading  nature.  Also the Company  reviewed the future
economic  value  of  both  deposit  and  assets  and   determined   that  future
undiscounted  cash flows associated with these deposit and assets were uncertain



                                    Page 14
<PAGE>

and may not be  sufficient  to recover  their  carrying  values and so was fully
written down to additional paid-in capital.



13. RELATED PARTY TRANSACTIONS

(a)  Related Party Relationships

The following  related  parties are related  through  common  ownership with the
major shareholder of the Company:

Shanghai  Sifang  Information  Technology Co.  ("Sifang  Information")  Shanghai
Tianci Industry Co. Ltd. ("Tianci  Industry") Shanghai Tianci Industry Group Co.
Ltd. ("Tianci Group") Shanghai Shantian  Telecommunication Co. Ltd. ("Shantian")
Shanghai Sifang  Telecommunication  Co. Ltd. ("Sifang  Telecom") Shanghai Tianci
Real Estate Co. Ltd.  ("Tianci  Real  Estate")  Shanghai  Sifang Media Co., Ltd.
("Sifang Media").

(b)  Merchandise Sold to Related Parties

During the year ended  December  31, 2006,  TCH sold  Samsung GSM mobile  phones
valued at  $713,524  at a gross  profit  margin  of 4% or  $26,531  to  Shanghai
Shantian  Telecommunication Co. Ltd. ("Shantian"),  compared to $10,608,287 at a
gross  profit  margin of 4% or $382,371  for the year ended  December  31, 2005.
There was no accounts  receivable  due from Shantian as of December 31, 2006 and
2005.

(c)  Advertising Services Rendered to Related Party

                                                Year ended December 31,
                                  -----------------------------------------
                                                2006                 2005
                                                ----                 ----
       Tianci Real Estate              $           -        $   1,879,965
                                  ==================== ====================

In January  2005,  Sifang  Media and TCH  entered  into the "Bank  Digital  TV's
Cooperation  Agreement",  where TCH will assist in the  promotion  of TV ads for
various customers,  including Tianci Real Estate. TCH received a net fee of $nil
and  $1,879,965  from Tianci Real Estate for  providing  the service  during the
years ended December 31, 2006 and 2005  respectively.  The Advertisement  Agency
Contract  between Tianci Real Estate and Sifang Media was terminated in November
2005.

TCH, through Sifang Media, entered into certain agreements with customers, where
TCH will assist in the promotion of TV ads for these  customers.  TCH received a
net fee of $334,844  and  $881,633  for  providing  the service via Sifang Media
during the fiscal year of 2006 and 2005 respectively.

(d)  Service Provided by Related Party

                                           Year ended December 31,
                                   -----------------------------------------
                                   -----------------------------------------
                                                 2006                 2005
                                                 ----                 ----
       Sifang Information               $     473,534        $     426,009
                                   ==================== ====================

Pursuant to the service agreements between TCH and Sifang  Information,  TCH was
allowed to use Sifang Information's  facility (which may not be owned by foreign



                                    Page 15
<PAGE>

investors  at the present  time) to transmit  the  reformatted  information  and
Sifang Information also provided other management support and marketing services
to TCH.

(e)  Leasing From Related Parties

Sifang  Information  signed a leasing  agreement with the Tianci Real Estate for
leasing its apartment for office use.  During the years ended  December 31, 2006
and 2005, TCH paid rental expense of $50,378 and $49,565  respectively to Tianci
Real Estate.

(f)  Amount Due From Related Parties

                                             As of December 31,
                                  -----------------------------------------
                                                2006                 2005
                                                ----                 ----

       Sifang Information                  $6,446,275          $ 2,165,624
       Sifang Media                                 -              929,345
                                  -------------------- --------------------
                                            6,446,275            3,094,969
       Less: Amount written-off           (3,000,000)                    -
                                  -------------------- --------------------
                                          $ 3,446,275          $ 3,094,969
                                  ==================== ====================

The amount due from Sifang  Information and Sifang Media as of December 31, 2005
are trade related and relating to the mobile phone distribution business.

During  January  2006,  the  Company  entered  into  an  agreement  with  Sifang
Information  for the  establishment  of a new joint venture  entity with a third
party.  The purpose of the joint venture entity is to act as a sole  advertising
agent of TCH. The Company  advanced a total of $2,499,969 to Sifang  Information
to contribute to the joint venture.  This,  together with the trade  receivables
related to the mobile phone  distribution  business,  made up a total balance of
$6,446,275  receivable  from Sifang  Information  as of December 31, 2006. As of
December 31, 2006, Sifang  Information was informed of the non-continuous of the
formation of the joint venture by the third party and it was determined that the
amount is not to be  recovered  in the  foreseeable  future.  As a  result,  the
Companyprovided  a provision of $3,000,000 for 1) the full amount advance to the
joint venture and 2) the long outstanding  portion of the receivable from Sifang
Information.


