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

                                   FORM 10-KSB

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

          For the fiscal year ended December 31, 2005

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

          For the transition period from: ______________ to __________

                         Commission file number: 0-18731

                       FORLINK SOFTWARE CORPORATION, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in it charter)

                   Nevada                                     87-0438458
--------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or    (IRS Employer Identification
                organization)                                     No.)

            9F Fang Yuan Mansion, No. 56, ZhongGuanCun South Road Yi,
--------------------------------------------------------------------------------
                      Haidian District, Beijing, P.R. China
                    (Address of principal executive offices)

                               011-8610 8802 6368
--------------------------------------------------------------------------------
                           (issuer's telephone number)

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

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

    Title of each class          Name of each exchange on which registered
    -------------------          -----------------------------------------
          None                                    None

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

                         Common stock, $0.001 par value
                         ------------------------------
                                (Title of Class)

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 not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

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

The issuer's revenues for the fiscal year ended December 31, 2005: $5,912,323.

As of March 15,  2006,  the  aggregate  market value of the Common Stock held by
non-affiliates,   approximately   40,790,332   shares  of  Common   Stock,   was
approximately  $3,263,227  based  on an  average  of the bid and ask  prices  of
approximately $0.08 per share of Common Stock on such date.

The number of shares  outstanding of the issuer's Common Stock, $.001 par value,
as of March 15, 2006 was 76,924,707 shares.

Documents Incorporated By Reference: None.

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                                TABLE OF CONTENTS
                         TO ANNUAL REPORT ON FORM 10-KSB
                        FOR YEAR ENDED DECEMBER 31, 2005

PART I                                                                      Page
Item 1.   Description of Business .........................................    4
Item 2.   Description of Property .........................................   10
Item 3.   Legal Proceedings ...............................................   10
Item 4.   Submission of Matters to a Vote of Security Holders .............   10

PART II
Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters .........................................................   11
Item 6.   Management's Discussion and Analysis or Plan of Operation .......   12
Item 7.   Financial Statements ............................................   24
Item 8.   Changes in and Disagreements on Accounting and Financial
          Disclosure ......................................................   25
Item 8A.  Controls and Procedures .........................................   25
Item 8B.  Other Information ...............................................   25

PART III
Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act ...............   26
Item 10.  Executive Compensation ..........................................   27
Item 11.  Security Ownership of Certain Beneficial Owners and Management ..   29
Item 12.  Certain Relationships and Related Transactions ..................   31
Item 13.  Exhibits ........................................................   31
Item 14.  Principal Accountant Fees and Services ..........................   32

Signatures ................................................................   33

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)


                                       2
<PAGE>

                           CAUTIONARY NOTES REGARDING
                           FORWARD LOOKING INFORMATION

Readers of this document and any document  incorporated by reference herein, are
advised that this document and  documents  incorporated  by reference  into this
document  contain  both  statements  of  historical  facts and  forward  looking
statements.  Forward  looking  statements  are  subject  to  certain  risks  and
uncertainties,  which could cause actual results to differ  materially for those
indicated  by  the  forward-looking  statements.  Examples  of  forward  looking
statements include,  but are not limited to (i) projections of revenues,  income
or loss, earning or loss per share,  capital  expenditures,  dividends,  capital
structure and other financial items, (ii) statements of the plans and objectives
of  the  Company  or  its  management  or  Board  of  Directors,  including  the
introduction  of new  products,  or  estimates  or  predictions  of  actions  by
customers, suppliers, competitors or regulatory authorities, (iii) statements of
future economic performance, and (iv) statements of assumptions underlying other
statements and statements about the Company or its business.

This document and any documents  incorporated by reference  herein also identify
important  factors which could cause actual  results to differ  materially  from
those indicated by forward  looking  statements.  These risks and  uncertainties
include  price  competition,   the  decisions  of  customers,   the  actions  of
competitors,  the  effects  of  government  regulation,  possible  delays in the
introduction of new products and services,  customer  acceptance of products and
services,  the  Company's  ability to secure debt  and/or  equity  financing  on
reasonable  terms,  and other  factors  which  are  described  herein  and/or in
documents incorporated by reference herein.

The cautionary  statements made above and elsewhere by the Company should not be
construed  as  exhaustive  or  as  any  admission   regarding  the  adequacy  of
disclosures  made by the  Company.  Forward  looking  statements  are beyond the
ability of the Company to control and in many cases the Company  cannot  predict
what factors would cause results to differ  materially  from those  indicated by
the forward looking statements.  Unless otherwise required by applicable law, we
do not undertake,  and we specifically  disclaim any  obligation,  to update any
forward looking statements to reflect occurrences,  developments,  unanticipated
events or circumstances after the date of such statement.


                                       3
<PAGE>

                                     PART I

Item 1. Description of Business.

Company History and Recent Developments

Forlink Software  Corporation,  Inc. (the "Company" or the  "Registrant"),  is a
Nevada  corporation which was originally  incorporated on January 7, 1986 as Why
Not?,  Inc.  under  the laws of the State of Utah and  subsequently  reorganized
under the laws of Nevada on December 30, 1993. From 1996 until 1999, the Company
continued as an unfunded venture in search of a suitable business acquisition or
business combination.

On November 3, 1999,  the Company  entered  into a Plan of  Reorganization  with
Beijing Forlink Software Technology Co., Ltd., (hereinafter "BFSTC"),  under the
terms of which  BFSTC  gained  control of the  Company.  Pursuant to the Plan of
Reorganization,  the Company  acquired 100% of the  registered and fully paid-up
capital of BFSTC in exchange for 20,000,000 shares of the Company's  authorized,
but  unissued,  common  stock.  BFSTC is engaged in the  provision  of  computer
software  consultancy  and  engineering  services and it also develops and sells
computer  software in the People's  Republic of China (the "PRC").  As a part of
its computer consultancy and engineering services,  BFSTC is also engaged in the
sale of  computer  hardware.  In June 2001,  BFSTC  changed  its name to Forlink
Technologies Co. Ltd. ("FTCL").

In August  2001,  the  Company  acquired  Beijing  Slait  Science  &  Technology
Development  Limited Co. ("SLAIT")  pursuant to a Plan of  Reorganization  dated
January 11, 2001.  The Company issued  59,430,000  shares of its common stock to
SLAIT's  original  beneficial  owners in  exchange  for 100% of the  outstanding
equity of SLAIT. As a result of the share exchange, the former beneficial owners
of SLAIT own  approximately  70% of the  issued  and  outstanding  shares of the
Company. By virtue of the share exchange, SLAIT became a wholly-owned subsidiary
of the Company. The Company also agreed to transfer RMB1,085,000  (approximately
US$131,039) to the former owners of SLAIT. A change in control occurred in which
all but one of the officers and directors of the Company resigned and two former
directors  (also former  owners) of SLAIT became  officers and  directors of the
Company.   SLAIT  provides   application  system   integration   technology  and
specializes in large volume transaction processing software for networks such as
mobile phone  billing and band  operation.  Subsequent to the  acquisition,  the
principal   activities  of  SLAIT  have  been   gradually   shifted  to  Forlink
Technologies  Co., Ltd.  ("FTCL").  On February 13, 2004,  SLAIT was  officially
dissolved  in  accordance  with  relevant  PRC  regulations.  FTCL is the  major
operating company of the Group in Beijing.

On June  18,  2003,  Forlink  Technologies  (Hong  Kong)  Limited  ("FTHK")  was
incorporated in Hong Kong as a limited liability company. In December 2003, FTHK
became a wholly  owned  subsidiary  of Forlink.  FTHK is an  investment  holding
company.  Because of the  favorable  business  environment  in Hong Kong, we can
simplify and speed up investment  transactions through this subsidiary.  Through
FTHK,  on  December  18,  2003,  we invested  $760,870  in a privately  held PRC
company,  All China Logistics Online Co., Ltd. ("All China"), a leading provider
of logistic services in China, in exchange for a 17.8% equity interest.  Through
this investment,  we have become the second largest shareholder of All China and
its sole software  solution  provider.  On June 14, 2004,  Forlink  Technologies
(Chengdu)  Limited  ("FTCD") was established as a limited  liability  company in
Chengdu,  PRC and  subsequently  it became a wholly owned  subsidiary of FTHK in
September 2004. FTCD is our software  supporting  office that is currently under
initial development stage. Upon completion,  it will be responsible for software
outsourcing projects and software development. The registered capital of FTCD is
$5,000,000  and the fully paid up capital was  $750,000 as of December 31, 2005.
FTCD has commenced operations in 2005.


                                       4
<PAGE>

FTHK  is  also  responsible  for  directly  importing  hardware  needed  in  the
integration products from overseas companies, and which allows us to improve our
hardware pass-through profit margin.

In compliance with PRC's foreign investment  restrictions on Telecom value-added
services  and other laws and  regulations,  we conduct our  Telecom  value-added
services and application  integration  services for government  organizations in
China via  Beijing  Forlink  Hua Xin  Technology  Co.  Ltd.  ("BFHX").  BFHX was
established in the PRC on September 19, 2003 as a limited liability company. The
registered  capital  of BFHX is  $120,733  (RMB1,000,000)  and the fully paid up
capital was $36,232  (RMB300,000) as of December 31, 2004. Mr. Yi He and Mr. Wei
Li were entrusted as nominee  owners of BFHX to hold 70% and 30%,  respectively,
of the fully paid up capital of BFHX on behalf of  Forlink,  and  Forlink is the
primary  beneficiary.  BFHX is considered a Variable Interest Entity ("VIE") and
because Forlink is the primary  beneficiary,  Forlink's  consolidated  financial
statements  include BFHX. Upon the request of Forlink,  Mr. Yi He and Mr. Wei Li
are required to transfer  their  ownership in BFHX to Forlink or to designees of
Forlink at any time for the amount of the fully paid up capital of BFHX.  Mr. Yi
He is a  director  and a  major  stockholder  of  Forlink.  Mr.  Wei  Li is  the
administration manager of FTCL.

Except for FTCD,  which is currently under  development  stage, all of our major
group companies,  i.e. FTCL, FTHK and BFHX, are operating companies.  During the
reporting  period,  none of the group companies'  operation were discontinued or
dissolved.

On March 20, 2005,  Beijing Forlink Kuanshi  Technologies  Limited  ("BFKT") was
established  as a limited  liability  company by BFHX and two  individuals,  Mr.
Jianqiu Fang and Mr.  Bizhao Zhong.  BFHX,  Mr. Fang and Mr. Zhong hold 70%, 10%
and 20% of the fully paid up capital of BFKT,  respectively.  BFKT will  provide
software and operation support to IPTV (Internet Protocol Television) operators.
We believe this investment will enable us to capitalize in the fast growing IPTV
market in China by leveraging our technological expertise.

On October 24,  2005,  Forlink  entered on a  definitive  agreement to acquire a
17.5%  equity  interest  from China Liquid  Chemical  Exchange  Company  Limited
("CLCE"),  a limited liability company in PRC. Under the terms of the agreement,
Forlink  deployed the "For-online  Electronic  Trading  System",  a proprietary,
integrated software solution, to support the Exchange's  operations,  including,
but  not  limited  to,  online  trading,   online  billing  and  payment,   user
authentication,  customer care, in exchange for the 17.5% equity interest.  This
investment will increase our return in this fast growing market.

Overview of our business.

We have three wholly  owned  subsidiaries,  FTCL,  FTHK,  and BFHX.  Through our
subsidiaries,   we  are  developing  innovative  products,   solutions,  project
management  skills,  and the  industry  expertise  necessary  for the design and
implementation of large-scale,  specifications-intensive  integrated application
systems,   software  and  Information  Technology  ("IT")  outsourcing  services
typically  required  by  leading  companies  in  telecom,   logistic,   finance,
government, and other industry verticals.

Our head  office is  located  in  Beijing,  with  individual  branch  offices in
Chengdu,  Shenyang,  Shanghai  and  Guangzhou.  We  also  have  a  research  and
development ("R&D") center located in Chengdu.


                                       5
<PAGE>

Employees

As of December  31, 2005,  we have 270  employees,  of which 260 are  full-time.
Approximately  200 of our  full-time  employees  are  software  and  information
technology  specialists  engaged in research and  development,  maintenance  and
support   activities.   The  remaining   employees  are  sales,   marketing  and
administrative personnel. As an incentive, we have created employee stock option
plans  that  include  vesting   provisions   designed  to  encourage   long-term
employment.

Products and solutions

Our application  solutions are developed on Enterprise  Application  Integration
(EAI) platforms. Some of our major product offerings include:

o     ForOSS:  Our solution for Business & Operation  Support Systems  (BSS/OSS)
      for telecom carriers,  particularly  China Mobile. It consists of software
      products designed to support existing and expanding business operations of
      communications companies. ForOSS supports billing, customer care, customer
      relation  management,  accounting,  decision  support  and other  internal
      functionalities.

o     ForRMS:  Forlink  Resources  Management  System is an integrated  platform
      designed to improve  enterprises and organizations'  resources  management
      systems.

o     For-Online:  For-Online is an Enterprise Application  Integration platform
      designed to deliver ASP (Application  Service Provider)  services over the
      internet. The applications that can be delivered over the internet include
      many of Forlink's flagship products,  such as ForRMS (Resources Management
      System),  For-Mail  (E-mail  system),  For-ISMG  (Internet  Short  Message
      Gateway),  For-Online  Electronic  Trading System,  and other  Web-related
      applications.

Distribution methods of the products and services

We mainly sell our  products  and services  directly to our  customers.  We also
utilize distribution partners to sell our products and services.

Research and Development

We  are  committed  to  continuously   researching,   designing  and  developing
information  technology  solutions and software  products that meet the needs of
our customers. Our R&D expenses in 2005 and 2004 were $1,315,654 and $1,105,348,
respectively.

Status of new product or service

In May 2004, we launched For-online,  which delivers enterprise applications and
services  over the  Internet  to Small and  Medium-sized  Enterprises  (SMEs) in
China.  The version  launched  was 1.0.  Since then,  we have been  continuously
upgrading  For-online to enhance its  performance  and to provide added features
and functions. The current For-online version is 3.0.

Market Opportunities

Based on our extensive  market research and industry  insights,  we believe that
the major market  opportunities  for our  business  include the  following:  EAI
(Enterprise  Application  Integration);  ASP  (Application  Services  Provider);
Software and IT outsourcing.


                                       6
<PAGE>

Our Strategy

Our objective is to become a leading China-based  professional company providing
world  class  Enterprise  Application  Integration  (EAI)  solutions,   software
services,  and IT outsourcing  services by continuing to enable our customers to
build,  maintain,  operate,  manage and continuously  improve their  information
systems and processes. The key aspects of our strategy include the following:

Maximize revenue and reduce overall risk by applying shared core  technologies &
platforms to different industry  verticals.  By capitalizing on our expertise in
core technologies and utilizing them as share platforms and resources, we aim to
become  a  leading  IT  solution  provider  for  telecom,  logistics,   finance,
government, and other industry verticals in China. We believe this strategy will
increase our revenue and reduce overall risk.

Expand our software outsourcing and ASP (Application Services Provider) services
to enhance our value  chains.  Currently,  we are  working  with  University  of
Sichuan,  a prestigious  university in Southern  China, to establish and improve
our  software  factory's  outsourcing  services  and ASP  services.  We are also
increasing our  investments in these areas. As an important  milestone,  we have
achieved  Level 2 (Managed  Level of Software  Process  Maturity) of  Capability
Maturity  Model(R)  Integration  (CMMI).  The CMMI  project  is a key  technical
initiative  at  the  Software   Engineering   Institute  (SEI).   Based  on  the
internationally  recognized  Capability  Maturity Model  (CMM(R))  framework for
software process  improvement,  CMMI provides an integrated  approach to process
improvement.  It is a new and more  demanding  model for  assessing  a company's
software engineering capability and the maturity of an organization's processes.
As an internationally  recognized CMMI Level 2 company, our software factory can
provide  trusted  software  outsourcing  services at a lower price for  overseas
companies.  At the same time,  our research and  development  capabilities  will
enhance our value chains by serving as a shared  support  platform for our other
services,  including our EAI, ASP services.  We believe our  investments  in the
above-described  areas will enhance our value chains and further consolidate our
leading position as a professional software and IT services provider.

