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, 2005



                       Commission file number: 333-120431



                          CHINA DIGITAL WIRELESS, INC.
    -------------------------------------------------------------------------
                 (Name of Small Business Issuer in its Charter)

                 Nevada                                 90-0093373
----------------------------------------    ------------------------------------
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
      incorporation or organization)

           429 Guangdong Road
         Shanghai, China 200001                            N/A
----------------------------------------    ------------------------------------
(Address of principal executive offices)                (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. [ ]

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, 2005
were US$20,419,022.

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 1, 2006,  is
$4,277,787. The number of shares of common stock outstanding as of March 1, 2006
was 17,147,268.

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

<PAGE>

                          CHINA DIGITAL WIRELESS, INC.

                                   FORM 10-KSB

                                TABLE OF CONTENTS

                                                                            Page
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PART I


Item 1.   Description of Business..............................................3
Item 2.   Description of Property.............................................37
Item 3.   Legal Proceedings...................................................37
Item 4.   Submission of Matters to a Vote of Security Holders.................37

PART II

Item 5.   Market For Common Equity and Related Stockholder Matters............38
Item 6.   Management's Discussion and Analysis or Plan of Operation...........39
Item 7.   Financial Statements................................................47
Item 8.   Changes In and Disagreements With Accountants on Accounting
            and Financial Disclosure..........................................47
Item 8A.  Controls and Procedures.............................................47
Item 8B.  Other Information...................................................47


PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act.................48
Item 10.  Executive Compensation..............................................51
Item 11.  Security Ownership of Certain Beneficial Owners and Management
            and Related Shareholder Matters...................................51
Item 12.  Certain Relationships and Related Transactions......................52
Item 13.  Exhibits............................................................55
Item 14.  Principal Accountant Fees and Services..............................57


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








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<PAGE>


                                     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.

         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.

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,  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



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<PAGE>

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.

         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.

         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



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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.

         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,



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<PAGE>

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.

         We entered an  agreement  to  distribute  select  Nokia  mobile  phones
exclusively in the Shanghai  region of China  beginning in May 2005 and now have
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,  whereas the demand for mobile phones in
the  Chinese  market  started  becoming  saturated  along  with the  intensified
competition  among mobile  phone  distributors,  our sales  mark-up of the Nokia
mobile  phones to our  customers  dropped  significantly  from the initial 8% to
approximately  1% during the 4th quarter of 2005.  Our  management  is currently
reviewing  the market  factors and  considering  discontinuing  the mobile phone
distribution business in 2006 if the market situation remains unchanged.

         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
received  approximately  45% of the mobile phones we sold in 2005 from the three
retailers.

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



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<PAGE>

         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.

         Other  Advertising  Services.  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. TCH received a net fee of
approximately  $900,000  for  providing  the service via Sifang Media during the
fiscal year of 2005.

         Energy Saving Products.  In February 2006, we entered into an agreement
to acquire 95% of the equity  interests of Shanghai Kena Energy Saving  Electric
Co., Ltd. ("Kena") and related patent and patent rights to produce  high-energy,
high-efficiency  transformers.  The  Company's  decision  to enter into the Kena
acquisition  is driven  by an effort to  re-focus  the  Company's  strategy  and
capitalize on the strategic opportunity this transaction presents.

         Kena was  established in China on April 26, 2005.  Its chief  scientist
Dr. Chang Kenan, an experienced  Chinese-American  scientist, is the inventor of
energy  saving  street  lighting  system  ballasts  which are  noted for  energy
savings, material savings,  long-life, and being environmentally friendly. Since
its  establishment,  Kena has  undertaken  four  street  lighting  projects  and
generated  revenue of over RMB 5,000,000.  There are  approximately  nine street
lighting projects under negotiation.



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<PAGE>

         We believe that the Kena acquisition represents a strategic opportunity
for the Company in the following ways:

         1) The Chinese  government has provided strong support of energy saving
products.  In the first quarter of 2006,  Kena's energy saving lighting products
will be included in the Chinese government  purchasing lists. Official documents
will be issued by the Chinese government to help promote these products.

         2) There is a large demand for energy saving streetlights. According to
the Chinese Construct Department,  currently,  there are 18,000,000 streetlights
in China with a 17%-18% yearly growth rate. The average replacement rate is 10%.
The worldwide demand is estimated at five times as much as the demand in China.

         3) Kena's products present  consumers with positive economic and social
effects.  According to a Report from National Centre of Supervision & Inspection
on Electric  Light Source  Quality of Shanghai,  Kena's energy  saving  lighting
system  ballasts  result in a 20% energy saving,  allowing  consumers to recover
their costs in two years.  Compared to other  similar  products,  Kena's  system
ballasts use 15% less materials  than other similar  products and have a 20-year
service life, which is 10 years longer than other similar products.

Our Value-Added Information Services

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



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<PAGE>

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  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.



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<PAGE>

         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,
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,  2005,  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,



                                       10
<PAGE>

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

         We spent $60,092 and $17,468 on marketing and advertising  fees for our
mobile phone  distribution  and value-added  service business in fiscal 2004 and
2005, respectively.  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:

         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:



                                       11
<PAGE>

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:

         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



                                       12
<PAGE>

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

o        Continue  to  pursue   strategic   opportunities,   such  as  the  Kena
         acquisition.



Employees

         The following  table  summarizes  the  functional  distribution  of our
employees as of December 31, 2004 and 2005:


                                                  December 31,
         Department                          2004             2005

         Business Development                  5               10
         Customer Research                     5               10
         Customer Service                     20               20
         Finance                               3                3
         Human Resources                       2                2
         Investor Relations                    2                2
         Legal and Administrative              2                2
         Sales and Marketing                  25               30
         Product Development                  20               25
         Technical Support                    10                5

         Total                                94              109

         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.



                                       13
<PAGE>

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.

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.


                                       14
<PAGE>

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
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.



                                       15
<PAGE>

         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  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.



                                       16
<PAGE>

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.

         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;
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



                                       17
<PAGE>

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
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



                                       18
<PAGE>

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.

Pending 2006 Acquisition

         On December  29,  2005,  TCH  entered  into a series of  agreements  to
purchase (i) 95% of the equity interests of 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  transactions  are  subject to  regulatory  approval in the PRC. We
expect to complete the acquisition in the second quarter of 2006.

On February  10, 2006,  these  agreements  were amended to impose an  additional
condition on Zhang  Naiyao,  the  transferor of the patent and the 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 is to be paid by Sifang  Information on
behalf of TCH. Sifang Information is our affiliate in that Sifang  Information's
stockholders  are also  stockholders  of the  Company.  According to the amended
agreements,  the amount of the purchase consideration paid by Sifang Information
on  behalf  of TCH will be  applied  to  offset  advances  owed to TCH by Sifang
Information.

         Kena was established on April 26, 2005 and specializes in the research,
development and manufacture of energy-saving  products,  as well as illumination



                                       19
<PAGE>

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
that utilizes technology that allows  manufacturers to produce transformers with
high energy transfer  efficiency at a low costs.  This technology is expected to
be available for mass production within one year.































                                       20
<PAGE>

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.

         In the opinion of our Chinese counsel, Grandall Legal Group (Shanghai),
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  Grandall  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.



                                       21
<PAGE>

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,
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:



                                       22
<PAGE>

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.

         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,



                                       23
<PAGE>

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
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.



                                       24
<PAGE>

         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
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.



                                       25
<PAGE>

         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
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



                                       26
<PAGE>

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.

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



                                       27
<PAGE>

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.
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.



                                       28
<PAGE>

         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:

o        levy fines;



                                       29
<PAGE>

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.



                                       30
<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.

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.

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



                                       31
<PAGE>

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.

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",  where
TCH will  assist in the  promotion  of TV ads for various  customers,  including
Tianci Real Estate, a related party. Service revenue from Tianci Real Estate was
approximately $1.9 million,  or 9%, of total  consolidated  revenue for the year
ended  December  31,  2005  and  represented  approximately  47% of the  service
revenues for the year.  There was an  "Advertisement  Agency  Contract"  between
Tianci Real Estate and Sifang Media,  which expired in November 2005. We may not
be able to renew  these  contracts  and  agreements  in  future.  Because of the
significance of the revenues from these contracts to our consolidated results of
operations,  the  termination of either  contract could have a material  adverse
effect on our financial condition and results of operations.



                                       32
<PAGE>

We may not be able to complete or successfully  realize the benefits of the Kena
acquisition.

         The Kena  acquisition  is  subject  to  certain  conditions,  including
regulatory approval in the People's Republic of China. We cannot assure you that
we will  obtain  regulatory  approval  or  otherwise  be able  to  complete  the
acquisition.  In addition, to be successful after the acquisition,  we will need
to integrate the operations of Kena into ours. We could  encounter  difficulties
in this integration  process,  such as distraction of our management team. If we
cannot  integrate  Kena's  business  successfully,  we may fail to  realize  the
benefits we expect to result from the acquisition.

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.

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.



                                       33
<PAGE>

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.

         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:



                                       34
<PAGE>

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
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:



                                       35
<PAGE>

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
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.



                                       36
<PAGE>

         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  $49,000 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

         The Annual Meeting of Stockholders was held on December 1, 2005. At the
meeting,  the stockholders  elected each of the thirteen  directors who had been
nominated  by our  Board of  Directors  to serve for one year and  ratified  the



                                       37
<PAGE>

selection of  Grobstein,  Horwath & Company,  LLP as the  Company's  independent
auditors for the fiscal year ending  December 31, 2005.  The  following  are the
results of the stockholder vote at the annual meeting:

                      Proposition #1: Election of Directors

  ----------------------- ----------------- ----------------- ----------------
                                  For             Against           Abstain
  ----------------------- ----------------- ----------------- ----------------
  Tai Caihua                    14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Shi Ying                      14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Huang Tianqi                  14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Jing Weiping                  14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Mao Ming                      14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Song Jing                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Fu Sixing                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Yu Ruijie                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Zhang Xiaodong                14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Huang Wei                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Jiang Hong Ming               14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Yuan Feng                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------
  Juchen Li                     14,098,683               216            3,545
  ----------------------- ----------------- ----------------- ----------------


 Proposition #2: Ratification of Selection of Grobstein, Horwath & Company, LLP
        as Independent Auditors for Fiscal Year Ending December 31, 2005

             ------------------- ----------------- -----------------
                      For              Against           Abstain
             ------------------- ----------------- -----------------
                  14,101,746            535               163
             ------------------- ----------------- -----------------




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."  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 1, 2006,  the last  reported  sales price
for our common stock was $1.03 per share.