(g)  Amount Due To Related Parties

                                            As of December 31,
                                 -----------------------------------------
                                 -----------------------------------------
                                               2006                 2005
                                               ----                 ----

       Tianci Real Estate              $          -        $     123,467
       Shantian                                   -               99,932
                                 -------------------- --------------------
                                       $          -        $     223,399
                                 ==================== ====================

The balance owed to Tianci Real Estate  represented  the expenses paid by Tianci
Real Estate on behalf of the Company  during the year ended  December  31, 2005.



                                    Page 16
<PAGE>

The balance owed to Shantian  represents the advances received from Shantian for
mobile  phone  sales.  All of the  above  amounts  due to  related  parties  are
unsecured, non-interest bearing and due on demand.

(h) Deposit for Business Acquisition

In December 2005, TCH entered into a series of agreements to purchase (i) 95% of
the equity interests of Shanghai Kena Energy Saving Electric Co Ltd ("Kena") for
an aggregate purchase price of RMB 28,500,000 (approximately $3,532,000); (ii) a
related  patent  from  one  of the  shareholders  of  Kena  for  RMB  11,000,000
(approximately   $1,363,000);   and  (iii)  related  rights  to  make  a  patent
application   from  one  of  the   shareholders   of  Kena  for  RMB  11,000,000
(approximately $1,363,000).  The purchase price for both the equity interests in
Kena and the consideration for purchase of the patent and the right to apply for
registration of the patent shall be paid by Sifang Information on behalf of TCH.
On February  10, 2006,  these  agreements  were amended to impose an  additional
condition on Mr. Zhang  Naiyao,  the  transferor of the patent and holder of the
right to make the patent application,  that if he fails to provide the necessary
technical  assistance  services to enable TCH to use the patented  technology in
producing  products on a large scale that meet the  standards set by the Company
within one year,  TCH shall have the right to demand the return of the  relevant
payment  received  by him in  full  and  to  terminate  the  agreement  for  the
assignment of the patent and the right to apply for  registration of the patent.
The amendments  also set forth the arrangement for payment of the purchase price
between  TCH and  Sifang  Information.  The  purchase  price for both the equity
interests in Kena and the consideration for purchase of the patent and the right
to apply for  registration of the patent shall be paid by Sifang  Information on
behalf of TCH. According to the amended  agreements,  the amount of the purchase
consideration  paid by Sifang  Information  on behalf of TCH will be  applied to
offset the trade and other receivables owed to TCH by Sifang Information.

Kena was  established  on April 26,  2005 and it  specializes  in the  research,
development and manufacture of energy-saving  products,  as well as illumination
projects in China. The patent and patent application mentioned above relate to a
"three phase transformer" which is used in connection with a power supply system
and utilizes technology that allows  manufacturers to produce  transformers with
high energy transfer efficiency at a low cost. This technology is expected to be
available for mass production within one year.

As Mr.  Zhang Naiyao  failed to meet the  condition  mentioned-above  within the
period  prescribed,  the  Company  decided  not to  pursue  the  above-mentioned
acquisition of Kena. All the agreements in connection with the Kena  acquisition
were terminated by TCH and Kena.  Consequently,  the Company reviewed the future
economic value of the deposit for the anticipated  business  acquisition of Kena
and determined that future  undiscounted cash flows associated with this deposit
were uncertain and may not be sufficient to recover their carrying values and so
was fully written down as of December 31, 2006.


14. SEGMENT INFORMATION

The  Company  currently  operates  in  four  principal  business  segments:  (i)
advertising  service,  (ii) sales of mobile phones, (iii) mobile phone services,
and (iv) beep pagers  service.  The accounting  policies of the segments are the
same as those described in the summary of significant  accounting  policies (see
Note 3). The Company had no inter-segment sales for the years ended December 31,
2006 and 2005. The Company's  reportable  segments are strategic  business units
that  offer  different   products  and  services.   The  Company  evaluates  the
performance of its operating  segments based on income from  operations,  before
income taxes,  accounting  changes,  non-recurring items and interest income and
expense.