Improve   corporate   governance  and  financial   standing.   To  maximize  our
shareholders'  value,  we are  continuously  striving to improve  our  corporate
governance  and our  financial  standing.  It is our  goal to apply  for  NASDAQ
listing in the future when the listing requirements are met.

Our Competitive Strengths

o     Professional Software Development And Services System.

      Forlink  Technologies  has passed the ISO9001:2000  international  quality
      assurance  system   certification  and  CMMI  (Capability  Maturity  Model
      Integration) Level 2 certification. This indicates that Forlink's software
      development  and  services  system  is in  compliance  with  international
      standards.  Our professional  software development and services system has
      substantially  strengthened our competitive advantages by ensuring that we
      are  in  compliance   with  all  relevant   international   standards  and
      regulations for business.

o     Thirteen  Years  Of  Experience  In  Industry   Applications  With  Proven
      Solutions And Products.

      Forlink  developed the core application  software  products such as ForOSS
      and ForRMS based on  standardized  application  integration  technologies.
      Recognized  by our  customers,  partners  and  suppliers  as a  dependable
      provider of high quality  services,  solutions and products,  our previous
      work has not only strengthened  relationships but has continually provided
      new opportunities, as those who we deal with usually recommend us to those
      they deal with. Forlink is widely approbated by customers for its abundant
      application  integration experience and proven solutions and products. For
      example,  Forlink  has  been  ranked  as a  Class A  integration  services
      provider by China  Mobile (a global  Fortune 500  enterprise)  for our OSS
      (Operation  Support System),  and top 5 leading billing solutions provider
      according  to the regular  performance  review of the  solutions  by China
      Mobile.


                                       7
<PAGE>

o     Established Customer Relationships.

      Because  of  our  successful   track  of  record,   we  have   established
      relationships  with  leading  companies  in  telecom,  logistic,  finance,
      government,   and  other  industry   verticals  in  China.   Our  in-depth
      understanding  of their  requirements  allows us to  successfully  deliver
      customized  solutions and further strengthen our relationships.  Moreover,
      we have strong customer  service and research and development  teams based
      in China,  which allows us to respond quickly and efficiently to the needs
      of our customers.

o     A Strong And Stable Management Team.

      The current  management team includes pioneers of Application  Integration
      Technologies  in  China.   The  backgrounds  of  the  individuals  in  our
      management  offer a depth and  breadth  of  experience  that is capable of
      covering  all  aspects  related  to the  control  and  development  of AIT
      systems.  Beyond expertise in the field, their close working relationships
      with major  long-term  customers  demonstrates a proven ability to sustain
      and  cultivate a  successful  business.  The current  management  team has
      remained consistent since the commencement of our business.

Our Strategic Partners

Partner  strategies are essential  elements of our business model. At this time,
we have four types of partners  that  contribute  to a continued  success of our
business.

o     Product  partners.  These  partners  provide  products and solutions to be
      integrated  in our  solutions.  We are  authorized  resellers  of  Hewlett
      Packard ("HP"),  Sun, EMC, Oracle and CISCO systems. We were awarded by HP
      for  The  Excellent  sales   achievement   prize  in  1999  and  the  Best
      Co-operation prize in 1999.

o     Technology   development  partners.   These  partners  provide  technology
      (through  licensing or other  arrangements) for our solutions or for joint
      development. Our major technology development partners include HP, Oracle,
      BEA, IONA, Redhat, Turbolinux, and Redflag-linux.

o     Marketing and Product  partners.   These partners  provide products and/or
      technology  to be bundled with our  solutions  and products for  marketing
      purposes.  Our marketing and product partners include HP, Intel, IBM, Sun,
      Compaq, Oracle, Informix, CA, Lenovo, Founder, and Digital China.

o     Distribution  partners.   These  partners  distribute  our  solutions  and
      products to our  customers.  Our  distribution  partners  include  Beijing
      Federal.


                                       8
<PAGE>

Competitive conditions

The market for information  technology  services in China is rapidly growing and
changing. We compete with both international and local companies.  Our principal
competitors  in   application   integration   services  are  AsiaInfo,   Linkage
Technology, and Digital China. Our principal competitors in the ASP (Application
Services  Provider)  field  include  UFSOFT,  MYCRM,  and  HAN  Consulting.  Our
principal  competitors in software  outsourcing include Neusoft,  Dalian HaiHui,
and China Software & Technology Corporation.

Government Regulation

The  Chinese  government  has  generally   encouraged  the  development  of  the
information  technology industry, and the products and services we offer are not
currently subject to extensive government regulations.

Dependence on Major Customers

As of December 31, 2005,  approximately  84% of the Company's total net revenues
were  generated by two  customers  who each  accounted for more than 10% of such
revenues.  The loss of any and/or all of these  customers  could have a material
adverse effect on our business.

Our largest customer has been Beijing Mobile Communication  Company,  which is a
subsidiary of China Mobile.  Since 1998, we have been developing and maintaining
BOSS (Business Operation Support System) for the carrier.  BOSS is an integrated
software  platform and it is developed in stages to  accommodate  the  carrier's
increasing  subscribers and service offerings.  We are currently  developing and
maintaining phase two of BOSS.

Although we are an important  strategic IT partner of Beijing Mobile,  we do not
have  long-term  contracts  with the  carrier.  All of our  agreements  with the
carrier are for short-term projects or sales of third-party  hardware.  While we
feel that our significant  relationships with Beijing Mobile will likely provide
additional sales agreements in the future,  Beijing Mobile is not  contractually
bound to purchase  any products or services  from us. The loss of this  customer
could hurt our business by reducing our revenues and profitability.

During the fiscal  years ended  December 31, 2001,  2002,  2003,  2004 and 2005,
sales to Beijing  Mobile  Communication  Company  were  $4,097,560,  $8,229,159,
$8,999,662,  $9,002,191, and $4,122,370,  respectively, and such sales accounted
for 80%, 88%, 96%, 89% and 70%, of our revenue for these periods, respectively.

Patents, Intellectual Property, and Licensing

We rely on a combination  of patents,  copyrights,  trademarks,  trade  secrets,
confidentiality  agreements,  and other contractual  restrictions with employees
and third parties to establish and protect our proprietary rights. Despite these
precautions,  the  measures we  undertake  may not prevent  misappropriation  or
infringement  of our  proprietary  technology.  These  measures may not preclude
competitors  from  independently   developing  products  with  functionality  or
features similar to our products.

As of  December  31,  2005,  we have been  issued 47 patents in the PRC that are
currently in force and have 2 patent applications pending in the PRC. The normal
expiration dates of our issued patents in the PRC range from 2026 to 2030. It is
possible  that we will  not  receive  patents  for  every  application  we file.
Furthermore,  our issued patents may not adequately  protect our technology from
infringement  or prevent  others from  claiming  that our products  infringe the
patents of those third parties. Our failure to protect our intellectual property
could   materially  harm  our  business.   In  addition,   our  competitors  may
independently develop similar or superior technology, duplicate our products, or
design around our patents.  It is possible that  litigation  may be necessary in
the future to enforce our  intellectual  property  rights,  to protect our trade
secrets,  or to determine  the validity and scope of the  proprietary  rights of
others.  Litigation could result in substantial costs and diversion of resources
and could materially harm our business.


                                       9
<PAGE>

Some of our  products  are  designed to include  software or other  intellectual
property licensed from third parties. While it may be necessary in the future to
seek or renew licenses  relating to various aspects of our products,  we believe
that such licenses generally could be obtained on commercially reasonable terms.
However,  failure to obtain such licenses on commercially reasonable terms could
materially harm our business.

Environmental matters

None

SEC Reports Available on Website

The Company's  Annual Report on Form 10-KSB,  Quarterly  Reports on Form 10-QSB,
Current  Reports on Form 8-K,  and  amendments  to  reports  filed  pursuant  to
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are
available free of charge through our website  (http://www.forlink.com) when such
reports are available on the U.S.  Securities  and Exchange  Commission  ("SEC")
website.  The public may read and copy any  materials  filed by the Company with
the SEC at the SEC's Public Reference Room at 450 Fifth Street,  NW, Washington,
DC 20549.  The public  may obtain  information  on the  operation  of the Public
Reference  Room by  calling  the SEC at  1-800-SEC-0330.  The SEC  maintains  an
Internet site that contains reports,  proxy and information statements and other
information   regarding  issuers  that  file  electronically  with  the  SEC  at
http://www.sec.gov.  The contents of these  websites are not  incorporated  into
this filing.  Further,  the Company's  references to the URLs for these websites
are intended to be inactive textual references only.

Item 2. Description of Property.

We  currently  rent our  facilities  at 9/F,  16/F  Fang  Yuan  Mansion,  No. 56
Zhongguancun South Road Yi, Haidian District,  Beijing, China and space at 11/F,
Bin He Plaza, No.1 Che Dao Gou Road, Haidian District, Beijing, China.

We own an  office  in the city of  Chengdu,  PRC  that  serves  as our  software
development center. It is located at B-16B,  WangFuJing  Business Mansion,  No.5
HuaXingZheng Street, ChengDu, SiChuan Province, PRC.

In addition,  we also have regional  field support  offices in various cities in
China, namely, in Shanghai, Shenyang, Guangzhou.

We  believe  that  the  current  facilities  occupied  by the  Company  and  its
subsidiaries will be able to meet the Company's operational needs for the coming
year.

Item 3. Legal Proceedings.

There are no pending legal proceedings involving the Company.

Item 4. Submission of Matter to a Vote of Security Holders.

The  Company  did not submit any  matters to a vote of the  shareholders  in the
fourth quarter of 2005.


                                       10
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The Common  Stock of the  Company is  currently  trading on the Over the Counter
Bulletin  Board system under the symbol  "FRLK".  There is no assurance that the
Common  Stock will  continue to be quoted or that any  liquidity  exists for the
Company's shareholders.

The  following  table  sets  forth the range of high and low bid  prices for the
Company's Common Stock for each quarterly period  indicated,  as reported by the
Yahoo's Finance website.  Quotations reflect  inter-dealer prices without retail
markup, markdown or commissions and may not represent actual trades.

                                  Common Stock

                  Quarter Ended             High Bid    Low Bid
                  -------------             --------    -------

                  December 31, 2005           $0.12      $0.06
                  September 30, 2005          $0.11      $0.07
                  June 30, 2005               $0.17      $0.07
                  March 31, 2005              $0.23      $0.17

                  December 31, 2004           $0.30      $0.10
                  September 30, 2004          $0.37      $0.15
                  June 30, 2004               $0.20      $0.11
                  March 31, 2004              $0.45      $0.32

Holders

As of March 15, 2006, there were 76,924,707 shares of the Company's common stock
outstanding  held  of  record  by  approximately   549  persons  (not  including
beneficial owners who hold shares at broker/dealers in "street name").

Dividends

The  Company  has never paid cash  dividends  on its  Common  Stock and does not
intend to do so in the  foreseeable  future.  The Company  currently  intends to
retain its earnings for the operation and expansion of its business.

Sales of unregistered securities

The Company has not issued or sold any of its  securities  without  registration
within the past three fiscal years.

Repurchases of equity securities

The Company did not repurchase any of its outstanding  equity  securities during
the fourth quarter of the year ended December 31, 2005.


                                       11
<PAGE>

Item 6. Management's Discussion and Analysis or Plan of Operation.

GENERAL

Statements  contained herein that are not historical  facts are  forward-looking
statements as that term is defined by the Private  Securities  Litigation Reform
Act of 1995. Although we believe that the expectations reflected in such forward
looking statements are reasonable, the forward looking statements are subject to
risks and  uncertainties  that could cause  actual  results to differ from those
projected.  We caution investors that any forward looking  statements made by us
are not  guarantees  of future  performance  and that actual  results may differ
materially  from  those  in  the  forward-looking  statements.  Such  risks  and
uncertainties include, without limitation: well-established competitors who have
substantially  greater  financial  resources  and  longer  operating  histories,
regulatory  delays or  denials,  ability to  compete as a start-up  company in a
highly competitive market, and access to sources of capital.

The following  discussion and analysis  should be read in  conjunction  with our
financial  statements and notes thereto included  elsewhere in this Form 10-KSB.
Except for the historical  information  contained herein, the discussion in this
Form 10-KSB contains certain  forward-looking  statements that involve risks and
uncertainties,  such as statements of our plans,  objectives,  expectations  and
intentions. The cautionary statements made in this Form 10-KSB should be read as
being applicable to all related forward looking statements  wherever they appear
in this Form 10-KSB.  The Company's actual results could differ  materially from
those discussed here.

OVERVIEW

We are a leading  provider  of software  solutions  and  information  technology
services  in China  (the "PRC" or  "China").  We focus on  providing  Enterprise
Application  Integration  (EAI)  solutions  for large  companies in the telecom,
finance, and logistics  industries.  In May 2004, we launched For-online,  which
delivers  enterprise  applications  and services  over the Internet to Small and
Medium-sized  Enterprises  (SMEs) in China.  For-online  is quickly  becoming an
important new channel for delivering and  distributing our products and services
to more customers.

On August 28, 2001,  we completed  the  acquisition  of Beijing  Slait Science &
Technology  Development  Limited  Co.  ("Slait").   Slait  was  engaged  in  the
development  and sale of network  software  systems and  provision of enterprise
application  system  integration  services for  telecommunication  companies and
network  services  providers  in China.  Slait was also  engaged  in the sale of
computer hardware.  Subsequent to the acquisition,  the principal  activities of
Slait were gradually  shifted to Forlink  Technologies  Co., Ltd.  ("FTCL").  On
February 13, 2004,  Slait was officially  dissolved in accordance  with relevant
PRC regulations. FTCL is the major operating company of the Group in Beijing.

We have  derived,  and believe that we will  continue to derive,  a  significant
portion of our revenues from Beijing Mobile Communication  Company, a subsidiary
of China  Mobile.  Since 1998,  we have been  developing  and  maintaining  BOSS
(Business  Operation  Support  System) for the  carrier.  BOSS is an  integrated
software  platform and it is developed in stages to  accommodate  the  carrier's
increasing  subscribers and service offerings.  We are currently  developing and
maintaining phase two of BOSS.

Although we are an important  strategic IT partner of Beijing Mobile,  we do not
have  long-term  contracts  with the  carrier.  All of our  agreements  with the
carrier are for short-term projects or sales of third-party  hardware.  While we
feel that our significant  relationships with Beijing Mobile will likely provide
additional sales agreements in the future,  Beijing Mobile is not  contractually
bound to purchase any products or services from us. Loss of this customer  could
hurt our business by reducing our revenues and profitability.


                                       12
<PAGE>

During the fiscal  years ended  December 31, 2001,  2002,  2003,  2004 and 2005,
sales to Beijing  Mobile  Communication  Company were  $4,097,560,  $ 8,229,159,
$8,999,662, $9,002,191, and $4,122,370,  respectively,  accounting for 80%, 88%,
96%, 89% and 70%, of our revenue for these periods, respectively.

We believe that there are opportunities for us to expand into new business areas
and to grow our business both internally and through acquisitions.  On March 20,
2005, Beijing Forlink Kuanshi Technologies Limited ("BFKT") was established as a
limited liability company by BFHX and two individuals,  Mr. Jianqiu Fang and Mr.
Bizhao  Zhong.  BFHX,  Mr. Fang and Mr. Zhong hold 70%, 10% and 20% of the fully
paid up capital of BFKT, respectively.  BFKT will provide software and operation
support to IPTV  (Internet  Protocol  Television)  operators.  We  believe  this
investment will enable us to capitalize in the fast growing IPTV market in China
by leveraging our technological expertise.

On October 24,  2005,  Forlink  entered on a  definitive  agreement to acquire a
17.5%  equity  interest  from China Liquid  Chemical  Exchange  Company  Limited
("CLCE"),  a limited liability company in PRC. Under the terms of the agreement,
Forlink  deployed the "For-online  Electronic  Trading  System",  a proprietary,
integrated software solution, to support the Exchange's  operations,  including,
but  not  limited  to,  online  trading,   online  billing  and  payment,   user
authentication,  customer care, in exchange for the 17.5% equity interest.  This
investment will increase our return in this fast growing market.