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

                                                               Common Stock
                                                               ------------
By Quarter Ended                                             High         Low
----------------                                             ----         ---

Fiscal 2004

March 31, 2004...........................................    $5.00        $0.42
June 30, 2004............................................    $4.05        $2.30



                                       38
<PAGE>

September 30, 2004.......................................    $3.90        $1.98
December 31, 2004........................................    $4.85        $2.80

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
------------------------------------------------------------
January 1, 2006 (through March 1, 2006)..................    $1.75        $0.60

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

         As of March 1, 2006,  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 2003,
2004 or 2005. 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

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.



                                       39
<PAGE>

         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.

Discussion and Analysis of Operating Results

Fiscal Year Ended  December 31, 2005 Compared to the Fiscal Year Ended  December
31, 2004

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 2005  fiscal  year  decreased  by  $4,101,928,  representing  a decrease  of
approximately  16.7%,  to $20,419,022  as compared to  $24,520,950  for the same
period of the prior year.  The  decrease was mainly due to the decline of mobile
phone sales to non-related third parties.  The market for mobile phones in China
is 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



                                       40
<PAGE>

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 2005  fiscal  year  decreased  by
$5,282,329,  representing a decrease of  approximately  47.8%,  to $5,775,069 as
compared to  $11,057,398  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 now have  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,  the sales mark-up of the Nokia mobile phones to
our customers  dropped  significantly  from the initial 8% to  approximately  1%
during the 4th  quarter of 2005.  The  management  of the  Company is  currently
reviewing  the market  factors and  considering  discontinuing  the mobile phone
distribution business in 2006 if the market situation remains unchanged.

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.  During
the 2005 fiscal year,  we sold  $10,608,287  worth of mobile phones to Shantian,
with an average  markup ratio of  approximately  3.6% (compared to $9,178,674 at
gross profit margin of 4% in 2004).  This  represents  an aggregate  increase of
$1,429,613  compared to the prior year. During the year ended December 31, 2004,
TCH also sold mobile  phones to other related  parties,  which  included  Tianci
Industy and Tianci Group for  $136,310  and $576,707 at gross profit  margins of
14% and 14%  respectively.  There were no mobile phone sales to Tianci  Industry
and Tianci  Group during the year ended  December 31, 2005.  The decrease in the
markup ratio was also attributable to the market factors mentioned above.

Information Service revenue, net

         Total  information  service  revenue  net of related  business  tax and
service fee for the 2005 fiscal year  decreased by  $2,297,793,  representing  a
decrease of  approximately  64.3%, to $1,274,068  compared to $3,571,861 for the
the prior year.

         Value-added service revenue from mobile phone users for the 2005 fiscal
year  decreased by $1,957,664 to $634,728  compared to $2,592,392  for the prior
year, representing a 75.5% decrease. $588,385 of the service revenue from mobile
phone users was  attributable to prepaid service fees generated by an installing
agent,  Chengao  Industry  Co. Ltd, who  installed  the software on a retailer's
(Beijing Jianghe  Communication  Co., Ltd.)  inventories and collected  proceeds
from the retailer and  transferred  the proceeds to the Company,  representing a
$1,385,457 decrease compared to the prior year. The remaining $46,343 portion of
the service revenue was generated by our SMS service via China Mobile's network,
representing  a material  decrease  compared to the prior year. The decrease was
mainly due to the decline of our  financial  value-added  service.  The sluggish




                                       41
<PAGE>

Chinese stock market along with inactive stock exchanges  hindered our growth in
this segment of business. In addition,  service revenue from pager users for the
2005 fiscal year decreased by $340,129 to $639,340  compared to $979,469 for the
prior year,  representing  a decrease of  approximately  34.7%.  We believe that
service  revenue from pager users will continue to decrease  given the increased
popularity  of mobile  phones  over  beepers  and  pagers.  We project  that the
decrease in service  revenue  from pager users will likely  plateau at a certain
level as most lower  income  pager  users still like to use pagers to access our
information services.

Advertising service revenue, net

         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.

         We 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.
The  completion  of this  agreement  enables us to  accelerate  the placement of
out-of-home  digital television  platforms,  particularly in banks across China.
The Company  negotiates  placement of the donation boxes and digital  television
media platform with banks and other commercial entities that wish to support the
national  charity.  The 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 our  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 our experience in 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.

         In addition,  during the 2005 fiscal year,  TCH rendered  advertisement
designing and producing  services to Tianci Real Estate,  a related  party,  for
publicity and promoting its apartment. Service revenue of $1,879,965 was derived
from this service. TCH has also generated  advertising service income from other
customers amounting to $881,633 during the 2005 fiscal year.

Cost of goods sold

         The cost of goods sold for the 2005 fiscal year decreased by $3,583,873
to  $16,024,959  compared  to  $19,608,832  for the prior year,  representing  a
decrease of  approximately  18.3%.  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.



                                       42
<PAGE>
<TABLE>
<CAPTION>

Cost of service

         The cost of service for the 2005 fiscal year  decreased  by $222,815 to
$823,178  compared to $1,045,993 for the prior year,  representing a decrease of
approximately  21.3%.  The decline was mainly due to the decrease of information
fees paid to content providers for the value-added service. The breakdown of our
service  business  has  changed and the  proportion  of beep  services  that are
related  to  financial  services  has  decreased,  resulting  in a  decrease  in
associated costs pertaining to the securities  information fee paid.  During the
2005 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. The percentage of decrease of
cost of  service  was less than the  decrease  in  information  service  revenue
because the fixed costs remained unchanged.

Gross profit

         After  taking into  account the cost of goods sold and cost of service,
our gross profit for the 2005 fiscal year  decreased by $295,240 to  $3,570,885,
representing  a decrease of  approximately  7.6%,  compared  to gross  profit of
$3,866,125  for the prior  year.  The  decrease  in gross  profit was  primarily
attributable  to the  continuing  decline in mobile  phone sales to  non-related
parties and gross profit margin  thereon being offset by the proceeds  generated
from the new  advertising  service with related  parties  during the 2005 fiscal
year.

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

                               Advertising    Phone Sales/    Information     Information
                                 Service      Mobile Phone      Service -       Service -
                                 Revenue      Distribution    Mobile Phone       Pager           Total
                              ------------    ------------    ------------    ------------    ------------


For the year ended December
31, 2004

<S>                           <C>             <C>             <C>             <C>             <C>
Revenue                       $       --      $ 20,949,089    $  2,592,392    $    979,469    $ 24,520,950
                              ----------------------------    ------------    ------------    ------------
Cost                                  --        19,608,832         498,194         547,799      20,654,825
                              ----------------------------    ------------    ------------    ------------
Gross profit                          --         1,340,257       2,094,198         431,670       3,866,125
                              ----------------------------    ------------    ------------    ------------
Gross profit ratio                    --               6.4%           80.8%           44.1%           15.8%
                              ----------------------------    ------------    ------------    ------------

For the year ended December
31, 2005

Revenue                       $  2,761,598    $ 16,383,356    $    634,728    $    639,340    $ 20,419,022
                              ----------------------------    ------------    ------------    ------------
Cost                               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
                              ----------------------------    ------------    ------------    ------------
Gross profit ratio                    94.9%            2.2%           35.3%           58.1%           17.5%
                              ----------------------------    ------------    ------------    ------------
</TABLE>

Sales and marketing expenses

         Sales and  marketing  expenses  for the 2005 fiscal year  decreased  by
$112,000  to  $134,639  compared to  $246,639  the prior  year,  representing  a
decrease of approximately  45.4%. The decrease was primarily due to the decrease
in  commission  fees paid to the  salesmen  for mobile  phones  and  advertising
expenses.



                                       43
<PAGE>

General and administrative expenses

         General and administrative  expenses for the 2005 fiscal year decreased
by $405,675 to  $1,251,166  compared  to  $1,656,841  for the same period of the
prior year,  representing  a 24.5%  decrease.  The higher  expenses in 2004 were
mainly  due to one time  non-cash  compensation  of  $1,014,423  related  to the
reverse  merger that was  generated at the parent  level,  consisting of 167,895
shares  issued to a consultant  in lieu of a cash payment at a fair market value
of $604,000 and the issuance of 166,667  redeemable  shares  pursuant to a stock
purchase  agreement  resulting in a charge of $410,000  representing the premium
between  the  trading  price  ($3.60  per share)  and the  pre-negotiated  stock
purchase price ($1.14 per share) of the shares.

         General and  administrative  expenses  incurred at the TCH level in the
2005 fiscal year  increased  slightly from $456,445 to $512,844,  representing a
12.4% increase, which is mainly due to the increase of staff welfare expenses.

         In June 2005, we signed a Consulting  Agreement with HNZ Bearings Point
Inc.,  a firm that helps  companies  with fund  raising and  arranging  investor
conferences.  Under this agreement,  we paid $45,000 for consulting fees for the
first three months of service.  The  remaining  $45,000 has not been paid as the
consulting service is deferred.  Also in June 2005, we entered an agreement with
Insight  Communication Inc., and paid $130,000 for its management consulting and
advisory services for 2005.

         The other cash-based  expenses incurred at the parent level in the 2005
fiscal year of $557,760  represented  payments for audit fees, retainer fees and
other consultancy fees.

Governmental subsidy

         During our 2005 fiscal year, we received a general  government  subsidy
from the local bureau,  which is  equivalent to 7% of the taxable  income of TCH
throughout  the period  from  September  2004 to December  2004.  The subsidy is
non-recurring and subject to government approval. It represented a 100% increase
from nil to $108,476.

Interest income (expense)

         During our 2005 fiscal  year,  the  interest  income  derived from bank
deposits increased by $535 to $2,490, compared to $1,955 for the prior year.