                                    Page 17
<PAGE>
<TABLE>
<CAPTION>


Summarized financial information concerning the Company's reportable segments is
shown in the following table for the years ended December 31, 2006 and 2005:

                          Advertising       Sales of          Mobile         Beep
                              service        mobile           phone         pagers
2006                          revenue         phones         service        service      Corporate            Total
----                          -------         ------         -------        -------      ---------            -----
<S>                           <C>             <C>            <C>            <C>          <C>                  <C>

Revenue, net                $  334,844   $  1,269,485     $  736,742      $  548,365     $        -     $  2,889,436
Cost of revenue                110,876      1,191,340        815,364         188,822              -        2,306,402
Gross profit (loss)            223,968         78,145        (78,622)        359,543              -          583,034
Depreciation                         -              -        110,924               -         78,442          189,366
Interest expense                     -             --              -               -              -                -
Net income (loss)              224,746       (250,082)      (385,372)        121,202     (3,173,865)      (3,463,371)
Total assets                         -              -              -               -      4,464,612        4,464,612
Expenditure for
   long-lived assets        $        -    $         -      $       -      $        -     $        -      $         -

</TABLE>
<TABLE>
<CAPTION>

                          Advertising       Sales of          Mobile          Beep
                           service          mobile            phone         pagers
2005                       revenue          phones           service        service      Corporate            Total
----                       -------          ------           -------        -------      ---------            -----
<S>                        <C>              <C>              <C>            <C>          <C>                  <C>

Revenue, net              $ 2,761,598     $16,383,356     $  634,728      $  639,340     $        -    $  20,419,022
Cost of revenue               141,554      16,024,959        410,898         270,726              -       16,848,137
Gross profit                2,620,044         358,397        223,830         368,614              -        3,570,885
Depreciation                        -               -        191,773               -         47,943          239,716
Interest expense                    -               -              -               -          9,093            9,093
Net income (loss)           1,940,596         154,136         47,843         162,207       (493,675)       1,811,107
Total assets                        -         913,957        139,055               -     13,923,849       14,976,861
Expenditure for
   long-lived assets       $        -      $        -     $   71,542      $        -     $  353,983     $    425,525

</TABLE>


15. CHINA CONTRIBUTION PLAN

The PRC has been  undergoing  significant  reforms  with regard to its  employee
welfare and fringe benefits administration.  Any enterprise operating in the PRC
is  subject to  government-mandated  employee  welfare  and  retirement  benefit
contributions.  In accordance with PRC laws and regulations, TCH participates in
a multi-employer  defined contribution plan pursuant to which TCH is required to
provide  employees with certain  retirement,  medical and other fringe benefits.
PRC  regulations  require  TCH to pay the local  labor  administration  bureau a
monthly  contribution at a stated  contribution  rate based on the monthly basic
compensation  of qualified  employees.  The local labor  administration  bureau,
which manages various  investment funds, will take care of employee  retirement,
medical and other fringe  benefits.  TCH has no further  commitments  beyond its
monthly  contribution.  TCH  contributed  a total of $45,122 and $54,430 for the
years ended December 31, 2006 and 2005 respectively.



16. STATUTORY RESERVES

The Company's PRC subsidiary,  TCH, is required to make  appropriations to three
reserve  funds,  comprised of the statutory  surplus  fund,  the staff bonus and
welfare  fund,  and the company  expansion  fund,  based on after-tax net income
determined in accordance with generally  accepted  accounting  principles of the
People's  Republic of China (the "PRC  GAAP").  Appropriation  to the  statutory
surplus  fund should be at least 10% of the after tax net income  determined  in



                                    Page 18
<PAGE>

accordance with the PRC GAAP.  Appropriations  to the company expansion fund and
the staff  bonus and  welfare  fund are made at the  discretion  of the Board of
Directors.  The  company  expansion  fund  is  established  for the  purpose  of
providing employee facilities and other collective benefits to the employees and
is non-distributable  other than in liquidation.  Appropriation to the statutory
surplus fund is suspended when the accumulated  balances of the fund reached 50%
of the registered capital of TCH.



For the years ended  December 31, 2006 and 2005,  TCH  appropriated  $20,200 and
$554,466 respectively, to the reserves based on its net income under PRC GAAP.



17. CONCENTRATION OF RISK

(a) Major Customers and Vendors

     For the years  ended  December  31,  2006 and 2005,  100% of the  Company's
     assets  were  located  in the PRC and 100% of the  Company's  revenues  and
     purchases were derived from customers and vendors located in the PRC.