REVENUES

Our business includes Forlink brand  "For-series"  software system sales such as
ForOSS, ForRMS, For-Mail and their copyright licensing, and "For-series" related
system integration,  which consists of hardware sales and other related services
rendered to  customers.  The  following  table shows our  revenue  breakdown  by
business line:

                                                        Year Ended December 31,
                                                   ----------------------------
                                                         2005              2004
                                                   ----------------------------

Sales of For-series software                       $2,545,383        $2,029,069
as a percentage of net sales                               43%               20%

For-series related system integration              $3,366,940        $7,971,041
as a percentage of net sales                               57%               80%

As  indicated  in  the  foregoing  table,  sales  of  For-series  software  as a
percentage of net sales  increased  from 20% in 2004 to 43% in 2005.  For-series
related system  integration  as a percentage of net sales  decreased from 80% in
2004 to 57% in 2005.  These changes were mainly  attributable to our strategy of
increasing software sales and reducing low profit margin hardware projects.  And
the  decreased  sales  of  For-series   related  system   integration  was  also
attributable to increased competition in the system integration market.

Generally,   we  offer  our  products  and  services  to  our   customers  on  a
total-solutions  basis.  Most of the  contracts we undertake  for our  customers
include revenue from hardware and software sales and professional services.


                                       13
<PAGE>

SOURCES OF REVENUE

Hardware Revenue

Revenues  from sales of  products  are mainly  derived  from sales of  hardware.
Normally,  the hardware  that we procure is in connection  with  total-solutions
basis system integration contracts.

Service Revenue

Service revenue consists of revenue for the professional  services we provide to
our customers for network  planning,  design and systems  integration,  software
development, modification and installation, and related training services.

Software License Revenue

We generate revenue in the form of fees received from customers to whom we issue
licenses for the use of our software products over an agreed period of time.

COST OF REVENUE

Our  costs  of  revenue  include  hardware  costs,  software-related  costs  and
compensation and travel expenses for the professionals  involved in the relevant
projects.  Hardware costs consist  primarily of third party hardware  costs.  We
recognize hardware costs in full upon delivery of the hardware to our customers.
Software-related  costs  consist  primarily  of  packaging  and  written  manual
expenses for our proprietary software products and software license fees paid to
third-party software providers for the right to sublicense their products to our
customers  as  part  of our  solutions  offerings.  The  costs  associated  with
designing and modifying our proprietary  software are classified as research and
development expenses as such costs are incurred.

OPERATING EXPENSES

Operating  expenses are comprised of selling expenses,  research and development
expenses and general and administrative expenses.

Selling  expenses include  compensation  expenses for employees in our sales and
marketing  departments,  third  party  advertising  expenses,  as well as  sales
commissions and sales agency fees.

Research and development  expenses relate to the development of new software and
the  modification  of  existing  software.  We  expense  such  costs as they are
incurred.

TAXES

According to the relevant PRC tax rules and  regulations,  FTCL and BFHX,  which
are entities recognized as New Technology Enterprises operating within a New and
High  Technology  Development  Zone,  are entitled to an  Enterprise  Income Tax
("EIT") rate of 15%.

Pursuant  to  approval  documents  dated  September  23, 1999 and August 2, 2000
issued by the Beijing Tax Bureau and the State Tax Bureau,  respectively,  FTCL,
which is  recognized  as a New  Technology  Enterprise,  was eligible for a full
exemption  from EIT for the fiscal years 1999,  2000,  2001 and 2002.  FTCL also
became eligible for a 50% EIT reduction at the rate of 7.5% for the fiscal years
2003, 2004 and 2005.

Pursuant to an approval  document dated January 19, 2004 issued by the State Tax
Bureau,  BFHX, which is recognized as a New Technology  Enterprise,  is eligible
for full exemption from EIT for the fiscal years 2004, 2005 and 2006.

Hong Kong profits tax is calculated at 17.5% on the estimated assessable profits
of FTHK for the period.


                                       14
<PAGE>

The EIT rates for FTCD,  BFKT,  QJT and XKT range from 15% to 33%. No  provision
for EIT was made for  BFKT,  QJT and XKT as they  had not  commenced  operations
during the year.

Revenue from the sale of hardware  procured in China  together  with the related
system  integration  is subject  to a 17% value  added  tax.  Although  sales of
software in China are subject to a 17% value added tax as well,  companies  that
develop  their own  software  and have the  software  registered  are  generally
entitled to a value  added tax refund.  If the net amount of the value added tax
payable exceeds 3% of software sales,  the excess portion of the value added tax
is refundable  upon our  application to tax authority.  This policy is effective
until  2010.  Changes  in  Chinese  tax laws may  adversely  affect  our  future
operations.

FOREIGN EXCHANGE

Our functional  currency is US$ and our financial records are maintained and the
financial statements prepared in US$. The functional currency of FTHK is HK$ and
the financial  records are maintained and the financial  statements  prepared in
HK$. The functional currency of Slait, FTCL, BFHX and FTCD is Renminbi (RMB) and
the financial  records are maintained and the financial  statements are prepared
in RMB.

Foreign currency transactions during the year are translated into each company's
denominated  currency at the  exchange  rates ruling at the  transaction  dates.
Gains and losses  resulting from foreign  currency  transactions are included in
the consolidated statement of operations.  Assets and liabilities denominated in
foreign  currencies at the balance sheet date are translated into each company's
denominated  currency at year-end  exchange rates. All exchange  differences are
dealt with in the consolidated statements of operations.

The financial  statements of our  operations  based outside of the United States
have been  translated  into US$ in accordance  with SFAS 52. We have  determined
that the functional currency for each of the Company's foreign operations is its
applicable  local  currency.  When  translating  functional  currency  financial
statements  into US$,  year-end  exchange rates are applied to the  consolidated
balance  sheets,   while  average  period  rates  are  applied  to  consolidated
statements  of  operations.   Translation  gains  and  losses  are  recorded  in
translation reserve as a component of shareholders' equity.

The  value of the RMB is  subject  to  changes  in  China's  central  government
policies and to  international  economic and  political  developments  affecting
supply and demand in the China Foreign  Exchange  Trading System  market.  Since
1994,  the  conversion of RMB into foreign  currencies,  including USD, has been
based on rates set by the People's  Bank of China,  which are set daily based on
the previous day's interbank  foreign exchange market rates and current exchange
rates on the world  financial  markets.  Since 1994, the official  exchange rate
generally has been stable. In July 2005, the Chinese  government  announced that
it will no  longer  peg its  currency  exclusively  to USD but will  switch to a
managed floating  exchange rate based on market supply and demand with reference
to a basket of currencies  yet to be named by the People's Bank of China,  which
will likely increase the volatility of RMB as compared to USD. The exchange rate
of RMB to USD changed from RMB8.28 to RMB8.11 in late July.

Exchange  rates  between  US$, HK$ and RMB had minimal  fluctuations  during the
periods presented. The rates ruling for 2005 and 2004 are US$1: HK$7.75: RMB8.11
and US$1: HK$7.75: RMB8.28, respectively.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our  consolidated  financial  statements in accordance with generally
accepted accounting  principles in the United States of America. The preparation
of those financial statements requires us to make estimates and assumptions that
affect the reported  amounts of assets and  liabilities  and the  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amount of revenues and expenses during the reporting  period. On an
on-going basis, we evaluate our estimates and judgments, including those related
to revenues and cost of revenues under  customer  contracts,  bad debts,  income
taxes,  investment in  affiliate,  long-lived  assets and goodwill.  We base our
estimates and judgments on  historical  experience  and on various other factors
that we believe are  reasonable.  Actual results may differ from these estimates
under  different  assumptions or conditions.  We believe the following  critical
accounting policies affect the more significant  judgments and estimates used in
the preparation of our consolidated financial statements.


                                       15
<PAGE>

Revenue Recognition

We generally provide services under multiple element arrangements, which include
software  license  fees,  hardware  and  software  sales,  provision  of  system
integration  services  including   consulting,   implementation,   and  software
maintenance.  We evaluate revenue recognition on a contract-by-contract basis as
the  terms  of  each  arrangement   vary.  The  evaluation  of  the  contractual
arrangements  often  requires  judgments and estimates that affect the timing of
revenue  recognized in the  statements of  operations.  Specifically,  we may be
required to make judgments about:

-     whether the fees  associated  with our  products and services are fixed or
      determinable;

-     whether collection of our fees is reasonably assured;

-     whether  professional  services are essential to the  functionality of the
      related software product;

-     whether we have the ability to make reasonably dependable estimates in the
      application of the percentage-of-completion method; and

-     whether  we have  verifiable  objective  evidence  of fair  value  for our
      products and services.

We  recognize  revenues in  accordance  with the  provisions  of  Statements  of
Position,  or SOP, No. 97-2, "Software Revenue  Recognition",  as amended by SOP
No. 98-9, "Modification of SOP 97-2, Software Revenue Recognition,  with respect
to Certain  Transactions",  Staff  Accounting  Bulletin,  or SAB, 104,  "Revenue
Recognition".  SOP 97-2 and SAB 104 require among other matters, that there be a
signed contract evidencing an arrangement exists, delivery has occurred, the fee
is fixed or determinable, and collectibility is probable.

Revenue from provision of system integration services and other related services
are  recognized  when  services are rendered in stages as separate  identifiable
phases of a project are completed and accepted by customers.

Revenue  from  software  sales is  recognized  when  the  related  products  are
delivered and installed and collection of sales proceeds is deemed  probable and
persuasive evidence of an arrangement exists.

Software license revenue is recognized over the accounting  periods contained in
the  terms of the  relevant  agreements,  commencing  upon the  delivery  of the
software  provided that (1) there is evidence of an arrangement,  (2) the fee is
fixed or  determinable  and (3)  collection of the fee is  considered  probable.
Under  certain  arrangements,  the  Company  capitalizes  related  direct  costs
consisting  of third party  software  costs and direct  software  implementation
costs. These costs are amortized over the term of the arrangement.

In the case of maintenance  revenues,  vendor-specific  objective  evidence,  or
VSOE, of fair value is based on substantive renewal prices, and the revenues are
recognized ratably over the maintenance period.

In the case of consulting and implementation  services  revenues,  where VSOE is
based on  prices  from  stand-alone  sale  transactions,  and the  revenues  are
recognized as services are performed pursuant to paragraph 65 of SOP 97-2.


                                       16
<PAGE>

The sale of computer  hardware is recognized as revenue on the transfer of risks
and rewards of ownership, which generally coincides with the time when the goods
are delivered to customers and title has passed, pursuant to SAB 104.

Remote hosting services,  where VSOE is based upon consistent pricing charged to
customers based on volumes and performance  requirements on a stand-alone  basis
and substantive  renewal terms, are recognized ratably over the contract term as
the services are performed.  The remote hosting  arrangements  generally require
the Company to perform one-time set-up  activities and include a one-time set-up
fee.  This  one-time  set-up fee is  generally  paid by the customer at contract
execution. The Company determined that these set-up activities do not constitute
a separate unit of  accounting,  and  accordingly,  the related  set-up fees are
recognized ratably over the term of the contract.

We consider the  applicability of EITF 00-3,  "Application of AICPA Statement of
SOP 97-2 to  Arrangements  That  Include  the  Right to Use  Software  Stored on
Another  Entity's  Hardware",   to  the  hosting  services   arrangements  on  a
contract-by-contract   basis.   If  we  determine  that  the  customer  has  the
contractual  right to take  possession  of our  software  at any time during the
hosting period without significant penalty, and can feasibly run the software on
its own  hardware or enter into another  arrangement  with a third party to hast
the software,  a software  element  covered by SOP 97-2 exists.  When a software
element  exists in a hosting  services  arrangement,  we recognize  the license,
professional  services  and  hosting  services  revenues  pursuant  to SOP 97-2,
whereby the fair value of the hosting  service is recognized as revenue  ratably
over the term of the hosting  contract.  If we determine that a software element
covered by SOP 97-2 is not present in a hosting  services  arrangement,  then we
recognize revenue for the hosting services  arrangement ratably over the term of
the hosting contract pursuant to SAB 104.

Income Taxes

We account for income  taxes in  accordance  with SFAS No. 109  "Accounting  for
Income Taxes". Under SFAS No. 109, deferred tax liabilities or assets at the end
of each period are  determined  using the tax rate expected to be in effect when
taxes are actually paid or recovered.  Valuation allowances are established when
it is more likely than not that some or all of the  deferred tax assets will not
be realized.

Allowance for Doubtful Accounts

We record an allowance for doubtful  accounts based on  specifically  identified
amounts that the Company believes to be uncollectible.  We have a limited number
of customers  with  individually  large  amounts due at any given  balance sheet
date. Any  unanticipated  change in one of those customer's credit worthiness or
other matters  affecting the  collectibility of amounts due from such customers,
could have a material affect on the results of operations in the period in which
such changes or events  occur.  After all attempts to collect a receivable  have
failed, the receivable is written off against the allowance.

Goodwill

SFAS 142, Goodwill and Other Intangible Assets, requires that goodwill be tested
for impairment on an annual basis  (December 31 for us) and between annual tests
if an event  occurs or  circumstances  change  that would more  likely  than not
reduce the fair value of a reporting unit below its carrying value. These events
or  circumstances  could include a significant  change in the business  climate,
legal  factors,   operating  performance   indicators,   competition,   sale  or
disposition of a significant  portion of a company.  Application of the goodwill
impairment test requires judgment, including the determination of the fair value
of a company.  The fair value of a company is estimated  using a discounted cash
flow methodology.  This requires  significant  judgments including estimation of
future cash flows, which is dependent on internal  forecasts,  estimation of the
long-term rate of growth for our business, the useful life over which cash flows
will occur,  and the  determination  of our  weighted  average  cost of capital.
Changes  in  these  estimates  and  assumptions   could  materially  affect  the
determination of fair value and/or goodwill impairment for a company.


                                       17
<PAGE>

Recent Accounting Pronouncements

SFAS No. 151,  "Inventory  Costs", is effective for fiscal years beginning after
June 15, 2005.  This  statement  amends the  guidance in ARB No. 43,  Chapter 4,
"Inventory  Pricing",  to clarify the  accounting  for abnormal  amounts of idle
facility expense, freight,  handling costs, and wasted material (spoilage).  The
adoption  of SFAS No.  151 is  expected  to have no impact  on our  consolidated
financial statements.

SFAS No. 123 (Revised 2004) ("SFAS No. 123R"),  "Share-Based Payment," issued in
December 2004, is a revision of FASB Statement 123,  "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees,"  and its related  implementation  guidance.  The  Statement  focuses
primarily on accounting for  transactions  in which an entity  obtains  employee
services in share-based  payment  transactions.  SFAS No. 123R requires a public
entity to measure the cost of  employee  services  received  in exchange  for an
award of equity  instruments  based on the  grant-date  fair  value of the award
(with limited  exceptions).  That cost will be recognized over the period during
which an employee is required to provide  service in exchange for the award.  On
March 29,  2005,  the SEC issued  Staff  Accounting  Bulletin  No. 107 ("SAB No.
107"), which provides the Staff's views regarding  interactions between SFAS No.
123R and certain SEC rules and regulations and provides  interpretations  of the
valuation of share-based payments for public companies.

SFAS No. 123(R) permits public companies to adopt its requirements  using one of
two methods:

(1) A "modified  prospective"  method in which  compensation  cost is recognized
beginning  with the  effective  date (a) based on the  requirements  of SFAS No.
123(R) for all  share-based  payments  granted after the effective  date and (b)
based on the  requirements  of SFAS No. 123 for all awards  granted to employees
prior to the  effective  date of SFAS No.  123(R)  that  remain  unvested on the
effective date.