         During our 2005 fiscal year,  finance  expense  incurred in discounting
bank drafts net of  interest  income from bank  deposit  increased  by $1,739 to
$11,583, compared to $9,844 for the prior year.

Income tax

         The Company's  Chinese  subsidiary TCH is registered at Pudong District
in Shanghai  and is 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.  The  income  tax  provisions
presented in the  Company's  financial  statements  are based on the  historical
actual income tax rates of TCH at 15% for the year ended  December 31, 2005. The
income tax provision presented for the year ended December 31, 2004 was based on
7.5%  for the  months  of  January  to June  and 15% for the  months  of July to
December. In the 2004 and 2005 fiscal years, income tax expense was $369,971 and
$481,743, respectively, based on pretax income of $1,964,600 (which included the
stock  compensation  of  $1,014,423   incurred  in  the  U.S.)  and  $2,292,850,


                                       44
<PAGE>

respectively.  Because the loss of approximately $1,014,423 incurred in the U.S.
did not offset the taxable  income in China,  the income tax expense of $369,971
incurred in China was based on the taxable income of $2,979,023  during our 2004
fiscal year.

Comprehensive income

         We  recorded  comprehensive  income of  $2,096,503  for the 2005 fiscal
year, a $501,611  increase in  comprehensive  income  compared to  comprehensive
income  of  $1,594,892  for  the  prior  year,   representing   an  increase  of
approximately  31.4%. The increase in  comprehensive  income was attributable to
(i) the  non-cash  expenses  that  offset the net profit  generated  in the 2004
fiscal year,  (ii) the  contribution  of our new  advertising  business that was
initiated in the 2005 fiscal year, and (iii) the  appreciation of Chinese RMB to
US dollars.  These  factors  offset the  declines in gross  profit from sales of
mobile phones and information services.

Earnings per share

         The earnings  per share for the 2005 fiscal year  increased by $0.01 to
$0.11  compared to $0.10 for the prior year.  The increase was due mainly to the
increase in our net income  which was  partially  offset by the  increase in the
weighted  average  number of shares of  common  stock  outstanding  for the 2005
fiscal year, compared with the weighted average number of shares of common stock
outstanding for the prior year.

Liquidity and Capital Resources

         Our cash  balance  increased  from  $75,511 as of December  31, 2004 to
$3,578,367 as of December 31, 2005.  This increase in cash and cash  equivalents
was  primarily  due to the increase in accounts  payable and the  collection  of
accounts receivable.  At December 31, 2005 and 2004, our net working capital was
$5,808,706 and $9,877,040, respectively,  reflecting current ratios of 4.2:1 and
7.2:1, respectively, at such dates.

         Net cash provided by operating  activities  was  $5,290,767  during our
2005 fiscal  year,  compared to net cash  provided by  operating  activities  of
$2,953,773  during the prior year.  The  increase of cash  provided by operating
activities  was due  mainly  to the  increase  of  $3,778,282  in cash  from the
collection  of  accounts  receivable  and the  increase  of $825,379 in accounts
payable,  partially  offset by the change in deferred  revenue of  $586,096  and
increase in amounts due from related parties of $929,345.

         Net  cash  used in  investing  activities  for  the  2005  fiscal  year
decreased to $3,551,569  compared to $4,874,843 for the same period of the prior
year,  representing a $1,323,274 decrease.  The change in cash used in investing
activities  was due mainly to the  increase of  $3,435,258  in the change in the
amounts due from related parties.  As of December 31, 2005, the amounts due from
Tianci Real Estate and Sifang  Information  represented  $929,345 and $8,423,214
(including  the deposit  paid to Sifang  Information  for  business  acquisition
amount of $6,257,590), respectively.

         Net cash provided by financing  activities for the 2005 fiscal year was
$1,500,000  compared  to $282,570  for the same  period of the prior  year.  The
$1,500,000  relates to  proceeds  for shares that were issued in fiscal 2004 but
were held in escrow  until we filed a  Registration  Statement on Form SB-2 with
the SEC in March 2005. We treated the proceeds held in escrow as a current asset
as the entire amount was released from escrow in March 2005 and paid to us.



                                       45
<PAGE>

         We believe that current cash balance and cash flows from operations, if
any, will be sufficient to meet present growth  strategies  and related  working
capital.  In regards to the capital  expenditures,  we have sufficient  funds to
expand our operations.  We plan to utilize a combination of internally generated
funds from operations  with potential debt and/or equity  financings to fund our
longer-term  growth  over a period of two to five  years.  The  availability  of
future financings will depend on market  conditions.  There is no assurance that
the future funding will be available.

         The  forecast  of the  period  of  time  through  which  our  financial
resources will be adequate to support operations is a forward-looking  statement
that involves risks and uncertainties.

Recent Accounting Pronouncements

         In November 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued SFAS No.  151,  Inventory  Costs,  which  clarifies  the  accounting  for
abnormal amounts of idle facility expense,  freight,  handling costs, and wasted
material.  SFAS No. 151 will be effective for inventory  costs  incurred  during
fiscal years  beginning  after June 15, 2005.  We do not believe the adoption of
SFAS  No.  151  will  have  a  material  impact  on our  consolidated  financial
statements.

         In December 2004, the FASB issued SFAS No. 123-R, Share Based Payments,
which  requires  that the  compensation  cost  relating to  share-based  payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements.  The cost will be measured based on the estimated fair
value of the equity or  liability  instruments  issued.  SFAS No. 123-R covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  Management  believes  the  adoption  of  this
pronouncement  will not have a  material  effect on our  consolidated  financial
statements.

         In December  2004,  the FASB also issued  SFAS No. 153,  "Exchanges  of
Nonmonetary  Assets,  an  amendment  of  APB  Opinion  No.  29,  Accounting  for
Nonmonetary Transactions".  The amendments made by SFAS No. 153 are based on the
principle that the exchange of  nonmonetary  assets should be measured using the
estimated fair market value of the assets exchanged. SFAS No. 153 eliminates the
narrow exception for nonmonetary  exchanges of similar  productive  assets,  and
replaces it with a broader exception for exchanges of nonmonetary  assets do not
have commercial substance.  A nonmonetary exchange has "commercial substance" if
the future cash flows of the entity are  expected to change  significantly  as a
result  of  the  transaction.  This  pronouncement  is  effective  for  monetary
exchanges in fiscal periods beginning after June 15, 2005.  Management  believes
the  adoption  of this  pronouncement  will not have a  material  effect  on our
consolidated financial statements.

         In May 2005,  the FASB  issued SFAS No.  154,  "Accounting  Changes and
Error  Corrections."  This statement  requires  entities that voluntarily make a
change in  accounting  principle to apply that change  retrospectively  to prior
periods' financial statements, unless this would be impracticable.  SFAS No. 154
supersedes APB Opinion No. 20, "Accounting  Changes",  which previously required
that most voluntary  changes in accounting  principle be recognized by including
in the current period's net income the cumulative  effect of changing to the new
accounting   principle.   SFAS  No.  154  also  makes  a   distinction   between



                                       46
<PAGE>

"retrospective  application" of an accounting principle and the "restatement" of
financial statements to reflect the correction of an error. SFAS No. 154 applies
to  accounting  changes  and error  corrections  that are made in  fiscal  years
beginning  after  December  15, 2005.  Management  believes the adoption of this
statement  will  not  have an  immediate  material  impact  on our  consolidated
financial statements.

         In March 2005, the FASB issued FASB  Interpretation  No. 47 ("FIN 47"),
"Accounting for Conditional Asset Retirement Obligations". FIN 47 clarifies that
the term "conditional  asset retirement  obligation,"  which as used in SFAS No.
143, "Accounting for Asset Retirement Obligations", refers to a legal obligation
to perform an asset  retirement  activity in which the timing and (or) method of
settlement  are  conditional on a future event that may or may not be within the
control of the entity.  The entity must record a liability  for a  "conditional"
asset  retirement  obligation  if  the  fair  value  of  the  obligation  can be
reasonably estimated. FIN 47 also clarifies when an entity would have sufficient
information  to  reasonably  estimate  the fair  value  of an  asset  retirement
obligation.  FIN 47 is  effective  no later than the end of fiscal  years ending
after  December  15,  2005.  The  adoption  of this  statement  does not have an
immediate material impact on our consolidated financial statements.

         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 Grobstein,  Horwath & Company,  LLP 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, 2005.


ITEM 8B. OTHER INFORMATION

         Not applicable




                                       47
<PAGE>

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 March 1, 2006. The
directors  listed  below will serve until the next  annual  meeting of the China
Digital shareholders:


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
Yu Ruijie                   43        Director
Zhang Xiaodong              38        Director
Huang Wei                   43        Director
Qian Fang                   47        Chief Financial Officer
Jiang Hong Ming             51        Director
Mao Wenxing                 38        Director
Zhang Xinpeng               30        Director

         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.

         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.



                                       48
<PAGE>

         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.



                                       49
<PAGE>

         Jiang Hong Ming has served as a member of our board of directors  and a
member of the audit  committee of the board of directors  since April 2005.  Mr.
Jiang worked as a certified  public  accountant at Shanghai Hua Cheng  Certified
Public  Accountants  from 1998 to 2003 and has been a director at  Shanghai  Hua
Cheng Certified  Public  Accountants  since 2003. Mr. Jiang received a Bachelors
Degree from Shanghai TV Cable University.

         Mao  Wenxing  has  served as an  independent  director  of our board of
directors  and a member of the audit  committee of the board of directors  since
January 2006.  Mr. Mao has served as manager of Zhongfang  Real Estate  Exchange
Co. since  November  1999.  Mr. Mao earned a Masters  Degree in  Economics  from
Shanghai Finance & Economics University.

         Zhang  Xinpeng  has served as an  independent  director of our board of
directors  and a member of the audit  committee of the board of directors  since
January 2006.  Mr. Zhang has worked as the assistant to the CEO of Shanghai Kena
Technology  Co., Ltd.  since July 2002.  Mr. Zhang earned a Masters  Degree from
Shanghai Jiaotong University in June 2002.