     For the years ended  December 31, 2006 and 2005,  customers and vendors who
     account for 10% or more of revenues and purchases are presented as follows:


       Customers           Revenues                   Accounts receivable
       ---------
                        ------------------------------------------------
                           2006          2005       2006        2005
                           ----          ----       ----        ----

       Customer A           25%           52%          -           -
       Customer B           17%            3%          -         27%
       Customer C             -            3%          -           -
       Customer D             -           12%          -           -
       Customer E             -            2%          -         64%
                        -------- -------------  ---------  ----------
                            42%           72%          -         91%
                        ======== =============  =========  ==========
        Vendors           Purchases                Accounts payable
        -------
                        ----------------------------------------------

                           2006          2005       2006        2005
                           ----          ----       ----        ----

       Vendor A             23%           34%          -           -
       Vendor B             14%            8%          -         12%
       Vendor C               -            9%          -         87%
       Vendor D               -           31%          -           -
                        -------- -------------  ---------  ----------

                            37%           82%          -         99%
                        ======== =============  =========  ==========

(b) Credit Risk

     Financial  instruments that potentially  subject the Company to significant
     concentrations  of  credit  risk  consist  principally  of  trade  accounts
     receivable.   The  Company  performs  ongoing  credit  evaluations  of  its
     customers' financial condition,  but does not require collateral to support
     such receivables.




                                    Page 19
<PAGE>


18. COMMITMENTS

As of December 31, 2005, the Company has entered into commitments for consulting
services amounting to a total of $450,000 to be rendered in 2005 and 2006. As of
December 31, 2005, the Company has paid $200,000 and, therefore, has outstanding
commitments  of $250,000  for  consulting  services in 2006.  Subsequently,  the
consultancy  services was cancelled  and the Company made no payment  during the
year ended December 31, 2006.

The Company did not have any commitment as of December 31, 2006.



19. SUBSEQUENT EVENTS


(a)  On January 24, 2007, a group of individuals  ("Purchasers") entered a share
     purchase  agreement with a group of shareholders of the Company to purchase
     12,911,835  shares of the Company's common stocks with $0.001 par value for
     an aggregate  consideration of $490,000.  Purchasers are Guohua Ku, Hanqiao
     Zheng,  Ping Sun,  Qianping  Huang,  Xiaohong Zhang and Lixia Zhang.  Among
     them,  Guohua Ku and Hanqiao Zheng acquired  9,073,700 shares and 2,406,365
     shares respectively.  As a result, they became the beneficial owners of the
     majority voting shares of the Company and gained control of the Company.


(b)  On March 8, 2007,  the name of the Company was changed to "China  Recycling
     Energy  Corporation" and engages in recycling  energy  business,  providing
     energy saving and recycling products and services.


(c)  On April 8, 2007,  the  Company's  Board of  Directors  approves  and makes
     effective  a  TRT  Project  Joint-Operation   Agreement   ("Joint-Operation
     Agreement")  which is  conditionally  entered on February  1, 2007  between
     Shanghai TCH Data Technology Co., Ltd.  ("TCH") and Xi'an Yingfeng  Science
     and Technology Co., Ltd.("Yingfeng"). Yingfeng is a Chinese company that is
     located in Xi'an, Shaanxi Province,  China, and is engaging in the business
     of  designing,  selling,  installing,  and  operating TRT systems and other
     renewable energy products.


     Under the Joint-Operation Agreement, TCH and Yingfeng will jointly pursue a
     top gas recovery turbine project ("Project") which is to design, construct,
     install and operate a TRT system in Xingtai  Iron and Steel  Company,  Ltd.
     ("Xingtai").  This project was originally initiated by a Contract to Design
     and  Construct  TRT System  ("Project  Contract")  entered by Yingfeng  and
     Xingtai on September 26, 2006.  TCH provides  various forms of  investments
     and  properties  into  the  Project  including  cash,  hardware,  software,
     equipments,  major components and devices.  In return, TCH becomes entitled
     to all the rights, titles,  benefits and interests that Yingfeng originally
     had under the  Project  Contract,  including  but not  limited  to the cash
     payment  made by  Xingtai on regular  basis and other  property  rights and
     interests.


     Yingfeng  remains  liable for  providing  all the  manpower,  expertise and
     skills to design,  construct,  install, maintain and operate the TRT system
     under the terms of the Project  Contract and also takes  responsibility  to
     manage  the  properties  that  TCH  possesses  in  this  Project.   As  for
     consideration,  TCH will make monthly  payment of RMB30,000  (approximately



                                    Page 20
<PAGE>

     $3,900) to  Yingfeng as  compensation  for their  effort in managing  TCH's
     properties.


     Prior to the  approval by the Board of the Company,  TCH and Yingfeng  have
     taken several  preliminary  actions in first quarter of 2007 in preparation
     for the full pursuit of the Project,  including  selecting  and  purchasing
     necessary  components and software for TRT system,  organizing and training
     the technician  team for the Project and developing  the  construction  and
     installation plan for the TRT system.





                                    Page 21
<PAGE>