(2) A "modified  retrospective"  method which includes the  requirements  of the
modified  prospective  method  described  above,  but also  permits  entities to
restate  based on the  amounts  previously  recognized  under  SFAS No.  123 for
purposes of pro forma disclosures  either (a) all prior periods presented or (b)
prior interim periods of the year of adoption.

This  statement is  effective  for the  beginning of the first annual  reporting
period that begins after June 15, 2005, therefore, we will adopt the standard in
the  first  quarter  of  fiscal  2006 and plan to use the  modified  prospective
method.  SFAS No. 123(R) also requires the benefits of tax  deductions in excess
of recognized  compensation cost to be reported as a financing cash flow, rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption.

At this  time we do not  believe  that  the  adoption  of SFAS No.  123(R)  will
materially  impact our  consolidated  operating  results,  nor will there be any
impact on our future consolidated cash flows.

SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
29", is effective for fiscal years beginning after June 15, 2005. This statement
addresses the  measurement of exchange of nonmonetary  assets and eliminates the
exception  from fair value  measurement  for  nonmonetary  exchanges  of similar
productive  assets in  paragraph  21(b) of APB Opinion No. 29,  "Accounting  for
Nonmonetary Transactions",  and replaces it with an exception for exchanges that
do not have  commercial  substance.  The adoption of SFAS No. 153 is expected to
have no impact on our consolidated financial statements.


                                       18
<PAGE>

In March 2004, the EITF reached a consensus on Issue No. 03-01,  "The Meaning of
Other-Than-Temporary  Impairment  and Its  Application  to Certain  Investments"
(EITF 03-01).  EITF 03-01 provides guidance on  other-than-temporary  impairment
models for marketable  debt and equity  securities  accounted for under SFAS No.
115,  "Accounting for Certain  Investments in Debt and Equity  Securities" (SFAS
No. 115),  and  non-marketable  equity  securities  accounted for under the cost
method.  The EITF  developed a basic  three-step  model to  evaluate  whether an
investment is other-than-temporarily impaired. The FASB issued proposed FSP EITF
03-1-a in September  2004,  which delayed the effective date of the  recognition
and measurement  provisions of EITF 03-01. In November 2005, the FASB issued FSP
FAS  115-1 and 124-1  ("FSP")  which  nullifies  the  guidance  in EITF 03-1 for
determining  whether  impairment is  other-than-temporary.  However,  it carries
forward  many  of the  provisions  of  EITF  03-1.  The  guidance  of the FSP is
effective to reporting  periods  beginning  after  December 15, 2005.  We do not
expect the adoption of the FSP to have material impact on its financial position
and results of operations.

CONSOLIDATED RESULTS OF OPERATIONS

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

Net sales.

Our net sales  decreased 41% to $5,912,323 in 2005,  from  $10,000,110  in 2004.
Sales  of  For-series  software  increased  25%  to  $2,545,383  in  2005,  from
$2,029,069 in 2004. Sales of For-series related system integration decreased 58%
to  $3,366,940 in 2005 from  $7,971,041  in 2004.  The decrease in net sales was
mainly  attributable  to our strategy of increasing  software sales and reducing
low profit margin hardware  projects.  The decreased sales of For-series related
system integration was also attributable to increased  competition in the system
integration market.

Cost of sales.

Our cost of sales  decreased 41% to $3,772,620 in 2005, from $6,379,552 in 2004.
The decrease was mainly due to decreased hardware pass-through.

Gross profit.

Gross profit  decreased 41% to $2,139,703 in 2005,  from $3,620,558 in 2004. The
decrease was mainly due to decreased net sales. Gross profit margin was remained
stable at 36% in 2005 and 2004.

Operating expenses.

Total operating expenses increased 13% to $3,711,242 in 2005, from $3,282,027 in
2004. These increases  resulted largely from increases in selling expenses,  and
research and development expenses.

Selling expenses  increased 25% to $750,264 in 2005, from $599,921 in 2004. This
increase  was  primarily  due to our  increased  advertising  expenses and sales
efforts to market our fast growing ASP (Application  Service Provider)  services
"For-online",  our IT  outsourcing  services,  as well  as our  EAI  (Enterprise
Application Integration) services.


                                       19
<PAGE>

Research and  development  expenses  increased 19% to  $1,315,654 in 2005,  from
$1,105,348  in 2004 due to our continued  focus on  developing  new products and
solutions to increase our competitive advantages.

General and  administrative  expenses  increased 4% to $1,645,324 in 2005,  from
$1,576,758 in 2004.  The increase was  primarily due to additional  overhead and
salaries expenses associated with ASP services.

Operating profit (loss).

We recorded an operating loss of $1,571,539 in 2005, as compared to an operating
profit of $338,531 in 2004.  The decrease was largely due to decreased net sales
and  increased  operating  expenses  associated  with  new  business  lines,  as
discussed above.

Other income

Our other income  increased 10% to $184,029 in 2005, from $166,623 in 2004. This
increase was mainly due to increased software sales. Our other income comes from
a value added tax refund associated with software sales. Software sales in China
are subject to a 17% value added tax. However,  companies that develop their own
software  and have the software  registered  are  generally  entitled to a value
added tax refund. If the net amount of the value added tax payable exceeds 3% of
software sales,  then the excess portion of the value added tax is refundable to
us upon our application to tax authority. This policy is effective until 2010.

Net (loss) / profit.

We recorded a net loss of $1,394,177 in 2005, or basic and diluted loss of $0.02
per share,  as compared to net income of $468,052 in 2004,  or basic and diluted
earnings of $0.01 per share.

LIQUIDITY AND CAPITAL RESOURCES

Our capital  requirements are primarily working capital  requirements related to
costs of hardware for network  solution  projects and costs  associated with the
expansion  of  our   business.   In  order  to  minimize  our  working   capital
requirements,  we generally  obtain from our hardware vendors payment terms that
are timed to permit us to receive  payment from our  customers  for the hardware
before our  payments to our  hardware  vendors are due.  However,  we  sometimes
obtain less favorable payment terms from our customers,  thereby  increasing our
working capital requirements.  We have historically financed our working capital
and other financing requirements through careful management of our billing cycle
and, to a limited extent, bank loans.

Our accounts  receivable balance at December 31, 2005 was $861,000,  as compared
to  $638,398  at the  end of  2004.  The  increase  is  mainly  attributable  to
receivables  from  projects that were booked and billed in 2005 and that will be
collected in 2006.

Our inventory  position at the end of 2005 was $264,839,  as compared to $24,639
at the beginning of the year. At the end of 2005, we had several inventory items
in the  process of  delivery to Beijing  Mobile.  This caused the 2005  year-end
inventory to increase.

We ended the year with a cash  position of $589,781.  We had negative  operating
cash flow of $1,249,327, primarily due to net loss.

Although our revenues and operating  results for any period are not  necessarily
indicative of future  periods,  we anticipate  that our available funds and cash
flows generated from operations will be sufficient to meet our anticipated needs
for working capital,  capital  expenditures and business expansion through 2006.
We may need to raise additional funds in the future,  however,  in order to fund
acquisitions,   develop  new  or  enhanced  services  or  products,  respond  to
competitive  pressures to compete  successfully  for larger  projects  involving
higher levels of hardware  purchases,  or if our business  otherwise  grows more
rapidly than we currently  predict.  If we do need to raise additional funds, we
expect to raise  those  funds  through  new  issuances  of shares of our  equity
securities  in one or more public  offerings or private  placements,  or through
credit facilities extended by lending institutions.


                                       20
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

As of  December  31,  2005,  we have  not  entered  into any  off-balance  sheet
arrangements with any individuals or entities.

CONTRACTUAL OBLIGATIONS

As of December 31,  2005,  we had  commitments  under  non-cancelable  operating
leases requiring annual minimum rental payments as follows:

      Date                                                Rent Payment Due
      --------------------------------------------------------------------
      January 1, 2006 to December 31, 2006                $451,181
      January 1, 2007 to December 31, 2008                $109,628

RELATED PARTY TRANSACTIONS

On January 11,  2001,  the Company  entered into a Plan of  Reorganization  with
Beijing  Slait  Science  &  Technology   Development  Limited  Co.  (hereinafter
"Slait"),  under  the  terms of which  the  Company  acquired  up to 100% of the
outstanding  equity  of  Slait.  Pursuant  to the  Plan of  Reorganization  (the
"Plan"),  in August 2001, the Company  acquired 100% of the registered and fully
paid-up capital of Slait in exchange for 59,430,000  shares of restricted common
stock of the  Company.  Under  the terms of the Plan,  three  former  beneficial
owners of Slait,  Yi He,  Hongkeung  Lam and Jing Zeng were  issued  25,800,000,
10,500,000 and 5,760,000,  respectively,  of the Company's shares. Additionally,
at closing,  all of the  Company's  officers  and  directors  resigned  with the
exception of Xiaoxia Zhao,  who remained as an officer and director,  Yi He, who
was appointed as President and Director, and Hongkeung Lam, who was appointed as
a Director of the Company.

The Company,  from time to time,  received from or made  repayments to one major
stockholder  who is also a member of the management of the Company.  The amounts
due  from/to  stockholders  do not bear  any  interest  and do not have  clearly
defined terms of repayment.

As of December 31, 2005 and December 31, 2004,  the amount due from  stockholder
represented  travel  advances to Mr. Yi He, a director  and  stockholder  of the
Company.

As of December 31, 2005 and December 31, 2004,  the amounts due to  stockholders
represented advances from stockholders.

Mr. Yi He, an officer  and  director  of the  Company,  purchased  the  building
located in  Chengdu  on behalf of the  Company.  By a  stockholders'  resolution
passed on March 8, 1999, it was ratified that the title to the building belonged
to SLAIT.  The  building has been pledged as  collateral  for the mortgage  loan
granted to Mr. Yi He. The related  mortgage  still remains in the name of Mr. Yi
He,  however  the  Company  has  agreed  to pay Mr. Yi He  amounts  equal to the
required mortgage payments.  As of December 31, 2004, the amount of the mortgage
loan is $44,584  ($53,010 as of December  31,  2003) and is included in "Amounts
due to  stockholders"  on the balance  sheet.  In the last quarter of 2005,  the
mortgage loan was fully repaid and the title to the building was  transferred to
the Company.


                                       21
<PAGE>

To  comply  with  PRC  laws  and  regulations,  Forlink  conducts  its  Internet
value-added  services in PRC via Beijing  Forlink  Hua Xin  Technology  Co. Ltd.
("BFHX").  BFHX  was  established  in PRC on  September  19,  2003 as a  limited
liability company. The registered capital of BFHX is $120,733 (RMB1,000,000) and
the fully paid up capital was $36,232  (RMB300,000)  as of December 31, 2004. In
accordance with a directors' resolution of Forlink passed on September 15, 2003,
Mr. Yi He and Mr.  Xiaoxia Zhao were entrusted as nominee owners of BFHX to hold
70% and 30% of the fully  paid up capital  of BFHX,  respectively,  on behalf of
Forlink and Forlink is the primary  beneficiary.  BFHX is  considered a variable
interest  entity  ("VIE")  and  because  Forlink  is  the  primary  beneficiary,
Forlink's  consolidated  financial  statements include BFHX. Upon the request of
Forlink, Mr. Yi He and Mr. Xiaoxia Zhao are required to transfer their ownership
in BFHX to Forlink or to  designees of Forlink at any time for the amount of the
fully paid up capital of BFHX.

In accordance with a registered  capital  transfer  agreement dated February 16,
2004,  and the owners'  resolutions  of BFHX passed on February  16,  2004,  Mr.
Xiaoxia  Zhao  transferred  the  fully  paid  up  capital  of  BFHX  of  $10,870
(RMB90,000)  to Mr. Wei Li for  $10,870.  Mr. Yi He and Mr. Wei Li entered  into
agreements  with Forlink on November 8, 2003 and March 18,  2004,  respectively,
under which agreements Mr. Yi He and Mr. Wei Li were entrusted as nominee owners
of BFHX to hold 70% and 30%, respectively,  of the fully paid up capital of BFHX
on behalf of Forlink.  Forlink is the primary  beneficiary  of such  agreements.
Upon the request of Forlink,  Mr. Yi He and Mr. Wei Li are  required to transfer
their  ownership  in BFHX to Forlink or to  designees of Forlink at any time for
the amount of the fully paid up capital of BFHX.

The capital of BFHX was funded by FTCL and  recorded as  interest-free  loans to
Mr. Yi He and Mr. Wei Li.  These  loans  were  eliminated  with  capital of BFHX
during consolidation.  Mr. Yi He is an officer, director and a major stockholder
of Forlink.  Mr.  Xiaoxia Zhao is a former  director and a major  stockholder of
Forlink. Mr. Wei Li is the administration manager of FTCL.

In the opinion of the directors,  except for the arrangements in connection with
the  purchase  of the  office  in  Chengdu,  all  the  above  transactions  were
negotiated at arm's length and entered into and executed under the normal course
of  business  with no  difference  from those that  would be  negotiated  with a
clearly  independent  party.  With  respect  to the  purchase  of the  office in
Chengdu,  if Mr. Yi He would not have  been  able to obtain a  mortgage  for the
property,  the  Company  may not have been able to obtain one on its own and the
financial  resources may not have been available for the Company to purchase the
property outright.

RISK FACTORS AFFECTING OUR OPERATING RESULTS AND COMMON STOCK

In addition to the other  information  in this  report,  the  following  factors
should be considered in evaluating our business and our future prospects:

POLITICAL  AND  ECONOMIC  POLICIES OF THE CHINESE  GOVERNMENT  COULD  AFFECT OUR
INDUSTRY IN GENERAL AND OUR COMPETITIVE POSITION IN PARTICULAR

Since the establishment of the People's Republic of China in 1949, the Communist
Party has been the governing  political  party in the PRC. The highest bodies of
leadership are the Politburo of the Communist Party,  the Central  Committee and
the  National  People's  Congress.  The  State  Council,  which  is the  highest
institution  of  government  administration,  reports to the  National  People's
Congress  and has  under  its  supervision  various  commissions,  agencies  and
ministries,    including   The   Ministry   of   Information    Industry,    the
telecommunications  regulatory  body of the Chinese  government.  Since the late
1970s,  the Chinese  government has been reforming the Chinese  economic system.
Although we believe that economic reform and the macroeconomic  measures adopted
by the Chinese  government  have had and will continue to have a positive effect
on economic  development  in China,  there can be no assurance that the economic
reform  strategy  will  not  from  time to time be  modified  or  revised.  Such
modifications or revisions,  if any, could have a material adverse effect on the
overall  economic  growth  of  China  and  investment  in the  Internet  and the
telecommunications  industry in China. Such developments  could reduce,  perhaps
significantly,  the demand for our products and services.  There is no guarantee
that the  Chinese  government  will not  impose  other  economic  or  regulatory
controls that would have a material adverse effect on our business. Furthermore,
changes in political,  economic and social  conditions in China,  adjustments in
policies  of the Chinese  government  or changes in laws and  regulations  could
affect our industry in general and our competitive position in particular.


                                       22
<PAGE>

THE  GROWTH  OF OUR  BUSINESS  IS  DEPENDENT  ON  GOVERNMENT  TELECOMMUNICATIONS
INFRASTRUCTURE  AND BUDGETARY  POLICY,  PARTICULARLY  THE ALLOCATION OF FUNDS TO
SUSTAIN THE GROWTH OF THE TELECOMMUNICATIONS INDUSTRY IN CHINA

Virtually  all of our  large  customers  are  directly  or  indirectly  owned or
controlled by the government of China.  Accordingly,  their business strategies,
capital expenditure budgets and spending plans are largely decided in accordance
with government policies,  which, in turn, are determined on a centralized basis
at the highest level by the National Development and Reform Commission of China.
As a result,  the growth of our  business  is heavily  dependent  on  government
policies  for  telecommunications  and  Internet  infrastructure.   Insufficient
government   allocation   of  funds   to   sustain   the   growth   of   China's
telecommunications  industries  in the  future  could  reduce the demand for our
products and services and have a material  adverse effect on our ability to grow
our business.