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 consists of three independent members,  Jiang Hong Ming, Mao
Wenxing and Zhang Xinpeng,  who are independent within the meaning of the Nasdaq
listing standards. At least one member of the audit committee,  Jiang Hong Ming,
is financial  expert,  as that term is used under Item 401(e) of Regulation S-B,
and is  independent,  as that term is used in Item  7(d)(3)(iv)  of Schedule 14A
under the  Exchange  Act.  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



                                       50
<PAGE>
<TABLE>
<CAPTION>

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 2005,  three of our
directors,  Jiang Hong Ming,  Yan Feng,  and Juchen Li, didnot file Forms 3, and
our President and Chairman Tai Caihua inadvertently filed a Form 4 late.

Code of Ethics

         In September 2005, we adopted an amended and restated corporate code of
ethics. We believe our code of ethics is reasonably designed to deter wrongdoing
and promote honest and ethical conduct; provide full, fair, accurate, timely and
understandable disclosure in public reports; comply with applicable laws; ensure
prompt internal  reporting of code violations;  and provide  accountability  for
adherence  to the code.  A copy of our  corporate  code of ethics is filed as an
exhibit to this annual  report.  The Company will provide to any person  without
charge, upon request, a copy of the corporate code of ethics. Any person wishing
a copy  should  write to Ms.  Maria  Liu,  China  Digital  Wireless,  Inc.,  429
Guangdong Road, Shanghai, China, 200001.




ITEM 10.    EXECUTIVE COMPENSATION

         The  following   Summary   Compensation   Table  sets  forth  all  cash
compensation  paid to our chief executive  officer for services  rendered in all
capacities to the company during the noted periods.  No other executive officers
received  salary and bonus  compensation  in excess of $100,000  during the 2005
fiscal year.

Summary Compensation Table
                                          Annual Compensation
                                         -----------------------
                                                                                    Securities
                                                                     All Other      Underlying
Name and Principal Position      Year    Salary ($)    Bonus ($)  Compensation ($)    Options
---------------------------      ----    ----------    ---------  ----------------  ----------
<S>                              <C>     <C>           <C>        <C>               <C>
Fu Sixing(1)                     2005      $5,536          --          --               --
Chief Executive Officer and      2004       1,795
Director
Timothy P. Halter (2)            2004        --            --          --            131,722 (3)
Chief Executive Officer and
Director
Glenn Little ((4))               2004        --            --          --               --
Chief Executive Officer and      2003        --            --          --               --
Director
</TABLE>
------------------------
(1)      Appointed Chief Executive Officer and a director of the Company in June
         2004.
(2)      Appointed  Chief  Executive  Officer in March 2004 and  resigned  as an
         officer and director of the Company in June 2004.
(3)      On February 23, 2004,  the company  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 (as adjusted for stock splits).
(4)      Resigned  as Chief  Executive  Officer and a director of the Company in
         March 2004.

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

         The  following  table sets forth,  as of March 1, 2006,  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



                                       51
<PAGE>
<TABLE>
<CAPTION>

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.

                                                    Amount and Nature of Beneficial Ownership
                                                        Number            Percent of
Name and Address                                      of Shares (1)    Voting Stock (2)
----------------                                      -------------    ---------------------
<S>                                                  <C>                    <C>
Tai Caihua (3)                                         10,430,963             60.8%
Shi Ying                                                1,791,743             10.5%
Mao Ming                                                  413,480              2.4%
Song Jing                                                 413,480              2.4%
Huang Tianqi                                              275,652              1.6%
Jing Weiping                                              275,652              1.6%
Fu Sixing                                                 275,652              1.6%
Yu Ruijie                                                 275,652              1.6%
Zhang Xiaodong                                            275,652              1.6%
Huang Wei                                                 275,652              1.6%
Jiang Hong Ming                                                 0                --
Mao Wenxing                                                     0                --
Zhang Xinpeng                                                   0                --
Qian Fang                                                       0                --

Directors  and  executive  officers  as a group        12,911,835             75.2%
(13 persons) (3)
</TABLE>


(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  "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 1, 2006 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.
(3)      Includes  1,791,743  shares held by Mr. Tai's wife,  Shi Ying.  Mr. Tai
         disclaims beneficial ownership of those shares.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During the year ended  December 31, 2005,  there were no purchases from
related  parties.  During the year ended December 31, 2004, TCH purchased  local
brand mobile phones from Sifang Telecom valued at $390,340, and all these mobile
phones were sold to retailers in 2004.



                                       52
<PAGE>

         During the year ended  December 31,  2005,  TCH sold Samsung GSM mobile
phones  valued  at  $10,608,287  at a gross  profit  margin  of 4% to  Shantian,
compared to $9,178,674 at gross profit margin of 4% for the prior year. Accounts
receivable  includes  $1,583,512 and nil due from  Shantian,  for 2004 and 2005,
respectively.  During the year ended  December  31,  2004,  TCH also sold mobile
phones to other related parties,  which included Tianci Industy and Tianci Group
for $136,310 and $576,707 at gross profit  margins of 14% and 14%  respectively.
There were no mobile phones sold to Tianci  Industry and Tianci Group during the
year ended December 31, 2005.

         On July 16,  2004,  the Tianci Group  entered into an agency  agreement
with TCH to sell CDMA mobile phones owned by China Unicom.  TCH obtains the same
commission  structure that Tianci Group earns from China Unicom.  For each phone
sold, TCH receives $15.70 per unit and a sales commission of $3.62 per SIM card.
TCH recognized commission income of $204,214 in the year ended December 31, 2004
from the Tianci Group, which is recorded in service revenues,  net on the income
statement. There was no agency income in the year ended December 31, 2005.

         In accordance with terms contained in signed service agreements between
TCH and Sifang  Information  giving  TCH the right to use  Sifang  Information's
facility  (which may not be owned by foreign  investors at the present  time) to
transmit the reformatted information,  the Company paid service fees annually in
each of the years ended December 31, 2004 and 2005.  The service  agreements are
in  effect  for ten years and  became  effective  on June 1,  2004.  The  annual
payments  for  the  services  have  declined  from  approximately   $567,000  to
approximately $366,000 since January 1, 2005. During the year ended December 31,
2005,  Sifang  Information also provided other management  support and marketing
services to TCH for $61,352,  compared to $36,462 for the prior year. TCH earned
information  service revenues net of costs from China Mobile / China Unicom that
were passed through from Sifang Information and are recorded in Service revenue,
net on the income  statement.  For the year ended  December 31, 2005,  the total
revenue  generated  was $634,728  and the total cost of services  was  $410,898,
compared to $2,592,392 of total revenue  generated and $498,194 of total cost of
services for the prior year.  TCH earned  paging  service  revenues net of costs
that were passed  through  from Sifang  Information  and are recorded in service
revenue, net on the income statement.  For the year ended December 31, 2005, the
total revenue generated was $639,340 and the total cost of services was $368,614
compared to $979,469 of total  revenue  generated  and $547,799 of total cost of
services  for the prior  year.  TCH  launched  a smart  card  project as a joint
cooperation project with Sifang Information in June 2004.  However,  the project
was abandoned in the fourth  quarter of 2004 due to government  regulations.  No
revenue was generated from the project in either 2004 or 2005 fiscal years.

         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
$1,879,965  for providing the service  during the year ended  December 31, 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.  TCH received a
fee of $881,633  for  providing  the service via Sifang  Media during the fiscal
year of 2005.



                                       53
<PAGE>

         Sifang  signed a leasing  agreement  with the  Tianci  Real  Estate for
leasing its apartment for office use,  which was assumed by TCH as a part of the
carve-out  transaction.  The original leasing term was from May 1, 2003 to April
30, 2008. The original lease agreement was terminated on September 30, 2004, but
was reinstated on January 1, 2005,  for an additional  term from January 1, 2005
to December 31, 2005. The related rental expense for the year ended December 31,
2005 was $49,565, compared to $30,810 for the prior year.

         Cash  collections  received and payments made to Sifang  Information on
behalf of TCH,  resulted  in a net  receivable  of  $2,165,624  due from  Sifang
Information  at  December  31,  2005.  The  amount due from  related  party also
consists of $122,677 relating to the value added  information  services provided
to Sifang  Information and sold to China Unicom and another $664,722 relating to
the paging  revenues that are collected by Sifang  Information on behalf of TCH.
In January and February  2006, TCH collected  $247,825 from Sifang  Information.
The Company's  management  believes that the collection of the remaining balance
from Sifang Information is reasonably assured and accordingly,  no allowance has
been recorded as of December 31, 2005.  The Company also advanced  $1,205,000 to
provide  Sifang  Information's  needs for  working  capital in order to complete
spin-off  procedures in the PRC. The outstanding  balance was fully collected in
March 2005.

         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.
It is  expected  the  transaction  will be  closed  upon the  completion  of the
business registration in April 2006.

         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



                                       54
<PAGE>

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)

           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)



                                       55
<PAGE>

           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)

           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.



                                       56
<PAGE>

(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.


ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Paid to Independent Public Accountants for 2005 and 2004

Audit Fees

         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.

         The aggregate  audit fees for 2004 were $160,695.  The amounts  include
fees of $56,483  for  professional  services  rendered by  Grobstein,  Horwath &
Company,  LLP  in  connection  with  the  audit  of our  consolidated  financial
statements  as of and for  the  2004  fiscal  year  and  fees  of  $110,212  for
professional  services  rendered by BDO  Shanghai  Zhonghua in  connection  with
reviews of our unaudited consolidated interim financial statements for the third
quarter of 2004.

Audit-Related Fees

         There  were no  audit-related  fees  billed  by  Grobstein,  Horwath  &
Company, LLP or BDO Shanghai Zhonghua for other services rendered to the Company
for the 2004 or 2005 fiscal years.

Tax Fees

         There  were no fees for tax  services  billed by  Grobstein,  Horwath &
Company, LLP or BDO Shanghai Zhonghua for other services rendered to the Company
for the 2004 or 2005 fiscal years.