CURRENCY  EXCHANGE  RATE RISK DUE TO  FLUCTUATIONS  IN THE EXCHANGE RATE BETWEEN
U.S. DOLLARS AND RENMINBI

The  functional  currency  of our  operations  is  Renminbi  and  our  financial
statements  are expressed in U.S.  dollars.  As a result,  we are subject to the
effects of exchange rate fluctuations  between these currencies.  Because of the
unitary  exchange  rate  system  introduced  in China on January  1,  1994,  the
official bank exchange rate for  translation of Renminbi to U.S.  dollars is set
to US$1 to RMB8.28.  Any future  devaluation  of the  Renminbi  against the U.S.
dollars may have an adverse effect on our reported net income. As our operations
are conducted in the PRC, substantially all our revenues,  expenses,  assets and
liabilities  are  denominated in Renminbi.  In general,  our exposure to foreign
exchange  risks  should be  limited.  However,  the value in our  shares  may be
affected by the foreign  exchange rate between the U.S.  dollar and the Renminbi
because the value of our business is effectively denominated in Renminbi,  while
our shares are traded in U.S.  dollars.  Furthermore,  a decline in the value of
Renminbi  could reduce the U.S.  dollar  equivalent of the value of the earnings
from, and our investment in, our  subsidiaries  in the PRC; while an increase in
the value of the  Renminbi  may require us to exchange  more U.S.  dollars  into
Renminbi to meet the working capital  requirements of our subsidiaries in China.
Depreciation  of the value of the U.S.  dollar will also reduce the value of the
cash  we hold  in  U.S.  dollars,  which  we may  use  for  purposes  of  future
acquisitions or other business  expansion.  We actively  monitor our exposure to
these risks and adjust our cash  position in the  Renminbi  and the U.S.  dollar
when we believe such adjustments will reduce risks.

GENERAL RISK OF FINANCING

In  order  for the  Company  to meet its  continuing  cash  requirements  and to
successfully  implement  its growth  strategy,  the Company will need to rely on
increased future revenues and/or will require additional financing. In the event
additional financing is required, no assurances can be given that such financing
will be available in the amount  required  or, if  available,  that it can be on
terms satisfactory to the Company.


                                       23
<PAGE>

Item 7. Financial Statements.

The  information  required by Item 7 and an index thereto  commences on the next
page.


                                       24
<PAGE>

                       Forlink Software Corporation, Inc.

                        Consolidated Financial Statements
                               For the years ended
                           December 31, 2005 and 2004

<PAGE>

                       Forlink Software Corporation, Inc.

                   Index To Consolidated Financial Statements

                                                                        Pages

Report of Independent Registered Public Accounting Firm                  F-1

Consolidated Balance Sheets                                              F-2

Consolidated Statements of Operations                                    F-3

Consolidated Statements of Stockholders' Equity                          F-4

Consolidated Statements of Cash Flows                                    F-5

Notes to Consolidated Financial Statements                            F-6 - F-24

<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and stockholders of
Forlink Software Corporation, Inc.

We have audited the accompanying consolidated balance sheets of Forlink Software
Corporation, Inc. as of December 31, 2005 and 2004, and the related consolidated
statements  of  operations,  stockholders'  equity  and cash flows for the years
ended  December  31,  2005  and  2004.   These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  The audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the Company's  internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits 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 Forlink
Software  Corporation,  Inc. as of December 31, 2005 and 2004 and the results of
its consolidated operations and cash flows for the years ended December 31, 2005
and 2004, in conformity  with generally  accepted  accounting  principles in the
United States of America.

As described in Note 17, the  consolidated  financial  statements as of December
31, 2004, and for the year then ended have been restated.

/s/ BDO McCabe Lo Limited

BDO McCabe Lo Limited

Hong Kong, March 6, 2006


                                      F-1
<PAGE>

                       Forlink Software Corporation, Inc.

                           Consolidated Balance Sheets

(Expressed in US Dollars)

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

Current assets
  Cash and cash equivalents                                        $   589,781       $ 2,298,831
  Accounts receivable (Note 3)                                         861,000           638,398
  Other receivables, deposits and prepayments (Note 4)                 515,787           440,401
Other tax recoverable (Note 12)                                         32,350                --
  Inventories (Note 5)                                                 264,839            24,639
  Amount due from stockholder (Note 6)                                      --            38,286
                                                                   -----------       -----------

  Total current assets                                               2,263,757         3,440,555

Property, plant and equipment (Note 7)                                 884,108           698,521
Long term investments (Note 8)                                         760,870           798,001
Goodwill (Note 9)                                                    1,684,023         1,684,023
                                                                   -----------       -----------

Total assets                                                       $ 5,592,758       $ 6,621,100
                                                                   ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
  Short term borrowings (Note 13)                                  $   246,609       $        --
  Accounts payable                                                     762,593           269,745
  Amounts due to stockholders (Note 6)                                 149,622           624,989
  Customer deposits                                                    580,482           425,368
  Other payables and accrued expenses (Note 10)                        287,246           204,252
  Income tax payable (Note 11)                                              --            31,754
  Other taxes payable (Note 12)                                             --           196,864
                                                                   -----------       -----------

  Total current liabilities                                        $ 2,026,552       $ 1,752,972
                                                                   -----------       -----------

Commitments and contingencies (Note 14)

Stockholders' equity
  Common stock, par value $0.001 per share;
    100,000,000 shares authorized;
    85,224,707and 85,088,207 shares issued and 76,924,707 and
      76,788,207 shares outstanding, respectively                  $    85,225       $    85,088
   Treasury stock                                                     (215,800)         (215,800)
  Additional paid-in capital                                         8,949,810         8,936,297
  Accumulated losses                                                (5,331,634)       (3,937,457)
  Accumulated other comprehensive income                                78,605                --
                                                                   -----------       -----------

  Total stockholders' equity                                       $ 3,566,206       $ 4,868,128
                                                                   -----------       -----------

Total liabilities and stockholders' equity                         $ 5,592,758       $ 6,621,100
                                                                   ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

                       Forlink Software Corporation, Inc.

                      Consolidated Statements of Operations

(Expressed in US Dollars)

<TABLE>
<CAPTION>
                                                      Year ended         Year ended
                                                     December 31,       December 31,
                                                         2005               2004
                                                                        As restated
                                                     ------------       ------------
<S>                                                  <C>                <C>
Net sales (Note 2)                                   $  5,912,323       $ 10,000,110

Cost of sales                                          (3,772,620)        (6,379,552)
                                                     ------------       ------------

Gross profit                                            2,139,703          3,620,558

Selling expenses                                         (750,264)          (599,921)

Research and development expenses                      (1,315,654)        (1,105,348)

General and administrative expenses                    (1,645,324)        (1,576,758)
                                                     ------------       ------------

Operating (loss) / profit                              (1,571,539)           338,531

(Loss) / Income from equity method investee               (37,516)               899

Interest income                                             3,098             10,608

Interest expenses                                          (3,231)                --

Other income, net (Note 12)                               184,029            166,623
                                                     ------------       ------------

(Loss) / Profit before income tax                      (1,425,159)           516,661

Income tax (Note 11)                                       30,982            (48,609)
                                                     ------------       ------------

Net (loss) / profit                                  $ (1,394,177)      $    468,052
                                                     ============       ============

(Loss) / Earnings per share - basic and diluted      $      (0.02)      $       0.01
                                                     ============       ============

Weighted average common shares
 outstanding - basic and diluted                       76,897,785         76,776,915
                                                     ============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                       Forlink Software Corporation, Inc.

                 Consolidated Statement of Stockholders' Equity

(Expressed in US Dollars)

<TABLE>
<CAPTION>
                                                       Common Stock
                                 --------------------------------------------------------
                                   Number        Number of      Number of                                     Additional
                                  of Share         Share        Treasury                       Treasury        Paid-in
                                   Issued       Outstanding       Stock          Amount         Stock          Capital
                                 -----------    -----------    -----------    -----------    -----------     -----------
<S>                               <C>            <C>             <C>          <C>            <C>             <C>
Balance, December 31, 2003        85,073,207     76,773,207      8,300,000    $    85,073    $  (215,800)    $ 8,934,812

Shares issued under Plan 2002         15,000         15,000             --             15             --           1,485

Net profit for the year                   --             --             --             --             --              --
                                 -----------    -----------    -----------    -----------    -----------     -----------


Balance, December 31, 2004        85,088,207     76,788,207      8,300,000    $    85,088    $  (215,800)    $ 8,936,297


Shares issued under Plan 2002        136,500        136,500             --            137             --          13,513

Net loss for the year                     --             --             --             --             --              --

Translation reserve                       --             --             --             --             --              --


Comprehensive income                      --             --             --             --             --              --
                                 -----------    -----------    -----------    -----------    -----------     -----------

Balance, December 31, 2005        85,224,707     76,924,707      8,300,000    $    85,225    $  (215,800)    $ 8,949,810
                                 ===========    ===========    ===========    ===========    ===========     ===========

<CAPTION>
                                  Accumulated       Retained
                                     other          Profits/        Total       Comprehensive
                                 comprehensive   (Accumulated   Stockholders'      Income/
                                    income          Losses)         Equity         (Losses)
                                 -------------    -----------   -------------   -------------
<S>                               <C>            <C>             <C>             <C>
Balance, December 31, 2003        $        --    $(4,405,509)    $ 4,398,576     $        --

Shares issued under Plan 2002              --             --           1,500              --

Net profit for the year                    --        468,052         468,052         468,052
                                  -----------    -----------     -----------     -----------


Balance, December 31, 2004        $        --    $(3,937,457)    $ 4,868,128     $   468,052
                                                                                 ===========

Shares issued under Plan 2002              --             --          13,650              --

Net loss for the year                      --     (1,394,177)     (1,394,177)     (1,394,177)

Translation reserve                    78,605             --          78,605          78,605
                                                                                 -----------

Comprehensive income                       --             --              --     $(1,315,572)
                                  -----------    -----------     -----------     ===========

Balance, December 31, 2005        $    78,605    $(5,331,634)    $ 3,566,206
                                  ===========    ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                       Forlink Software Corporation, Inc.

                      Consolidated Statements of Cash Flows
                (Decrease)/Increase in Cash and Cash Equivalents

(Expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                  2005            2004
                                                              -----------     -----------
<S>                                                           <C>             <C>
Cash flows from operating activities
  Net (loss)/income                                           $(1,394,177)    $   468,052
      Adjustments to reconcile net income to
        net cash used in operating activities
      Depreciation of property, plant and equipment               171,037         111,361
      Loss on disposal of property, plant and equipment                --           3,190
      Loss/(Income) from equity method investee                    37,516            (899)

      Change in:
        Accounts receivable                                      (210,779)        (51,579)
        Other receivables, deposits and prepayments               (62,378)          4,031
        Inventories                                              (234,763)      1,120,459
        Accounts payable                                          483,062        (827,683)
        Customer deposits                                         143,196      (1,352,404)
        Other payables and accrued expenses                        78,263         (64,554)
        Income tax payable                                        (31,754)         17,054
        Other taxes payable                                      (228,550)         66,953
                                                              -----------     -----------

Net cash used in operating activities                          (1,249,327)       (506,019)
                                                              -----------     -----------

Cash flows from investing activities
   Acquisition of property, plant and equipment                  (380,777)       (358,974)
   Proceeds from insurance compensation/sale of equipment              --          10,899
   Cash payment associated with long term investments                  --         (36,232)
                                                              -----------     -----------

Net cash used in investing activities                            (380,777)       (384,307)
                                                              -----------     -----------

Cash flows from financing activities
   Proceeds from short term borrowings                            246,609              --
   Advances to stockholder                                             --         (24,035)
   (Repayment to)/advances from stockholders                     (435,324)        373,695
   Proceeds from issuances of common stock under Plan 2002         13,650           1,500
                                                              -----------     -----------

Net cash  (used in) / provided by financing activities           (175,065)        351,160
                                                              -----------     -----------

Effect of exchange rate changes on
  cash and cash equivalents                                        96,119              --
                                                              -----------     -----------

Net decrease in cash and cash equivalents                      (1,709,050)       (539,166)

Cash and cash equivalents at beginning of year                  2,298,831       2,837,997
                                                              -----------     -----------

Cash and cash equivalents at end of year                      $   589,781     $ 2,298,831
                                                              ===========     ===========

Supplemental disclosure of cash flow information
   Income tax paid                                            $       772     $    31,803
                                                              ===========     ===========
   Interest paid                                              $     3,231     $        --
                                                              ===========     ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Beijing  Slait  Science &  Technology  Development  Limited  Co.  ("Slait")  was
established in the People's Republic of China (the "PRC") on January 25, 1998 as
a limited liability company.  Slait commenced  operations in May 1998. Slait was
beneficially owned by three individual PRC citizens, namely Yi He, Hongkeung Lam
and Jing  Zeng.  Slait was  granted a ten year  operation  period,  which can be
extended with approvals from relevant PRC authorities.

On January 11, 2001,  Slait entered into an agreement of Plan of  Reorganization
("the Plan") with Forlink Software Corporation,  Inc.  ("Forlink").  Forlink had
issued to the owners of Slait as  individuals  59,430,000  authorized  shares of
common stock of Forlink in exchange for 100% of the registered and fully paid up
capital of Slait. In accordance with the terms of the Plan, Forlink  transferred
$131,039  (RMB1,085,000)  to Slait.  The amount was  disbursed  to the  original
owners of Slait.  The closing date of this exchange  transaction  was August 28,
2001.

As a result of the  acquisition,  the  former  owners of Slait  hold a  majority
interest  in the  combined  entity.  Generally  accepted  accounting  principles
require, in certain circumstances,  that a company whose stockholders retain the
majority voting interest in the combined business be treated as the acquirer for
financial  reporting purposes.  Accordingly,  the acquisition has been accounted
for as a  "reverse  acquisition"  whereby  Slait  is  deemed  to have  purchased
Forlink.  However,  Forlink  remains  the legal  entity and the  Registrant  for
Securities and Exchange Commission reporting purposes. Subsequent to the reverse
acquisition,  the principal  activities of Slait have been gradually  shifted to
Forlink  Technologies  Co.,  Ltd.  ("FTCL").  On February  13,  2004,  Slait was
officially dissolved in accordance with relevant PRC regulations.

On June  18,  2003,  Forlink  Technologies  (Hong  Kong)  Limited  ("FTHK")  was
incorporated  in Hong Kong as a limited  liability  company  with an  authorized
share capital of $129,032  (HK$1,000,000) divided into 1,000,000 ordinary shares
of $0.129 (HK$1) each. At the time of incorporation, two ordinary shares of HK$1
each were issued to the subscribers.  In December 2003,  999,998 ordinary shares
were issued to Forlink. Since then, FTHK has become a wholly owned subsidiary of
Forlink. The principal activities of FTHK is investment holding.

To  comply  with  PRC  laws  and  regulations,  Forlink  conducts  its  internet
value-added  services in PRC via Beijing  Forlink  Hua Xin  Technology  Co. Ltd.
("BFHX").  BFHX  was  established  in PRC on  September  19,  2003 as a  limited
liability company. The registered capital of BFHX is $120,733 (RMB1,000,000) and
has been  fully  paid up by March 31,  2005.  In  accordance  with a  directors'
resolution of Forlink  passed on September 15, 2003,  Mr. Yi He and Mr.  Xiaoxia
Zhao were entrusted as nominee owners of BFHX to hold 70% and 30%, respectively,
of the fully paid up capital  of BFHX on behalf of  Forlink  and  Forlink is the
primary  beneficiary.  BFHX is considered a Variable Interest Entity ("VIE") and
because Forlink is the primary  beneficiary,  Forlink's  consolidated  financial
statements include BFHX. Upon the request of Forlink,  Mr. Yi He and Mr. Xiaoxia
Zhao are required to transfer their ownership in BFHX to Forlink or to designees
of Forlink at any time for the amount of the fully paid up capital of BFHX.