All Other Fees

         There were no additional aggregate fees billed by Grobstein,  Horwath &
Company,  LLP and BDO  Shanghai  Zhonghua  for other  services  rendered  to the
Company for the 2004 or 2005 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



                                       57
<PAGE>

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.





























                                       58
<PAGE>



                                   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.


By:  /s/ Tai Caihua                                          Date: April 4, 2006
   -----------------------------------------
   Tai Caihua, President and Chairman of the Board
   (Principal Executive Officer)

By:  /s/ Qian Fang                                           Date: April 4, 2006
   -----------------------------------------
   Qian Fang, Chief Financial  Officer
   (Principal Financial and Accounting Officer)


         In accordance with the requirements of the Securities Act of 1933, this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities and on the date stated.

By: : /s/ Tai Caihua                                         Date: April 4, 2006
     ---------------------------------------
        Tai Caihua, Director

By: /s/ Huang Tianqi                                         Date: April 4, 2006
   -----------------------------------------
        Huang Tianqi , Director

By: /s/ Jing Weiping                                         Date: April 4, 2006
   -----------------------------------------
        Jing Weiping, Director

By: /s/ Mao Ming                                             Date: April 4, 2006
   -----------------------------------------
        Mao Ming, Director

By: /s/ Song Jing                                            Date: April 4, 2006
   -----------------------------------------
        Song Jing, Director

By: /s/ Fu Sixing                                            Date: April 4, 2006
   -----------------------------------------
        Fu Sixing, Director

By: /s/ Yu Ruijie                                            Date: April 4, 2006
   -----------------------------------------
        Yu Ruijie, Director

By: /s/ Zhang Xiaodong                                       Date: April 4, 2006
   -----------------------------------------
        Zhang Xiaodong, Director

By: /s/ Huang Wei                                            Date: April 4, 2006
   -----------------------------------------
        Huang Wei, Director

By: /s/ Jiang Hong Ming                                      Date: April 4, 2006
   -----------------------------------------
        Jiang Hong Ming, Director

By: /s/ Mao Wenxing                                          Date: April 4, 2006
   -----------------------------------------
        Mao Wenxing, Director

By: /s/ Zhang Xinpeng                                        Date: April 4, 2006
   -----------------------------------------
        Zhang Xinpeng, Director




                                       59
<PAGE>

                REPORT OF INDEPENDENT REGISTERED 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-1
<PAGE>
<TABLE>
<CAPTION>

                   CHINA DIGITAL WIRELESS, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS

                                                                    December 31,   December 31,
                                                                        2004           2005
                                                                    ------------   ------------
<S>                                                                 <C>            <C>
ASSETS

Current assets:
   Cash and cash equivalents                                        $     75,511   $  3,578,367
   Accounts receivable, net of allowance for doubtful accounts
     of $47,922 and $44,472                                            4,619,809        844,977
   Inventories                                                           101,696         62,386
   Deferred tax assets                                                    28,772         12,846
   Common stock proceeds held in escrow                                1,500,000           --
   Amounts due from related parties                                    4,987,956      3,094,969
   Advances and deposits to suppliers                                    150,412         19,970
                                                                    ------------   ------------

Total current assets                                                  11,464,156      7,613,515
                                                                    ------------   ------------

Property and equipment, net                                            1,198,509      1,105,756
Deposit for business acquisition                                            --        6,257,590
                                                                    ------------   ------------

Total assets                                                        $ 12,662,665   $ 14,976,861
                                                                    ============   ============


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                 $     55,839   $    881,218
   Advance from customers                                                   --            6,399
   Deferred revenue                                                      617,694         31,598
   VAT payable                                                           213,535         92,649
   Income tax payable                                                    312,763        193,586
   Amounts due to related parties                                        100,260        223,399
   Other current liabilities                                             287,025        375,960
                                                                    ------------   ------------

Total current liabilities                                              1,587,116      1,804,809
                                                                    ------------   ------------


Shareholders' equity:
   Common stock - $0.001 par value, 100,000 000 shares
      authorized, 17,147,268 (2004 - 17,018,692) shares issued
      and outstanding                                                     17,019         17,148
   Additional paid-in capital                                          4,229,974      4,229,845
   Retained earnings                                                   6,828,281      8,084,922
   Restricted reserves                                                      --          554,466
   Accumulated other comprehensive income                                    275        285,671
                                                                    ------------   ------------


Total shareholders' equity                                            11,075,549     13,172,052
                                                                    ------------   ------------

Total liabilities and shareholders' equity                          $ 12,662,665   $ 14,976,861
                                                                    ============   ============
</TABLE>


           See accompanying notes to consolidated financial statements


                                      F-2
<PAGE>
<TABLE>
<CAPTION>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME

                                                        Years Ended December 31,
                                                      ---------------------------
                                                          2004           2005
                                                      ------------   ------------
<S>                                                   <C>            <C>
Revenues:
   Product sales                                      $ 11,057,398   $  5,775,069
   Product sales to related parties                      9,891,691     10,608,287
   Information service revenue, net                      3,571,861      1,274,068
   Advertising service revenue, net                           --        2,761,598
                                                      ------------   ------------


Total revenue                                           24,520,950     20,419,022
                                                      ------------   ------------


Cost of goods sold                                      10,196,443      5,800,878
Cost of goods sold to related parties                    9,412,389     10,224,081
Cost of information service                              1,045,993        681,624
Cost of advertising service                                   --          141,554
                                                      ------------   ------------

Total cost of goods sold                                20,654,825     16,848,137
                                                      ------------   ------------

Gross profit                                             3,866,125      3,570,885
                                                      ------------   ------------

Operating expenses:
   Sales and marketing                                     246,639        134,639
   General and administrative                            1,656,841      1,251,166
                                                      ------------   ------------

Total operating expenses                                 1,903,480      1,385,805
                                                      ------------   ------------

Income from operations                                   1,962,645      2,185,080

Other revenue                                                 --            8,387
Governmental subsidy                                          --          108,476
Interest income (expense)                                    1,955         (9,093)
                                                      ------------   ------------

Income before income taxes                               1,964,600      2,292,850

Income tax provision                                       369,971        481,743
                                                      ------------   ------------

Net income                                            $  1,594,629   $  1,811,107
                                                      ============   ============

Other comprehensive income
   Translation adjustments                            $        263   $    285,396

Comprehensive income                                  $  1,594,892   $  2,096,503
                                                      ============   ============

Basic and diluted earnings per share                  $       0.10   $       0.11

Weighted average shares of common stock outstanding     15,458,000     17,054,368
</TABLE>



          See accompanying notes to consolidated financial statements.

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

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                      (In U.S. dollars, except share data)


                                                                                                            Other
                                 Common Stock             Additional                                    Comprehensive      Total
                                                            Paid-in        Retained       Restricted       Income      Shareholders'
                              Shares         Amount         Capital        Earnings        Reserves        (Loss)         Equity
                           ------------   ------------   ------------    ------------    ------------   ------------   ------------
<S>                        <C>            <C>            <C>             <C>             <C>            <C>            <C>
Balance at December 31,      13,782,636   $     13,783   $  1,436,217    $  5,233,652    $       --     $         12   $  6,683,664
2003

Recapitalization and
reorganization                1,585,705          1,586        308,465            --              --             --          310,051

Shares issued for
consulting  services            167,895            168        604,254            --              --             --          604,422

Shares issued for proceeds
of $190,000 and consulting
services                        166,667            167        599,834            --              --             --          600,001

Shares issued for net
proceeds of $1.5 million      1,315,789          1,315      1,498,685            --              --             --        1,500,000

Offset by issuing cost             --             --         (217,481)           --              --             --         (217,481)

Net income                         --             --             --         1,594,629            --             --        1,594,629

Foreign currency
translation adjustment             --             --             --              --              --              263            263
                           ------------   ------------   ------------    ------------    ------------   ------------   ------------

Balance at December 31,
2004                         17,018,692   $     17,019   $  4,229,974    $  6,828,281    $       --     $        275   $ 11,075,549

Issuance of common stock in
exchange for lock up
agreements                      128,576            129           (129)           --              --             --             --

Net income                         --             --             --         1,811,107            --             --        1,811,107

Transfer from retained
earnings to restricted
reserves (note 11)                 --             --             --          (554,466)        554,466           --             --

Foreign currency
translation adjustment             --             --             --              --              --          285,396        285,396
                           ------------   ------------   ------------    ------------    ------------   ------------   ------------

Balance at December 31,
2005                         17,147,268   $     17,148   $  4,229,845    $  8,084,922    $    554,466   $    285,671   $ 13,172,052
                           ============   ============   ============    ============    ============   ============   ============
</TABLE>


          See accompanying notes to consolidated financial statements.




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

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                           Years Ended December 31,
                                                                          --------------------------
                                                                              2004           2005
                                                                          -----------    -----------
<S>                                                                       <C>            <C>
Cash flows from operating activities:
   Net income                                                             $ 1,594,629    $ 1,811,107
   Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
        Depreciation                                                          287,232        239,716
        Bad debt expenses                                                      19,764         (3,450)
        Issuance of common stock to consultants for services                1,014,423           --
        Deferred taxes                                                        (23,817)        15,926
        (Gain) loss on disposal of fixed assets                                   652         (8,914)
        Changes in assets and liabilities:
           Accounts receivable                                             (2,276,245)     3,778,282
           Inventories                                                      1,489,527         39,310
           Amounts due from related parties                                      --         (929,345)
           Other current assets                                                25,438        130,442
           Accounts payable                                                   (55,730)       825,379
           Advance from customers                                                --            6,399
           Deferred revenue                                                    80,648       (586,096)
           VAT payable                                                        213,535       (120,886)
           Income tax payable                                                 312,763       (119,177)
               Amounts due to related parties                                  79,720        123,139
           Other current liabilities                                          191,234         88,935
                                                                          -----------    -----------

Net cash provided by operating activities                                   2,953,773      5,290,767
                                                                          -----------    -----------

Cash flows from investing activities:
   Purchase of property and equipment                                        (132,155)      (425,525)
   Proceeds on disposal of property and equipment                                --          309,214
   Amounts due from related parties                                        (4,742,688)    (3,435,258)
                                                                          -----------    -----------
Net cash used in investing activities                                      (4,874,843)    (3,551,569)
                                                                          -----------    -----------