                                      F-6
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS - Continued

In accordance  with a registered  capital  transfer  agreement dated and owners'
resolutions of BFHX passed on February 16, 2004,  Mr.  Xiaoxia Zhao  transferred
the fully  paid up  capital  of BFHX of  $10,870  (RMB90,000)  to Mr. Wei Li for
$10,870.  Mr. Yi He and Mr.  Wei Li  entered  into  agreements  with  Forlink on
November 8, 2003 and March 18, 2004, respectively. Pursuant to these agreements,
Mr. Yi He and Mr. Wei Li were  entrusted  as nominee  owners of BFHX to hold 70%
and 30% of the fully paid up capital of BFHX, respectively, on behalf of Forlink
and Forlink is the primary  beneficiary.  Upon the request of Forlink, Mr. Yi He
and Mr. Wei Li are required to transfer their ownership in BFHX to Forlink or to
designees  of Forlink at any time for the amount of the fully paid up capital of
BFHX.

The capital of BFHX was funded by FTCL and  recorded as  interest-free  loans to
Mr. Yi He and Mr. Wei Li.  These  loans  were  eliminated  with  capital of BFHX
during  consolidation.  Mr.  Yi He is a  director  and a  major  stockholder  of
Forlink.  Mr. Xiaoxia Zhao is a former director and stockholder of Forlink.  Mr.
Wei Li is the administration manager of FTCL.

On  June  14,  2004,  Forlink   Technologies   (Chengdu)  Limited  ("FTCD")  was
established as a limited liability  company in Chengdu,  PRC. In September 2004,
FTHK  invested  $750,000 in FTCD and FTCD became a wholly  owned  subsidiary  of
FTHK. The registered capital of FTCD is $5,000,000 and the fully paid up capital
was $750,000 as of December 31, 2005. FTCD has commenced  operations  during the
year.

On March 20, 2005,  Beijing Forlink Kuanshi  Technologies  Limited  ("BFKT") was
established  as a limited  liability  company by BFHX and two  individuals,  Mr.
Jianqiu Fang and Mr.  Bizhao  Zhong,  who hold 70%, 10% and 20% of fully paid up
capital  of BFKT,  respectively.  The  registered  capital  of BFKT is  $120,733
(RMB1,000,000)  and was fully paid up on March 16,  2005.  Upon March 28,  2005,
BFKT  acquired  90% and 95% of shares of  Qingdao  Jiashi  Technologies  Limited
("QJT") and Xiamen Kuanshi Technologies Limited ("XKT"), respectively.  Both QJT
and XKT were originally established by Mr. Yi He and Mr. Wei Li on March 4, 2005
and March 7, 2005, respectively.  Pursuant to the agreement reached between BFHX
and Mr. Wei Li, Mr. Wei Li was entrusted as nominee owner of QJT and XKT to hold
10% and 5%, respectively,  of the fully paid up capital of QCT and XKT on behalf
of BFHX and BFHX is the primary beneficiary.

On October 24, 2005,  Forlink  entered into a definitive  agreement to acquire a
17.5%  equity  interest  from China Liquid  Chemical  Exchange  Company  Limited
("CLCE"),  a limited liability company in PRC. Under the terms of the agreement,
Forlink  deployed the "For-online  Electronic  Trading  System",  a proprietary,
integrated software solution, to support the Exchange's  operations,  including,
but  not  limited  to,  online  trading,   online  billing  and  payment,   user
authentication,  customer care., in exchange for the 17.5% equity interest. This
investment has been  recognized as corporate  joint venture and is accounted for
under the equity method of  accounting,  under SOP 78-9.  CLCE has not commenced
operation  since its date of  establishment.  This  investment will increase the
Company return in this fast growing market.

Forlink, its subsidiaries,  the VIE and corporate joint venture are collectively
referred to as "the Company" hereafter.


                                      F-7
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS - Continued

The principal  activities of the Company are the development and sale of network
software systems and the provision of enterprise  application system integration
services  in the PRC.  The  Company  is also  engaged  in the  sale of  computer
hardware.

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The consolidated  financial statements are prepared in accordance with generally
accepted  accounting  principles in the United States of America and present the
financial statements of Forlink and its subsidiaries,  namely, FTCL, FTHK, BFHX,
FTCD,  BFKT, QJT and XKT. All  intercompany  transactions and balances have been
eliminated.

Minority interest at the balance sheet date, being the portion of the net assets
of subsidiaries  attributable to equity interests that are not owned by Forlink,
whether  directly or  indirectly  through  subsidiaries,  are  presented  in the
consolidated  balance sheet  separately from  liabilities and the  shareholders'
equity.  Minority  interests  in the  results of the group for the year are also
separately presented in the income statement.

Stock Based Compensation

The Company has adopted the  disclosure  provisions  of  Statement  of Financial
Accounting   Standards   ("SFAS")   No.   123,   "Accounting   for   Stock-Based
Compensation",  but applies Accounting  Principles Board Opinion ("APB") No. 25,
"Accounting  for Stock  Issued to  Employees"  and  related  interpretations  in
accounting for its plans.  Under APB No. 25, when the exercise price of employee
stock options  equals the market price for the  underlying  stock on the date of
grant, no compensation expense is recognised.

Generally  accepted  accounting  principles  require  companies  that  choose to
account  for stock  option  grants  using  the  intrinsic  value  method to also
determine the fair value of option grants using an option pricing model, such as
the Black-Scholes  model, and to disclose the impact of fair value accounting in
a note to the financial statements.  In December 2002, the FASB issued Statement
of  Financial   Accounting   Standards  No.  148,  "Accounting  for  Stock-Based
Compensation Transition and Disclosure, an Amendment of FASB Statement No. 123."
The Company did not elect to  voluntarily  change to the fair value based method
of accounting for stock based employee  compensation  and record such amounts as
charges to operating expense.  The impact of recognizing the fair value of stock
option grants and stock  purchased  under the Plan 2002 as an expense under FASB
Statement No. 148 would be as follows:


                                      F-8
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Stock Based Compensation

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

Net (loss)/profit, as reported                     $(1,394,177)     $   468,052
Deduct: Stock-based compensation expense
   determined under fair value based method            (32,350)        (107,906)
                                                   -----------      -----------

Pro forma net (loss)/profit                        $(1,426,527)     $   340,146
                                                   ===========      ===========

Earnings per share:
Basic   - Reported                                       (0.02)            0.01
        - Pro forma                                      (0.02)            0.00
Diluted - Reported                                       (0.02)            0.01
        - Pro forma                                      (0.02)            0.00

Recent Accounting Pronouncements

SFAS No. 151,  "Inventory  Costs", is effective for fiscal years beginning after
June 15, 2005.  This  statement  amends the  guidance in ARB No. 43,  Chapter 4,
"Inventory  Pricing",  to clarify the  accounting  for abnormal  amounts of idle
facility expense, freight,  handling costs, and wasted material (spoilage).  The
adoption  of  SFAS  No.  151 is  expected  to have no  impact  on the  Company's
consolidated financial statements.

SFAS No. 123 (Revised 2004) ("SFAS No. 123R"),  "Share-Based Payment," issued in
December 2004, is a revision of FASB Statement 123,  "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees,"  and its related  implementation  guidance.  The  Statement  focuses
primarily on accounting for  transactions  in which an entity  obtains  employee
services in share-based  payment  transactions.  SFAS No. 123R requires a public
entity to measure the cost of  employee  services  received  in exchange  for an
award of equity  instruments  based on the  grant-date  fair  value of the award
(with limited  exceptions).  That cost will be recognized over the period during
which an employee is required to provide  service in exchange for the award.  On
March 29,  2005,  the SEC issued  Staff  Accounting  Bulletin  No. 107 ("SAB No.
107"), which provides the Staff's views regarding  interactions between SFAS No.
123R and certain SEC rules and regulations and provides  interpretations  of the
valuation of share-based payments for public companies.  SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods:

(1) A "modified  prospective"  method in which  compensation  cost is recognized
beginning  with the  effective  date (a) based on the  requirements  of SFAS No.
123(R) for all  share-based  payments  granted after the effective  date and (b)
based on the  requirements  of SFAS No. 123 for all awards  granted to employees
prior to the  effective  date of SFAS No.  123(R)  that  remain  unvested on the
effective date.


                                      F-9
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

(2) A "modified  retrospective"  method which includes the  requirements  of the
modified  prospective  method  described  above,  but also  permits  entities to
restate  based on the  amounts  previously  recognized  under  SFAS No.  123 for
purposes of pro forma disclosures  either (a) all prior periods presented or (b)
prior interim periods of the year of adoption.

This  statement is  effective  for the  beginning of the first annual  reporting
period that begins after June 15, 2005, therefore, we will adopt the standard in
the  first  quarter  of  fiscal  2006 and plan to use the  modified  prospective
method.  SFAS No. 123(R) also requires the benefits of tax  deductions in excess
of recognized  compensation cost to be reported as a financing cash flow, rather
than as an  operating  cash flow as  required  under  current  literature.  This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption.

At this time  management  does not believe that the adoption of SFAS No.  123(R)
will materially impact our consolidated operating results, nor will there be any
impact on our future consolidated cash flows.

SFAS No. 153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No.
29", is effective for fiscal years beginning after June 15, 2005. This statement
addresses the  measurement of exchange of nonmonetary  assets and eliminates the
exception  from fair value  measurement  for  nonmonetary  exchanges  of similar
productive  assets in  paragraph  21(b) of APB Opinion No. 29,  "Accounting  for
Nonmonetary Transactions",  and replaces it with an exception for exchanges that
do not have  commercial  substance.  The adoption of SFAS No. 153 is expected to
have no impact on the Company's consolidated financial statements.


                                      F-10
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Recent Accounting Pronouncements - Continued

In March 2004, the EITF reached a consensus on Issue No. 03-01,  "The Meaning of
Other-Than-Temporary  Impairment and Its  Application to Certain  Investments" (
EITF 03-01).  EITF 03-01 provides  guidance on  other-than-temporary  impairment
models for marketable  debt and equity  securities  accounted for under SFAS No.
115,  "Accounting for Certain  Investments in Debt and Equity  Securities" (SFAS
No. 115),  and  non-marketable  equity  securities  accounted for under the cost
method.  The EITF  developed a basic  three-step  model to  evaluate  whether an
investment is other-than-temporarily impaired. The FASB issued proposed FSP EITF
03-1-a in September  2004,  which delayed the effective date of the  recognition
and measurement  provisions of EITF 03-01. In November 2005, the FASB issued FSP
FAS  115-1 and 124-1  ("FSP")  which  nullifies  the  guidance  in EITF 03-1 for
determining  whether  impairment is  other-than-temporary.  However,  it carries
forward  many  of the  provisions  of  EITF  03-1.  The  guidance  of the FSP is
effective to reporting  periods  beginning  after December 15, 2005. The Company
does not expect the adoption of the FSP to have material impact on its financial
position and results of operations.

Foreign Currency Translation and Transactions

The  functional  currency  of  Forlink  is US$ and  the  financial  records  are
maintained and the financial statements prepared in US$. The functional currency
of FTHK is HK$ and its  financial  records  are  maintained,  and its  financial
statements  prepared,  in HK$. The functional  currency of Slait, FTCL, BFHX and
FTCD is Renminbi (RMB) and their  financial  records are  maintained,  and their
financial statements are prepared, in RMB.

Foreign currency transactions during the year are translated into each company's
denominated currency at the exchange rates ruling at the transaction dates. Gain
and loss  resulting  from  foreign  currency  transactions  are  included in the
consolidated  statement of  operations.  Assets and  liabilities  denominated in
foreign  currencies at the balance sheet date are translated into each company's
denominated  currency at year-end  exchange rates. All exchange  differences are
dealt with in the consolidated statements of operations.

The financial statements of the Company's operations based outside of the United
States have been translated into US$ in accordance with SFAS 52.  Management has
determined  that  the  functional  currency  for each of the  Company's  foreign
operations  is  its  applicable  local  currency.  When  translating  functional
currency  financial  statements into US$, year-end exchange rates are applied to
the  consolidated  balance  sheets,  while  average  period rates are applied to
consolidated statements of operations. Translation gains and losses are recorded
in translation reserve as a component of stockholders' equity.

The  value of the RMB is  subject  to  changes  in  China's  central  government
policies and to  international  economic and  political  developments  affecting
supply and demand in the China Foreign  Exchange  Trading System  market.  Since
1994,  the  conversion of RMB into foreign  currencies,  including USD, has been
based on rates set by the People's  Bank of China,  which are set daily based on
the previous day's interbank  foreign exchange market rates and current exchange
rates on the world  financial  markets.  Since 1994, the official  exchange rate
generally has been stable. In July 2005, the Chinese  government  announced that
it will no  longer  peg its  currency  exclusively  to USD but will  switch to a
managed floating  exchange rate based on market supply and demand with reference
to a basket of currencies  yet to be named by the People's Bank of China,  which
will likely increase the volatility of RMB as compared to USD. The exchange rate
of RMB to USD changed from RMB8.28 to RMB8.11 in late July.


                                      F-11
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

Exchange  rates  between  US$, HK$ and RMB had minimal  fluctuations  during the
periods presented.  The rates ruling of 2005 and 2004 are US$1: HK$7.75: RMB8.11
and US$1: HK$7.75: RMB8.28, respectively.

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Revenue Recognition

The Company  generally  provides  services under multiple element  arrangements,
which include software license fees,  hardware and software sales,  provision of
system integration services including consulting,  implementation,  and software
maintenance. The Company evaluates revenue recognition on a contract-by-contract
basis as the terms of each  arrangement  vary. The evaluation of the contractual
arrangements  often  requires  judgments and estimates that affect the timing of
revenue  recognized in the statements of operations.  Specifically,  the Company
may be required to make judgments about:

-     whether the fees  associated  with our  products and services are fixed or
      determinable;

-     whether collection of our fees is reasonably assured;

-     whether  professional  services are essential to the  functionality of the
      related software product;

-     whether we have the ability to make reasonably dependable estimates in the
      application of the percentage-of-completion method; and

-     whether  we have  verifiable  objective  evidence  of fair  value  for our
      products and services.

The Company recognizes  revenues in accordance with the provisions of Statements
of Position, or SOP, No. 97-2, "Software Revenue Recognition", as amended by SOP
No. 98-9, "Modification of SOP 97-2, Software Revenue Recognition,  with respect
to Certain  Transactions",  Staff  Accounting  Bulletin,  or SAB, 104,  "Revenue
Recognition".  SOP 97-2 and SAB 104 require among other matters, that there be a
signed contract evidencing an arrangement exists, delivery has occurred, the fee
is fixed or determinable, and collectibility is probable.

Software license revenue is recognized over the accounting  periods contained in
the  terms of the  relevant  agreements,  commencing  upon the  delivery  of the
software  provided that (1) there is evidence of an arrangement,  (2) the fee is
fixed or  determinable  and (3)  collection of the fee is  considered  probable.
Under  certain  arrangements,   the  Company  capitalize  related  direct  costs
consisting  of third party  software  costs and direct  software  implementation
costs. These costs are amortized over the term of the arrangement.


                                      F-12
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

In the case of maintenance  revenues,  vendor-specific  objective  evidence,  or
VSOE, of fair value is based on substantive renewal prices, and the revenues are
recognized ratably over the maintenance period.

In the case of consulting and implementation  services  revenues,  where VSOE is
based on  prices  from  stand-alone  sale  transactions,  and the  revenues  are
recognized as services are performed pursuant to paragraph 65 of SOP 97-2.


                                      F-13
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Revenue Recognition - Continued

For hardware transactions where software is incidental, we do not apply separate
accounting  guidance  to the  hardware  and  software  elements.  We  apply  the
provisions of EITF 03-05,  "Applicability  of AICPA  Statement of Position 97-2,
Software  Revenue  Recognition,  to Non-Software  Deliverables in an Arrangement
Containing  More-Than-Incidental  Software" (EITF 03-05). Per EITF 03-05, if the
software is considered not essential to the functionality of the hardware,  then
the hardware is not considered "software related" and is excluded from the scope
of SOP 97-2.  Such sale of  computer  hardware is  recognized  as revenue on the
transfer of risks and rewards of ownership,  which generally  coincides with the
time when the goods are delivered to customers and title has passed, pursuant to
SAB 104.

Remote hosting services,  where VSOE is based upon consistent pricing charged to
customers based on volumes and performance  requirements on a stand-alone  basis
and substantive  renewal terms, are recognized ratably over the contract term as
the services are performed.  The remote hosting  arrangements  generally require
the Company to perform one-time set-up  activities and include a one-time set-up
fee.  This  one-time  set-up fee is  generally  paid by the customer at contract
execution. The Company determined that these set-up activities do not constitute
a separate  unit of  accounting,  and  accordingly  the related  set-up fees are
recognized ratably over the term of the contract.

The Company  considers the  applicability  of EITF 00-3,  "Application  of AICPA
Statement  of SOP 97-2 to  Arrangements  That  Include the Right to Use Software
Stored on Another Entity's Hardware",  to the hosting services arrangements on a
contract-by-contract  basis. If the Company determines that the customer has the
contractual  right to take  possession  of the  Company's  software  at any time
during the hosting period without significant  penalty, and can feasibly run the
software on its own  hardware  or enter into  another  arrangement  with a third
party to hast the software,  a software element covered by SOP 97-2 exists. When
a  software  element  exists  in a hosting  services  arrangement,  the  Company
recognizes  the license,  professional  services and hosting  services  revenues
pursuant  to SOP  97-2,  whereby  the  fair  value  of the  hosting  service  is
recognized  as revenue  ratably  over the term of the hosting  contract.  If the
Company  determines that a software element covered by SOP 97-2 is not present a
hosting services  arrangement,  the Company will then recognize  revenue for the
hosting  services  arrangement  ratably  over the term of the  hosting  contract
pursuant to SAB 104.

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.


                                      F-14
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

Inventories

Inventories  are stated at the lower of cost or market.  For  inventory  used in
system   integration   services,   cost  is   calculated   using  the   specific
identification  method.  For the sale of computer  hardware,  cost is calculated
using first-in,  first-out method. Cost includes all costs of purchase,  cost of
conversion and other costs incurred in bringing the inventories to their present
location and  condition.  Market value is  determined  by reference to the sales
proceeds  of items sold in the  ordinary  course of  business  after the balance
sheet date or to management estimates based on prevailing market conditions.

Property, Plant, Equipment and Depreciation

Property, plant and equipment are stated at cost. Depreciation is computed using
the  straight-line  method to allocate the cost of  depreciable  assets over the
estimated useful lives of the assets as follows:

                                                           Estimated useful life
                                                                 (in years)
                                                           ---------------------
Building                                                            20
Computer equipment                                                   5
Office equipment                                                     5
Motor vehicle                                                       10

Major  improvements  of property,  plant and  equipment are  capitalized,  while
expenditures  for repair and  maintenance and minor renewals and betterments are
charged  directly to the  statements of operations as incurred.  When assets are
disposed of, the related cost and accumulated  depreciation  thereon are removed
from the accounts and any resulting gain or loss is included in the statement of
operations.

Computer Software Development Costs

In accordance with SFAS No. 86 "Accounting for the Cost of Computer  Software to
be Sold, Leased or Otherwise  Marketed" software  development costs are expensed
as incurred until  technological  feasibility in the form of a working model has
been established. Deferred software development costs will be amortized over the
estimated  economic  life of the  software  once the  product is  available  for
general release to customers.  For the current  software  products,  the Company
determined  that  technological  feasibility was reached at the point in time it
was available for general distribution. Therefore, no costs were capitalized.


                                      F-15
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Long-lived Assets

Long-lived  assets are reviewed  for  impairment  whenever  events or changes in
circumstances  indicate  that the  carrying  amount of the  assets  might not be
recoverable.  The Company does not perform a periodic  assessment  of assets for
impairment in the absence of such  information  or indicators.  Conditions  that
would necessitate an impairment  assessment include a significant decline in the
observable  market  value of an asset,  a  significant  change in the  extent or
manner in which an asset is used,  or a  significant  adverse  change that would
indicate  that the  carrying  amount  of an asset  or  group  of  assets  is not
recoverable.  For long-lived  assets to be held and used,  the Company  measures
fair value based on quoted  market  prices or based on  discounted  estimates of
future cash flows.

Advertising costs

All  advertising  costs incurred in the promotion of the Company's  products and
services  are  expensed  as  incurred.  Advertising  expenses  were  $48,920 and
$145,181 for 2005 and 2004 respectively.

Long term investments

The Company's long term investments  consist of (1) Equity Investments which are
accounted for in accordance with the equity method (the `Equity Method') and (2)
Cost Investments which are accounted for under the Cost Method. Under the Equity
Method each such investment is reported at cost plus the Company's proportionate
share of the  income or loss or other  changes in  stockholders'  equity of each
such investee  since its  acquisition.  The  consolidated  results of operations
include such proportionate share of income or loss. See Note 7.

Income Taxes

The  Company  accounts  for  income  taxes  in  accordance  with  SFAS  No.  109
"Accounting for Income Taxes".  Under SFAS No. 109,  deferred tax liabilities or
assets at the end of each period are  determined  using the tax rate expected to
be in effect when taxes are actually paid or recovered. Valuation allowances are
established when it is more likely than not that some or all of the deferred tax
assets will not be realized.


                                      F-16
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

Net Earnings Per Common Share

The Company  computes net earnings  per share in  accordance  with SFAS No. 128,
"Earnings per Share" and SEC Staff Accounting  Bulletin No. 98 ("SAB 98"). Under
the  provisions  of SFAS No.  128 and SAB 98,  basic net  earnings  per share is
computed by dividing the net earnings  available to common  shareholders for the
period by the  weighted  average  number of shares of common  stock  outstanding
during the  period.  The  calculation  of diluted net  earnings  per share gives
effect to common  stock  equivalents,  however,  potential  common  stock in the
diluted EPS  computation  are excluded in net loss  periods,  as their effect is
anti-dilutive.

Use of Estimates

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

Fair Values of Financial Instruments

The carrying amounts of certain  financial  instruments  approximate  their fair
values as of December  31, 2005 and 2004  because of the  relatively  short-term
maturity of these instruments.

Foreign Currency Risk

The RMB is not a freely  convertible  currency.  The  State  Administration  for
Foreign  Exchange,  under the authority of the People's Bank of China,  controls
the conversion of RMB into foreign  currencies.  The value of the RMB is subject
to changes in central  government  policies  and to  international  economic and
political developments affecting supply and demand in the China Foreign Exchange
Trading System market.

The PRC subsidiaries conduct their business  substantially in the PRC, and their
financial performance and position are measured in terms of RMB. Any devaluation
of the RMB  against  the USD would  consequently  have an adverse  effect on the
financial  performance and asset values of the Company when measured in terms of
USD. The PRC subsidiaries'  products are primarily procured,  sold and delivered
in the  PRC  for  RMB.  Thus,  their  revenues  and  profits  are  predominantly
denominated in RMB. Should the RMB devalue against USD, such  devaluation  could
have a material adverse effect on the Company's profits and the foreign currency
equivalent of such profits repatriated by the PRC entities to the Company.

Comprehensive Income

Accumulated other comprehensive  income (loss) is defined to include all changes
in equity except those resulting from investments by owners and distributions to
owners.  During the years presented,  the Company's  comprehensive income (loss)
comprised of foreign  currency  translation  adjustments  and is included in the
consolidated statements of shareholders' equity.


                                      F-17
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 2 - SUMMARY OF IMPORTANT ACCOUNTING POLICIES - Continued

Allowance for Doubtful Accounts

The Company  records an allowance for doubtful  accounts  based on  specifically
identified  amounts that the Company believes to be  uncollectible.  The Company
has a limited  number of customers  with  individually  large amounts due at any
given balance sheet date. Any  unanticipated  change in one of those  customer's
credit worthiness or other matters  affecting the  collectibility of amounts due
from such  customers,  could have a material affect on the results of operations
in the  period in which such  changes or events  occur.  After all  attempts  to
collect a receivable  have  failed,  the  receivable  is written off against the
allowance.

NOTE 3 - ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts  receivable are customer  obligations due under normal trade terms. The
Company  performs  continuing  credit  evaluations of the  customers'  financial
condition and the Company generally does not require collateral.

Senior management reviews accounts  receivable from time to time to determine if
any  receivables  will  potentially be  uncollectible.  The Company  include any
accounts  receivable  balances that are  determined to be  uncollectible  in the
allowance for doubtful accounts. After all attempts to collect a receivable have
failed,  the  receivable  is written  off against  the  allowance.  Based on the
information  available to the Company,  no allowance for doubtful accounts as of
December 31, 2005 is required.

NOTE 4 - OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

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

Other receivables                                   $ 44,484          $127,038
Deposits                                             424,017           119,305
Prepayments                                           47,286           194,058
                                                    --------          --------

                                                    $515,787          $440,401
                                                    ========          ========


                                      F-18
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 5 - INVENTORIES

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

Computer hardware and software                      $264,839          $ 24,639
                                                    ========          ========

All the inventories were purchased for identified system integration contracts.

NOTE 6 - RELATED PARTY

The Company has had and expects to have  transactions  in the ordinary course of
business with many of its  stockholders,  directors,  senior  officers and other
affiliates  (and  their  associates)  on  substantially  the same terms as these
prevailing for comparable transactions with others. Listed below is a summary of
material   relationship  or  transactions   with  the  Company's   stockholders,
directors, senior officers and other affiliates:

Amounts due from/to stockholders

The Company,  from time to time,  received  from or made  repayment to two major
stockholders who also are the management of the Company. The amounts due from/to
stockholders  do not bear any interest  and do not have clearly  defined term of
repayment.

As of December  31, 2005 and  December  31,  2004,  amount due from  stockholder
represented  travel  advances to Mr. Yi He who is a director and  stockholder of
the Company.

As of December 31, 2005 and December 31, 2004,  the amounts due to  stockholders
represented advances from stockholders.

Related Party Transactions

During the year,  net sales derived from All China  Logistics  Online Co., Ltd.,
(See Note 8) was $815,493  (2004:  $445,972).  As of December 31, 2005 and 2004,
accounts receivable from the affiliate was $343,160 and $157,609, respectively.


                                      F-19
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT, NET

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

Building                                        $   180,137         $   155,648
Computer and office equipment                     1,015,006             662,708
Motor vehicles                                      194,306             190,317
Construction in progress                                 --              24,152
                                                -----------         -----------

                                                  1,389,449           1,032,825
Less: Accumulated depreciation                     (505,341)           (334,304)
                                                -----------         -----------

                                                $   884,108         $   698,521
                                                ===========         ===========

The  building  is located in  Chengdu,  PRC and was  purchased  on behalf of the
Company by Mr. Yi He, one of the stockholders and directors of the Company. By a
stockholders' resolution passed on March 8, 1999, it was ratified that the title
to the building belonged to the Company.  The building was pledged as collateral
for the mortgage loan granted to Mr. Yi He. The related mortgage was in the name
of Mr. Yi He, however,  the Company agreed to pay Mr. Yi He amounts equal to the
required mortgage payments.  In 2005, the mortgage loan was fully repaid and the
title to the building was  transferred to the Company.  As of December 31, 2004,
the amount of  mortgage  loan was $44,584  and was  included in "Amounts  due to
stockholders" on the balance sheet.

NOTE 8 - LONG TERM INVESTMENTS

The  Company  invested  $760,870  in a  privately  held PRC  company,  All China
Logistics Online Co., Ltd., for a 17.8% equity interest. The Company records the
investment at cost because it does not have the ability to exercise  significant
influence over the investee.

In October 2004, the Company  invested  $36,232 in a privately held PRC company,
Huntington Network Technologies  (Beijing) Co., Ltd. ("HNTB"),  for a 30% equity
interest  through BFHX. The investment in HNTB is accounted for under the equity
method  of  accounting  due to the  Company's  significant  influence  over  the
operational and financial policies of HNTB and accordingly,  the share of HNTB's
net loss and  impairment  of $37,516  (2004:  profit of $899) during the year is
included in investment loss in the accompanying statements of operations.

On October 24, 2005, the Company set up a corporate  joint venture,  named China
Liquid Chemical  Exchange Company Limited,  a limited  liability company in PRC,
and  shares  the risk and  rewards  up to the  equity  interest  of  17.5%.  The
consideration is made in form of the internally developed "For-online Electronic
Trading System" without any cash outflow.  Therefore,  the Company  recorded the
contribution of software at the lower of its carrying amount or fair value,  and
accounted  for under the equity  method under SOP 78-9. Up to December 31, 2005,
the share of loss was $14,478,  which has not been recorded in the  accompanying
statements of operations as the carrying amount of investment cost is zero.


                                      F-20
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 9 - GOODWILL

The  Company  accounted  for the  acquisition  in  accordance  with SFAS No. 141
"Business Combinations", which resulted in the recognition of goodwill. Goodwill
represents the excess of  acquisition  cost over the estimated fair value of net
assets  acquired as of August 27, 2001 as described  in Note 1. The  acquisition
cost is based upon a value of $0.34 per share,  the closing  price of  Forlink's
common   stock  on  January  11,  2001  (date  of  the   agreement  of  Plan  of
Reorganization),  plus a value  of $0.15  per  option  determined  using a Black
Scholes model on January 11, 2001.

The purchase price,  purchase-price allocation, and financing of the transaction
are summarized as follows:

      Consideration paid as:
        Common stock of Forlink issued                        $ 8,659,800
        Options of Forlink issued                                 125,550
                                                              -----------

                                                                8,785,350
        Allocated to historical book value/fair value of
          Forlink's assets and liabilities                       (134,781)
                                                              -----------

        Excess purchase price over allocation to
          identifiable assets and liabilities (goodwill)      $ 8,650,569
                                                              ===========

As the  acquisition  was  completed  after June 30,  2001,  no  amortization  of
goodwill  was  necessary in  accordance  with SFAS No. 142  "Goodwill  and other
Intangible Assets".

During the quarter ended June 30, 2002, the Company  completed the first step of
the transitional goodwill impairment test (i.e. comparing the carrying amount of
the net  assets,  including  goodwill,  with the fair value of the Company as of
January  1,  2002).  Based on the  results  of the first  step of the test,  the
Company believes that there was no impairment of goodwill as of January 1, 2002.

However,  in the quarter ended June 30, 2002,  the closing  trading price of the
Company's common stock had fallen to $0.05 per share, which indicated that there
might be a potential  impairment of goodwill  since January 1, 2002.  Therefore,
the Company  performed an additional  impairment  test as of June 30, 2002. As a
result of the impairment  test  performed,  which was based on the fair value of
the Company as determined by the trading price of the Company's common stock, an
impairment  of  $5,308,760  was  recorded  in the quarter  ended June 30,  2002.
Because the closing  trading price of the Company's  common stock as of December
31, 2002 had fallen to $0.04 per share,  a total  impairment of  $6,966,546  was
recorded for the year ended December 31, 2002.

As of  December  31,  2003,  2004 and 2005,  the  Company  completed  the annual
impairment  test. Based on the result of the first step of the test, the Company
believes  that there was no further  impairment  of goodwill as of December  31,
2003, 2004 and 2005.


                                      F-21
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 10 - OTHER PAYABLES AND ACCRUED EXPENSES

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

Other payables                                     $ 58,907           $ 70,765
Accrued salaries & wages                            171,508             98,418
Other accrued expenses                               56,830             35,069
                                                   --------           --------

                                                   $287,245           $204,252
                                                   ========           ========

NOTE 11 - INCOME TAX

According to the relevant PRC tax rules and  regulations,  FTCL and BFHX,  which
are recognized as New  Technology  Enterprises  operating  within a New and High
Technology  Development  Zone, are enterprises  entitled to an Enterprise Income
Tax ("EIT") rate of 15%.

Pursuant  to  approval  documents  dated  September  23, 1999 and August 2, 2000
issued by the Beijing Tax Bureau and State Tax Bureau respectively,  FTCL, which
is recognized as a New  Technology  Enterprise,  was an enterprise  eligible for
full  exemption  from EIT for the fiscal years 1999,  2000,  2001 and 2002.  The
Company  also became  eligible to 50% EIT  reduction at the rate of 7.5% for the
fiscal years 2003, 2004 and 2005.