Cash flows from financing activities:

   Recapitalization and reorganization                                        310,051           --
   Proceeds from issuing common stock                                       1,690,000           --
   Common stock proceeds held in escrow                                    (1,500,000)     1,500,000
   Issuing cost                                                              (217,481)          --
                                                                          -----------    -----------

Net cash provided by financing activities                                     282,570      1,500,000
                                                                          -----------    -----------

Foreign currency translation                                                      263        263,658
                                                                          -----------    -----------

Net increase (decrease) in cash and cash equivalents                       (1,638,237)     3,502,856

Cash and cash equivalents, beginning of the year                            1,713,748         75,511
                                                                          -----------    -----------

Cash and cash equivalents, end of the year                                $    75,511    $ 3,578,367
                                                                          ===========    ===========


Supplemental disclosure of cash flow information:
   Cash paid during the yearfor:
        Interest                                                          $      --      $      --
        Income taxes                                                      $    76,339    $   590,481

 Non-cash investing and financing activities:
 Deposit for business acquisition in exchange for reduction in accounts
   receivable                                                             $      --      $ 6,257,590
                                                                          ===========    ===========

 Issuance of common stock to consultants for consulting services          $ 1,014,423    $      --
                                                                          ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BUSINESS BACKGROUND

China Digital  Wireless,  Inc. ("CDW,"  formerly known as Boulder  Acquisitions,
Inc.) 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 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  and  Internet  services,  CDW's  subsidiary  has entered into
information service and cooperation agreements with two of CDW's affiliates that
are incorporated in China:  Shanghai Sifang Information  Technology Co. ("Sifang
Information")  and Shanghai  Tianci  Industry Co. Ltd ("Tianci  Industry").  CDW
holds no ownership  interest in Sifang  Information or Tianci  Industry.  Sifang
Information  and  Tianci  Industry  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  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.



                                      F-6
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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  shareholders'  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.  See the
shareholders'  equity statements for the period from January 1, 2004 to December
31, 2005. 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

CDW's business is primarily conducted through its wholly-owned subsidiary Sifang
Holdings and its wholly-owned  subsidiary TCH Data Technology Co., Ltd. ("TCH"),
that collectively with CDW 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.

CDW'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, 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.

As a result of the spin-off, the Company 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.



                                      F-7
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The  consolidated  financial  statements  have been prepared in accordance  with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP")  and  pursuant  to the  rules and  regulations  of the  Securities  and
Exchange  Commission ("SEC") for annual financial  statements.  The consolidated
financial  statements,  in the opinion of  management,  include all  adjustments
necessary  for a fair  statement  of the  consolidated  results  of  operations,
financial position and cash flows for each period presented.

The Company's  consolidated financial statements for the year ended December 31,
2004 have been derived from the historical  financial  statements and accounting
records of Sifang  Information  using the historical  operating  results and the
historical  basis of the assets and  liabilities  transferred  to the Company in
accordance with GAAP.  Management  believes that the assumptions  underlying the
accompanying  financial  statements  are  reasonable.   However,  the  financial
statements that are derived from Sifang Information's  financial records may not
necessarily  reflect the Company's  results of operations and cash flows had the
Company been a stand-alone company.

Principles of Consolidation

The consolidated financial statements include the accounts CDW, 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.  All significant  intercompany  accounts and transactions have been
eliminated.

Foreign Currency Translations and Transactions

The Renminbi ("RMB"),  the national currency of the PRC, is the primary currency
of  the  economic  environment  in  which  the  operations  of the  Company  are
conducted.  The Company  uses the United  States  dollar  ("U.S.  dollars")  for
financial reporting purposes.

The Company translates its financial  statements into U.S. dollars in accordance
with SFAS No.  52,  "Foreign  Currency  Translation."  All  asset and  liability
accounts  have been  translated  using the rate of  exchange  prevailing  at the
balance sheet date (at December 31, 2005, the prevailing exchange rate of the US
dollar against the RMB was 8.0702), and the statement of income is translated at
average  rates  during the  reporting  period.  Equity items are  translated  at
historical  rates.  Adjustments  resulting from the translation of the Company's


                                      F-8
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


financial  statements from RMB into U.S.  dollars are recorded in  shareholders'
equity as part of accumulated  comprehensive  income.  Gains or losses resulting
from transactions in currencies other than RMB are reflected in the statement of
income for the reporting periods.

Revenue Recognition

The  Company  derives  revenues  from the sale of mobile  phones,  advertisement
designing services 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 revenue net of related
business taxes and value added taxes.

Mobile Phone Sales:

Revenues  generated  from the sale of  mobile  phones  are  recognized  when the
products are shipped to the distributor or retailer and when persuasive evidence
of an  arrangement  exists,  delivery of the  products  has  occurred,  customer
acceptance has been obtained,  which means the significant  risks and rewards of
ownership  have  been  transferred  to the  customer,  the  price  is  fixed  or
determinable and collectibility is reasonably assured.

Advertising Servicing Revenue, Net:

Advertising revenues are derived from advertisement designing, masterminding and
producing services.  The Company recognizes service revenue 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 accordance 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
arrangements,  receives a fixed fee from  Sifang  Media,  and has 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 to 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 install
the Company's  software on mobile phones,  which are owned by the retailer.  The
retailer  sells  these  phones  for a premium  covering  a fee to be paid to the
installing agent and pre-charged  six-month  subscription fees to be paid to the
Company. After a customer using such a phone dials into the server to access the
desired information, the server records a unique identification number installed
on the mobile phone,  which  indicates  that a specific phone user starts his or
her  subscription  period.  After the Company  receives a detailed list from the
installing  agent  regarding the number of phones that have been  installed with



                                      F-9
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 correspondingly. 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:

o        Is not the primary obligor in the  arrangement,  as it relies on Sifang
         Information to transmit the information services to the end user,
o        Has limited  ability to adjust the cost of services  by  adjusting  the
         design or marketing of the service,
o        Has limited  ability to determine  prices,  the Company must follow the
         price policy within ranges prescribed by Mobile Operators, and
o        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 us to estimate portions of
their reported revenue for information  services from time to time. As a result,
subsequent  adjustments  may be made to our  information  service revenue in our
consolidated financial statements.  As we do not bill their information services
users  directly,  we depend on the  billing  systems  and  records of the mobile
telecommunications  operators to record the volume of their information services
provided,  to charge  our users  through  mobile  telephone  bills,  to  collect
payments from our users, and to pay us.



                                      F-10
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Cash and Cash Equivalents

The Company  considers all highly liquid  investments  with  maturities of three
months or less to be cash  equivalents.  The Company maintains its cash accounts
at credit worthy financial institutions.

Accounts Receivable and Concentration of Credit Risk

During the normal course of business,  the Company extends  unsecured  credit to
retailers and distributors  who are mainly located in the Shanghai  metropolitan
area. Typically, for mobile phone distributors,  credit terms require payment to
be made within 30 days of the sale. The Company does not require collateral from
its customers.  The Company's policy is to provide for an allowance for doubtful
accounts that is based on 5% of total trade accounts receivable less amounts due
from related parties and from the installing agent.

The Company  regularly  evaluates  and  monitors  the  creditworthiness  of each
customer on a case-by-case basis. The Company includes any account balances that
are  determined  to be  uncollectible  in the  overall  allowance  for  doubtful
accounts. After all attempts to collect a receivable have failed, the receivable
is written off against the  allowance.  The Company  believes that its allowance
for doubtful  accounts  was adequate as of December 31, 2004 and 2005.  However,
actual write-offs might exceed the recorded allowance.

The following table presents activities in the allowance for doubtful accounts.

                                                             December 31
                                                        -----------------------
                                                           2004         2005
                                                        ----------   ----------

Beginning balance                                       $   28,158   $   47,922
Additions charged to expense                                19,764         --
Recovered                                                     --         (3,450)
Actual write off                                              --           --
                                                        ----------   ----------
Ending balance                                          $   47,922   $   44,472
                                                        ==========   ==========


Inventories

Inventories  consist  principally  of mobile phones  manufactured  by name brand
manufacturers  with  various  features  and  are  stated  at the  lower  of cost
(weighted-average) or market.

Rebates and Credits Receivable

In 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.

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 for  internal use and gives the Company the



                                      F-11
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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  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.

Property and equipment

Property and  equipment  are recorded at cost and are stated net of  accumulated
depreciation.  Depreciation expense is determined using the straight-line method
over the estimated useful lives of the assets as follows:

         Buildings                                  20 years
         Software                                   2-3 years
         Vehicles and other equipment               2-5 years

Maintenance  and repairs are charged  directly to expense as  incurred,  whereas
betterment and renewals are generally  capitalized in their respective  property
accounts.  When an item is  retired  or  otherwise  disposed  of,  the  cost and
applicable  accumulated  depreciation are removed and the resulting gain or loss
is recognized and reflected as an item before operating income.

Impairment of Long-Lived Assets

The  Company  applies  the  provisions  of SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets", issued by the Financial Accounting
Standards  Board  ("FASB").  SFAS No. 144  requires  that  long-lived  assets be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that  the  carrying  amount  of an  asset  may not be  recoverable  through  the
estimated  undiscounted  cash flows expected to result from the use and eventual
disposition of the assets.  Whenever any such impairment  exists,  an impairment
loss will be recognized  for the amount by which the carrying  value exceeds the
fair value.  There was no  impairment  of  long-lived  assets in the years ended
December 31, 2004 and 2005.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents,  accounts receivable, advances
and deposits to suppliers,  accounts  payable and other current  liabilities are
reasonable  estimates of their fair value because of the short maturity of these
items.

Advertising Expenses:

Advertising  expenses are expensed in the period incurred.  Advertising expenses
for the years  ended  December  31,  2004 and 2005  were  $60,092  and  $17,468,
respectively.







                                      F-12
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Stock Based Compensation

The Company  utilizes SFAS No. 123 "Accounting  for  Stock-Based  Compensation",
when  accounting  for stock based  compensation  and  recognizes  the fair value
impact of the  compensation  granted to employees and consultants as a charge to
net income in the period that the services  associated with the compensation are
provided. The Company does not currently have a stock option plan.

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.

Income Taxes

The  Company  accounts  for  income  taxes  in  accordance  with  SFAS  No  109,
"Accounting  for Income  Taxes".  SFAS No. 109  requires an entity to  recognize
deferred tax  liabilities  and assets.  Deferred tax assets and  liabilities are
recognized for the future tax consequence attributable to the difference between
the tax bases of  assets  and  liabilities  and their  reported  amounts  in the
financial statements. Deferred tax assets and liabilities are measured using the
enacted tax rate expected to apply to taxable income in the years in which those
temporary  differences  are expected to be  recovered or settled.  The effect on
deferred tax assets and  liabilities  of a change in tax rates is  recognized in
income in the period that includes the enactment date. The Company establishes a
valuation  when it is more  likely  than not that  that the  assets  will not be
recovered.

The Company's  Chinese  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 the year ended  December 31, 2005. The
income tax provision  presented for the year ended December 31, 2004 is based on
7.5%  for the  months  of  January  to June  and 15% for the  months  of July to
December.  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.

Use of Estimates

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



                                      F-13
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Comprehensive Income

The Company adopted SFAS No. 130, "Reporting  Comprehensive  Income",  issued by
the FASB. SFAS No. 130 establishes  standards for reporting and  presentation of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  The Company has chosen to report comprehensive income in
the  statements  of income and  comprehensive  income.  Comprehensive  income is
comprised of net income and all changes to shareholders' equity except those due
to investments by shareholders and distributions to shareholders.

Earnings Per Share

The Company  presents  earnings per share in  accordance  with the SFAS No. 128,
"Earnings  per Share".  Basic  earnings  per share  includes no dilution  and is
computed by dividing net income available to common shareholders by the weighted
average number of shares  outstanding  during the period.  Diluted  earnings per
share  reflect  the  potential  dilution of  securities  that could share in the
earnings  of an entity  if they were  converted.  The  Company  did not have any
potentially dilutive common share equivalents as of December 31, 2004 or 2005.

Reclassifications

Certain amounts included in the prior year's consolidated  financial  statements
have been  reclassified  to  conform  to the  current  year  presentation.  Such
reclassifications  did not  have any  effect  on  reported  net  income  and are
immaterial to the consolidated financial statements as a whole.

Recent Accounting Pronouncements

In November 2004, the FASB issued SFAS No. 151, Inventory Costs, which clarifies
the accounting for abnormal amounts of idle facility expense,  freight, handling
costs, and wasted  material.  SFAS No. 151 will be effective for inventory costs
incurred  during fiscal years  beginning  after June 15, 2005. We do not believe
the  adoption  of SFAS No. 151 will have a material  impact on our  consolidated
financial statements.

In December 2004, the FASB issued SFAS No. 123-R,  Share Based  Payments,  which
requires that the compensation cost relating to share-based payment transactions
(including  the  cost  of all  employee  stock  options)  be  recognized  in the
financial statements. The cost will be measured based on the estimate fair value
of the equity or  liability  instruments  issued.  SFAS No.  123-R covers a wide
range  of  share-based   compensation   arrangements  including  share  options,
restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  Management  believes  the  adoption  of  this
pronouncement  will not have a  material  effect on our  consolidated  financial
statements.

In December 2004,  the FASB also issued SFAS No. 153,  "Exchanges of Nonmonetary
Assets,  an  amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions".  The  amendments  made by SFAS No. 153 are based on the principle
that the exchange of  nonmonetary  assets should be measured using the estimated
fair market value of the assets  exchanged.  SFAS No. 153  eliminates the narrow
exception for nonmonetary  exchanges of similar  productive assets, and replaces
it with a broader exception for exchanges of nonmonetary assets that do not have
commercial substance.  A nonmonetary exchange has "commercial  substance" if the




                                      F-14
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




future cash flows of the entity are expected to change significantly as a result
of the transaction.  This  pronouncement is effective for monetary  exchanges in
fiscal periods beginning after June 15, 2005.  Management  believes the adoption
of this  pronouncement  will  not have a  material  effect  on our  consolidated
financial statements.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections." This statement requires entities that voluntarily make a change in
accounting  principle  to apply that change  retrospectively  to prior  periods'
financial  statements,  unless  this  would  be  impracticable.   SFAS  No.  154
supersedes APB Opinion No. 20, "Accounting  Changes",  which previously required
that most voluntary  changes in accounting  principle be recognized by including
in the current period's net income the cumulative  effect of changing to the new
accounting   principle.   SFAS  No.  154  also  makes  a   distinction   between
"retrospective  application" of an accounting principle and the "restatement" of
financial statements to reflect the correction of an error. SFAS No. 154 applies
to  accounting  changes  and error  corrections  that are made in  fiscal  years
beginning  after  December  15, 2005.  Management  believes the adoption of this
statement  will  not  have an  immediate  material  impact  on the  consolidated
financial statements of the Company.

In  March  2005,  the  FASB  issued  FASB  Interpretation  No.  47  ("FIN  47"),
"Accounting for Conditional Asset Retirement Obligations". FIN 47 clarifies that
the term "conditional  asset retirement  obligation,"  which as used in SFAS No.
143, "Accounting for Asset Retirement Obligations", refers to a legal obligation
to perform an asset  retirement  activity in which the timing and (or) method of
settlement  are  conditional on a future event that may or may not be within the
control of the entity.  The entity must record a liability  for a  "conditional"
asset  retirement  obligation  if  the  fair  value  of  the  obligation  can be
reasonably estimated. FIN 47 also clarifies when an entity would have sufficient
information  to  reasonably  estimate  the fair  value  of an  asset  retirement
obligation.  FIN 47 is  effective  no later than the end of fiscal  years ending
after  December  15,  2005.  The  adoption  of this  statement  does not have an
immediate  material  impact  on the  consolidated  financial  statements  of the
Company.

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 the  Company's  present or future
consolidated financial statements.


NOTE 3 - EQUITY 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
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



                                      F-15
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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 shareholders'
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  shareholders'  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.

On August 9, 2005, the Company  announced its intent to apply for listing on the
American  Stock  Exchange  ("AMEX").  In connection  with the AMEX  application,
certain persons who hold more than 200,000 shares of the Company's  common stock
entered into lockup  agreements with the Company where they generally  agreed to
not offer, sell, assign or otherwise transfer a portion of their shares or other
equity  securities of the Company  without prior written  consent of the Company
until the  earlier of (i) 180 days after the date of the  lockup  agreements  or
(ii) the date that AMEX has  approved the  Company's  listing  application.  The
lockup  agreements  became effective on September 21, 2005, and were executed by
ten of the Company's  officers and directors and three additional  shareholders.
Under the lockup  agreements  with the  non-officer/director  shareholders,  the
Company issued an aggregate of 128,576  shares of common stock in  consideration
thereof.



                                      F-16
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 - PROPERTY AND EQUIPMENT

A summary of property and equipment at cost is as follows:

                                                            December 31,
                                                     --------------------------
                                                         2004           2005
                                                     -----------    -----------


Buildings                                            $   943,391    $   967,507
Software                                                 489,103        568,704
Vehicles                                                  65,485         89,229
Other equipment                                          455,453        488,984
                                                     -----------    -----------
                                                       1,953,432      2,114,424
Accumulated depreciation                                (754,923)    (1,008,668)
                                                     -----------    -----------

                                                     $ 1,198,509    $ 1,105,756
                                                     ===========    ===========

Depreciation expense for the years ended December 31, 2004 and 2005 was $287,232
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
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.


NOTE 5 - RELATED PARTY TRANSACTIONS

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")




                                      F-17
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Merchandise Sold to Related Parties

                                                        Years Ended December 31,
                                                       -------------------------
                                                           2004          2005
                                                       -----------   -----------


Shantian                                               $ 9,178,674   $10,608,287
Tianci Group                                               136,310          --
Tianci Industry                                            576,707          --
                                                       -----------   -----------
                                                       $ 9,891,691   $10,608,287
                                                       ===========   ===========


During the year ended  December  31, 2005,  TCH sold  Samsung GSM mobile  phones
valued at  $10,608,287  at a gross profit  margin of 4% or $382,371 to Shantian,
compared to  $9,178,674  at a gross profit margin of 4% or $378,061 for the same
period of the prior year.  Accounts  receivable  includes $1,583,512 and nil due
from Shantian, for 2004 and 2005,  respectively.  During the year ended December
31, 2004, TCH also sold mobile phones to other related  parties,  which included
Tianci  Industy and Tianci  Group for  $136,310  and  $576,707  at gross  profit
margins of 14% or $18,587 and 14% or $82,654, respectively. There were no mobile
phones sold to Tianci  Industry and Tianci Group during the year ended  December
31, 2005.

Agency Income from a Related Party

The Tianci Group  entered into an agency  agreement on July 16, 2004 with TCH to
sell CDMA mobile phones owned by China Unicom.  TCH obtains the same  commission
structure  that Tianci Group earns from China Unicom.  For each phone sold,  TCH
receives  $15.70  per unit and a sales  commission  of $3.62 per SIM  card.  TCH
recognized  commission  income of $204,214 in the year ended  December  31, 2004
from the Tianci Group, which was recorded in information service revenue, net on
the income statement.  There was no agency income in the year ended December 31,
2005.

Purchase from Related Party

                                                        Years Ended December 31,
                                                           2004          2005
                                                       -----------   -----------


Sifang Telecom                                         $   390,340   $      --

During the year ended December 31, 2004, TCH purchased local brand mobile phones
from Sifang Telecom valued at $390,340, and all these mobile phones were sold to
retailers in 2004.  There were no purchases from related parties during the year
ended December 31, 2005.

Advertising Services Rendered to Related Party

                                                        Years Ended December 31,
                                                           2004          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




                                      F-18
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



$1,879,965  for providing the service  during the year ended  December 31, 2005.
There was an  "Advertisement  Agency  Contract"  between  Tianci Real Estate and
Sifang Media,  which  terminated 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.  TCH
received a net fee of $881,633 for providing the service via Sifang Media during
the fiscal year of 2005.

Service Provided by Related Party

                                                        Years Ended December 31,
                                                           2004          2005
                                                       -----------   -----------

Sifang Information                                     $   604,314   $   426,009

In accordance with terms contained in signed service  agreements between TCH and
Sifang  Information  giving TCH the right to use Sifang  Information's  facility
(which may not be owned by foreign  investors  at the present  time) to transmit
the reformatted  information,  the Company paid service fees annually in each of
the years ended December 31, 2004 and 2005. The service agreements are in effect
for ten years and became  effective on June 1, 2004. The annual payments for the
services have declined from  approximately  $567,000 to  approximately  $366,000
since January 1, 2005.

During the year ended December 31, 2005, Sifang  Information also provided other
management  support  and  marketing  services  to TCH for  $61,352,  compared to
$36,462 for the year ended December 31, 2004.

Leasing from Related Parties

Sifang  Information  signed a leasing  agreement with the Tianci Real Estate for
leasing its apartment for office use,  which was assumed by TCH as a part of the
carve-out  transaction.  The original leasing term was from May 1, 2003 to April
30, 2008. The original lease agreement was terminated on September 30, 2004, but
was reinstated on January 1, 2005,  for an additional  leasing term from January
1, 2005 to December  31,  2005.  The related  rental  expense for the year ended
December 31, 2005 was $49,565, compared to $30,810 for the prior year.

Amounts Due from Related Parties

                                                        Years Ended December 31,
                                                           2004          2005
                                                       -----------   -----------

Sifang Information                                     $ 4,987,956   $ 2,165,624
Sifang Media                                                  --         929,345
                                                       -----------   -----------
                                                       $ 4,987,956   $ 3,094,969
                                                       ===========   ===========




                                      F-19
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In order to develop  the  Company's  mobile  phone  distribution  business,  the
Company  applied to become  Nokia's  distributor  (on the  provincial  level) of
mobile  phones.  On  March  20,  2005,  TCH  signed  an  agreement  with  Sifang
Information to cooperate with respect to the distribution of Nokia mobile phones
and  under  which  TCH  would  act as an agent to sell  Nokia  phones  on Sifang
Information's behalf. In May 2005, the final approval from Nokia was received by
Sifang  Information.  As of December 31, 2005, TCH had  outstanding  advances of
$2,165,624  to  Sifang   Information   for  working  capital  to  assist  Sifang
Information in this business.

In addition,  as of December 31, 2005, Sifang Media has collected  $929,345 from
TCH's advertising customers on its behalf.

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.
(Note 13)

Due to Related Parties

                                                        Years Ended December 31,
                                                           2004          2005
                                                       -----------   -----------


Tianci Real Estate                                     $    51,350   $   123,467
Shantian                                                      --          99,932
Tianci Group                                                48,910          --
                                                       -----------   -----------
                                                       $   100,260   $   223,399
                                                       ===========   ===========


The balance owed to Tianci Real Estate  represented rental payments for 2004 and
the expenses paid by Tianci Real Estate on behalf of the Company during the year
ended December 31, 2005. The rental  agreement was cancelled as of September 30,
2004.  The  balance  owed to Tianci  Group  represents  cash paid in advance for
mobile phone  purchases.  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.


                                      F-20
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 6 - INCOME TAXES

The income (loss)  generated in the Cayman Islands and China before income taxes
in 2004 and 2005, respectively, was as follows:


                                                      Years Ended December 31,
                                                         2004           2005
                                                     -----------    -----------


Loss in Cayman Islands before income taxes           $(1,199,738)   $  (737,758)
Income in China before income taxes                    3,164,338      3,030,608
                                                     -----------    -----------

                                                     $ 1,964,600    $ 2,292,850
                                                     ===========    ===========

The income tax provision was as follows:

                                                      Years Ended December 31,
                                                         2004           2005
                                                     -----------    -----------
Current:
   Cayman Islands                                    $      --      $      --
   China                                                 389,102        465,343
                                                     -----------    -----------
Deferred:
   Cayman Islands                                           --             --
    China                                                (19,131)        16,400
                                                     -----------    -----------
                                                     $   369,971    $   481,743
                                                     ===========    ===========


The difference  between the effective income tax rate and the expected statutory
rate was as follows:

                                                   Year ended       Year ended
                                                  December 31,     December 31,
                                                      2004             2005
                                                  ------------     ------------

Statutory rate                                            33.0%            33.0%
Income tax holiday                                       (21.9)           (18.0)
Permanent differences                                      7.7              6.0
Change in valuation allowance                             --               --

                                                  ------------     ------------
Effective income tax rate                                 18.8%            21.0%
                                                  ============     ============

The primary components of temporary differences which give rise to the Company's
deferred tax assets are as follows:



                                      F-21
<PAGE>
<TABLE>
<CAPTION>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                                        Years Ended December 31,
                                                           2004          2005
                                                       -----------   -----------
Allowance for receivables                              $     7,188   $     6,671
Accrued liabilities                                         21,584         6,176
                                                       -----------   -----------
                                                            28,772        12,847
Valuation allowance                                           --            --
                                                       -----------   -----------

Net deferred tax assets                                $    28,772   $    12,847
                                                       ===========   ===========

NOTE 7 - SEGMENT REPORTING

The Company currently operates in four principal  business segments.  Management
believes that the  following  table  presents  useful  information  to the chief
operation decision makers for measuring business performance and financing needs
and preparing the corporate budget,  etc. As most of the Company's customers are
located  in the  Shanghai  metropolitan  area  and the  Company's  revenues  are
generated  in  Shanghai,   the  PRC,  no  geographical  segment  information  is
presented.


                              Advertising
                               Service                     Mobile Phone    Beep Pagers
                               Revenue       Phone Sales     Service         Service       Corporate         Total
                             ------------   ------------   ------------   ------------   ------------    ------------
<S>                          <C>            <C>            <C>            <C>            <C>             <C>
2004
Revenue                      $       --     $ 20,949,089   $  2,592,392   $    979,469   $       --      $ 24,520,950
Gross profit                         --        1,340,257      2,094,198        431,670           --         3,866,125
Depreciation                         --             --          229,979           --           57,253         287,232
Interest expense                     --             --             --             --            1,955           1,955
Net income                           --          802,854      1,436,835        176,742        821,801       1,594,629
Total assets                         --        2,721,741      2,443,657           --        7,497,267      12,662,665
Expenditures for                     --             --          132,155           --             --           132,155
long-lived  assets

2005
Revenue                      $  2,761,598   $ 16,383,356   $    634,728   $    639,340   $       --      $ 20,419,022
Gross profit                    2,620,044        358,397        223,830        368,614           --         3,570,885
Depreciation                         --             --          191,773           --           47,943         239,716
Interest income (expenses)           --             --             --             --           (9,093)         (9,093)
Net income                      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
Expenditures for                     --             --           71,542           --          353,983         425,525
long-lived assets
</TABLE>



                                      F-22
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8 - GOVERNMENTAL SUBSIDY

During  the year  ended  December  31,  2005,  the  Company  received  a general
government  subsidy  from the local  bureau,  which is  equivalent  to 7% of the
taxable  income of TCH  throughout  the period from  September  2004 to December
2004. The subsidy is non-recurring and subject to government approval.


NOTE 9 - CONCENTRATION OF CUSTOMERS AND VENDORS

Customers  and  vendors  who  account  for  10% or more  of  revenues,  accounts
receivable, purchases and accounts payable are presented as follows:

Customer                          Revenues                   Accounts Receivable
                                  2004         2005          2004         2005

A (Shantian, a related party)      37%          52%           34%           -
B                                  11%           3%            7%          27%
C                                   8%           3%           46%           -
D                                   6%          12%            -            -
E                                   -            2%            -           64%
                                  ----         ----          ----         ----
                                   67%          72%           94%          91%

Vendor                            Purchases                   Accounts Payable
                                  2004         2005          2004         2005

A                                 33%           34%           96%           -
B                                 -              8%            -           12%
C                                 32%            9%            4%          87%
D                                 17%           31%            -            -%
                                  ---           ---           ----        ----
                                  82%           82%           100%         99%


NOTE 10 - EMPLOYEE WELFARE AND RETIREMENT BENEFITS

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 $39,391 and $54,430 to these
funds as part of selling,  general  and  administrative  expenses  for the years
ended December 31, 2004 and 2005, respectively.


                                      F-23
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - RESTRICTED RESERVES

The Company's PRC subsidiary,  TCH, is required to make  appropriations to three
restricted  reserve  funds,  comprised of the 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 surplus fund
should be at least 10% of the after tax net income determined in accordance with
the PRC GAAP. Appropriations to the surplus 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.  Appropriations  to the reserves are suspended when the accumulated
balances of the funds reach 50% of the registered capital of TCH.

During 2005 and 2004, the Company appropriated  $554,466 and nil,  respectively,
to  the   restricted   reserves   based  on  its  net  income  under  PRC  GAAP.
Appropriations  to the staff and welfare  fund for the years ended  December 31,
2005 and 2004 amounted to $142,288 and $64,174,  respectively,  and were charged
to general and administrative expense.


NOTE 12 - COMMITMENTS

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.


NOTE 13 - SUBSEQUENT EVENT

During the first  quarter of 2006 the  Company  began to reduce its  reliance on
related party  transactions  and establish more  sustainable  non-related  party
lines of business.  Management anticipates significantly less revenue during the
first  quarter  of 2006 as a result of the  reduction  in revenue  from  related
parties,  increased  competition and a continuing saturation of the mobile phone
distribution  business.  In response,  management is seeking to align or acquire
new  partners to take  advantage  of the  expected  increase in demand for value
added and other next generation services.

TCH  entered  into a series of  agreements  to  purchase  (i) 95% of the  equity
interests  of  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).

On February  10, 2006,  these  agreements  were amended to impose an  additional
condition on 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 advances owed to TCH by Sifang Information.



                                      F-24
<PAGE>

                   CHINA DIGITAL WIRELESS INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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.

The transactions are subject to regulatory approval in the PRC.




























                                      F-25