Pursuant to an  approval  document  dated  January  19,2004  issued by State Tax
Bureau,  BFHX,  which  is  recognized  as a  New  Technology  Enterprise,  is an
enterprise  eligible for full exemption from EIT for fiscal years 2004, 2005 and
2006.

Hong Kong profits tax is calculated at 17.5% on the estimate  assessable profits
of FTHK for the year.

The EIT rates for FTCD,  BFKT,  QJT and XKT range from 15% to 33%. No  provision
for EIT was made for  BFKT,  QJT and XKT as they  had not  commenced  operations
during the year.

Income tax  represents  current PRC income tax and Hong Kong profit tax which is
calculated at the respective statutory income tax rates on the assessable income
for the year ended December 31, 2005 and 2004.


                                      F-22
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 11 - INCOME TAX - Continued

Reconciliation  between the provision for income taxes  computed by applying the
statutory  tax rate in  Mainland  China to income  before  income  taxes and the
actual provision for income taxes is as follows:

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

Provision for income taxes at statutory tax
rate of 15%                                          $(213,774)      $  77,499
Tax holidays and concessions                            36,535         (57,538)
Effect of different tax rate of a subsidiary
operating in Hong Kong                                  (4,678)          4,507
Permanent difference                                    38,403          31,696
Increase in valuation allowances                        88,723           1,508
Others                                                  23,809          (9,063)
                                                     ---------       ---------

Effective tax                                        $ (30,982)      $  48,609
                                                     =========       =========

The components of deferred tax assets are as follows:

                                                    December 31,    December 31,
                                                        2005            2004
                                                    ------------    ------------
Net operating loss carried forwards                  $  90,231       $   1,508
Less: Valuation allowances                             (90,231)         (1,508)
                                                     ---------       ---------

                                                     $      --       $      --
                                                     =========       =========

The provision for income tax consisted of:

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

Current PRC corporate income tax                     $     772       $  16,855
Current Hong Kong profit tax                           (31,754)         31,754
Deferred tax                                                --              --
                                                     ---------       ---------

Income tax (recoverable)/payable                     $ (30,982)      $  48,609
                                                     =========       =========


                                      F-23
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 12 - OTHER TAXES RECOVERABLE / (PAYABLE)

Other taxes payable  comprise mainly  Valued-Added  Tax ("VAT") and Business Tax
("BT").  The  Company  is subject to output VAT levied at the rate of 17% of its
operating revenue. The input VAT paid on purchases of materials and other direct
inputs  can be used to offset the  output  VAT  levied on  operating  revenue to
determine the net VAT payable or  recoverable.  BT is charged at a rate of 5% on
the revenue from other services.

As part of the PRC government's  policy of encouraging  software  development in
the PRC, companies that fulfill certain criteria set by the relevant authorities
and which  develop  their own software  products and have the software  products
registered with the relevant  authorities in the PRC are entitled to a refund of
VAT  equivalent  to the excess over 3% of revenue  paid in the month when output
VAT exceeds input VAT (excluding export sales). The excess portion of the VAT is
refundable  and is recorded by the Company on an accrual  basis.  The VAT rebate
included  in  other   income  was  $155,407  and  $166,623  in  2005  and  2004,
respectively.

NOTE 13 - SHORT TERM BORROWINGS

The short  term bank loan is a 6-month  loan that  bears  interest  at a rate of
0.4875% per month, and the maturity date of the loan is March 29, 2006. The bank
loan is guaranteed by an unrelated third party.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Operating Lease Commitment

During the years ended  December 31, 2005 and 2004,  the Company  incurred lease
expenses  amounting to $547,974 and  $367,626  respectively.  As of December 31,
2005 and 2004,  the  Company had  commitments  under  non-cancellable  operating
leases, requiring annual minimum rentals as follows:

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

January 1, 2005 to December 31, 2005                       --          203,748
January 1, 2006 to December 31, 2006                  451,181          172,925
January 1, 2007 to December 31, 2007                  109,628           41,221
January 1, 2008 to December 31, 2008                       --               --
                                                     --------         --------

                                                     $560,809         $417,894
                                                     ========         ========


                                      F-24
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 15 - STOCK PLAN

On June  1,  2000,  the  Company  adopted  a plan  of  stock-based  compensation
incentives for selected eligible  participants who are the staff and consultants
of Forlink. This plan is known as the "Forlink Software Corporation,  Inc. Stock
Plan" ("the  Plan").  The total  number of shares of common  stock  reserved for
issuance  by Forlink  either  directly  as stock  awards or  underlying  options
granted  under  this Plan shall not be more than  1,600,000.  Under the terms of
this Plan,  options can be issued to purchase shares of Forlink's  common stock.
The Board of Directors  shall  determine the terms and conditions of each option
granted to eligible participants, which terms shall be set forth in writing. The
terms and conditions so set by the Board of Directors may vary from one eligible
participant to another.


                                      F-25
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 15 - STOCK PLAN - Continued

The following table summarizes the activity on stock options under the Plan:

                                                                Weighted average
                                              Number of shares   exercise price

Outstanding at December 31, 2002                  1,337,000          $1.00
Granted                                           1,968,000          $2.28
Exercised                                                 0              0
Forfeited or Cancelled                              631,000          $5.00
Outstanding at December 31, 2003, 2004, 2005      1,337,000          $1.00

All  outstanding  options  at  December  31,  2005  and  December  31,  2004 are
exercisable.

In  March  2000,   the  Financial   Accounting   Standards   Board  issued  FASB
Interpretation  No. 44,  Accounting  for Certain  Transactions  involving  Stock
Compensation, an interpretation of APB Opinion No. 25. The Interpretation, which
has been adopted  prospectively as of July 1, 2000,  requires that stock options
that have been  modified  to  reduce  the  exercise  price be  accounted  for as
variable.  Forlink  re-priced  337,000 stock options on September 21, 2000,  and
reduced the exercise price to $1 per share, the then-current market price of the
stock. Under the Interpretation,  the options are accounted for as variable from
September  21,  2000  until  the  options  are  exercised,  forfeited  or expire
unexercised.  Since  September 21, 2000, the market price of the Forlink's stock
decreased to a level lower than the exercise  price.  Accordingly,  there are no
effects of adopting the  Interpretation for the year ended December 31, 2005 and
2004.

On August 16, 2002, the Company  established a plan of stock-based  compensation
incentives for selected eligible  participants of the Company and its affiliated
corporations. This plan is known as the "Forlink Software Corporation, Inc. 2002
Stock  Plan"  (the  "Plan  2002").  The total  number of shares of common  stock
reserved for issuance by Forlink  either  directly as stock awards or underlying
options granted under the Plan 2002 shall not be more than 8,000,000.  Under the
terms of the Plan 2002,  options can be issued to purchase  shares of  Forlink's
common stock. The Board of Directors shall determine the terms and conditions of
each option granted to eligible participants,  which terms shall be set forth in
writing. The terms and conditions so set by the Board of Directors may vary from
one eligible participant to another.


                                      F-26
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 15 - STOCK PLAN - Continued

On September 7, 2004,  3,315,000 options were granted to the Company's employees
to  purchase  the  Company's  shares of common  stock,  $0.001 par value,  at an
exercise price of $0.10 per share.  Of the 3,315,000  options,  800,000  options
were granted to an employee with 5 years vesting period,  2,515,000 options were
granted to  employees  with 3 years  vesting  period.  The  expiration  date for
2,385,000  options is  December  30, 2006 (the  "December  2006  Options").  The
expiration  date for 130,000 options is June 30, 2007 (the "June 2007 Options").
The  expiration  date for  800,000  options  is June 30,  2009 (the  "June  2009
Options").  On September 7, 2004, 854,500 options were vested to employees.  The
market  price of the stock as of September 7, 2004 and January 1, 2005 was $0.10
per share.

The  following  table  summarizes  the activity on stock  options under the Plan
2002:

                                                                Weighted average
                                        Number of shares         exercise price

Granted on September 7, 2004               3,315,000                  $0.10
Vested                                       854,500                  $0.10
Exercised                                    (15,000)                 $0.10
Forfeited or Cancelled                             0                  $0.00
Outstanding at December 31, 2004           3,300,000                  $1.00
Exercised                                   (136,500)                 $0.10
Forfeited or Cancelled                      (132,500)                 $0.10
Outstanding at December 31, 2005           3,031,000                  $0.10

The  weighted  average fair value of the December  2006  Options,  the June 2007
Options and the June 2009  Options  granted on the date of grant,  were  $0.042,
$0.046 and $0.058 per option, respectively.

The Company  calculated the fair value of each option award on the date of grant
using the  Black-Scholes  option pricing model.  The following  assumptions were
used for each respective period.

                                   December 2006     June 2007     June 2009
                                      Options         Options        2005
                                   -------------     ---------     ---------

Risk-free interest rate                2.17%           2.28%         2.66%
Expected lives (in years)              1.167           1.417         2.417
Dividend yield                          0%               0%           0%
Expected volatility                    100%             100%         100%


                                      F-27
<PAGE>

                       Forlink Software Corporation, Inc.

                   Notes to Consolidated Financial Statements

(Expressed in US Dollars)

NOTE 16 - CONCENTRATION OF A CUSTOMER

During the year,  the following  customers  accounted for more than 10% of total
net revenue:

                                         Percentage of          Percentage of
                                           net sales         accounts receivable
                                       2005        2004       2005        2004
                                       ----        ----       ----        ----

Customer A                               70%         89%        35%         40%
Customer B                               14%          *         40%          *

NOTE 17 - RESTATEMENT OF 2004 FINANCIAL STATEMENTS

The Company restated certain items of the consolidated  statements of operations
for the year ended December 31, 2004 for better  presentation  of the figures of
net sales and other income.  The Company removed,  from its "Net Sales", the VAT
rebate that the Company received in connection with software sales and presented
the VAT rebate as part of the "Other  Income" in the  consolidated  statement of
operations for the fiscal year 2004. Such VAT rebate was previously  included as
part of the net sales in the consolidated statement of operations for the fiscal
year 2004. As described in note 12,  software  sales in PRC are subject to a 17%
VAT and the Company is responsible for billing,  collecting,  and submitting the
tax to the  Chinese  tax  authorities  (i.e.  the  PRC  Local  and  Federal  Tax
Authorities)  for  amounts  attributable  to both VAT  related  receivables  and
payables. However, to encourage local software development in China, the Chinese
tax authorities provide a refund of a certain percentage of the VAT to companies
who  develop  their  own  software  products  and  have  the  software  products
registered with the relevant  authorities in China.  The Company is qualified to
apply for such VAT rebate and thus if the net amount of the VAT payable  exceeds
3% of software  sales,  the excess  portion of the value added tax is refundable
upon the Company's application to the tax authority for such VAT rebate.

These corrections in 2004 have no effect on the Company's  consolidated  balance
sheet,  consolidated statements of cash flows and stockholders' equity contained
in the financial statements. Additionally, the restatements would not affect net
income as reported in the Company's consolidated  statements of operations.  The
following  is a  summary  of the  effects  of  these  changes  on the  Company's
consolidated statements of operations for the fiscal year 2004:

<TABLE>
<CAPTION>
                                            Consolidated Statements of Operations

                                       As previously
For the Year Ended December 31, 2004      reported         Adjustments     As restated
                                       -------------                       -----------
<S>                                     <C>                 <C>            <C>
Net sales                               $10,166,733         (166,623)      $10,000,110

Gross profit                              3,787,181         (166,623)        3,620,558

Operating (loss) / profit                   505,154         (166,623)          338,531

Other income, net                       $        --          166,623       $   166,623
</TABLE>


                                      F-28
<PAGE>

Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.

None.

Item 8A. Controls and Procedures.

Based on their most recent evaluation,  which was completed as of the end of the
period  covered  by this  annual  report on Form  10-KSB,  the  Company's  Chief
Executive Officer and Chief Financial  Officer believe the Company's  disclosure
controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
15d-15(e) are effective to ensure that  information  required to be disclosed by
the Company in this report is  accumulated  and  communicated  to the  Company's
management,  including its principal  executive officer and principal  financial
officer,   as  appropriate,   to  allow  timely  decisions   regarding  required
disclosure.

During  the last  fiscal  quarter to which this  report  relates,  there were no
changes  in  the  Company's  internal  controls  or  other  factors  that  could
significantly  affect these controls  subsequent to the date of their evaluation
and there were no corrective  actions with regard to  deficiencies  and material
weaknesses.

Item 8B. Other Information.

None.


                                       25
<PAGE>

                                    PART III

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

As of  December  31, 2005 and as of the date of the filing of this  report,  the
directors and executive  officers of the Company,  their ages,  positions in the
Company,  the dates of their  initial  election  or  appointment  as director or
executive officer,  and the expiration of the terms as directors (if applicable)
were as follows:

<TABLE>
<CAPTION>
Name                Age     Position                                      Director Since
----------------------------------------------------------------------------------------
<S>                 <C>     <C>                                            <C>
Yi He               39      Chief Executive Officer, Chairman and          August 2001
                            Director

Hongkeung Lam       53      Chief Financial Officer, Chief Accounting      August 2001
                            Officer, Secretary and Director

Guoliang Tian       66      Director                                         May 2003

Yu Fang             60      Director                                         May 2003
</TABLE>

The  Company's  directors  hold office  until their  successors  are elected and
qualified.  The  Company's  officers  are  appointed  annually  by the  Board of
Directors and serve at the pleasure of the Board.

Yi He has been a director of the Company since August 2001. From January 1998 to
August of 2001, Mr. He was the Founder,  Chairman and President of Beijing SLAIT
Science & Technology  Development  Limited Co. From March 1993 to January  1998,
Mr. He was the President of Beijing Sunny Computer System Engineering Co. Mr. He
has a Master Degree in Computer Science from Peking University.

Hongkeung  Lam, has been a director of the Company since August 2001.  From July
2000 to  August  2001,  Mr.  Lam  was the  Chairman  of  Beijing  Hi Sun In Soft
Information  Technology  Ltd.  From  June  1998 to June  2000,  Mr.  Lam was the
Chairman and President of Beijing Jinshili Information Technology Ltd. From 1992
to  February  1998,  Mr. Lam was the  Manager of Beijing  office of Taiwan  Acer
Computer (Far East) Co.

Guoliang Tian has been a director of the Company since May 2003. Currently,  Mr.
Tian is a Professor  with the Institute of Remote  Sensing  Applications  at the
Chinese Academy of Sciences, where he has been employed since 1986, and he is in
charge of the study of natural disaster monitoring and assessment.  His areas of
experience  and interest  involve the use of remote sensing data to research and
monitor  geographic and atmospheric  changes.  He has published 105 papers and 4
books.  In 1965, Mr. Tian received a degree in physics from Jilin  University of
China.

Yu Fang has been a director of the Company since May 2003. Currently Mr. Fang is
a Professor at Peking University,  where he has been employed since 1987. He has
served as the Vice  Director of the Institute of Remote  Sensing and  Geographic
Information  System at Peking  University  since 2001.  From 1982 until 2000, he
worked in the Department of Computer Science & Technology at Peking  University,
and served as Vice Chairman of the  Department of Computer  Science & Technology
at Peking University from 1987 to 1999. His areas of experience and interest are
software engineering,  geographic  information systems,  management  information
systems,  and parallel  processing and distribution  systems.  He has written 68
articles and 5 books.  In 1982,  Mr. Fang received a Masters  Degree in Computer
Science at Peking University after graduating from the Department of Mathematics
at Peking University in 1968.


                                       26
<PAGE>

Audit Committee and Audit Committee Financial Expert Disclosure

The Company does not have a separately  designated  standing audit  committee at
this time because it is not required to do so. Accordingly, the Company does not
have an audit committee financial expert.

Code of Ethics

On August 3, 2004,  the Board of Directors  established a written code of ethics
that applies to the Company's senior executive and financial officers. A copy of
the code of ethics is posted on the Corporation's web-site at www.forlink.com.

Compliance With Section 16(a) of the Securities Exchange Act of 1934

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers and directors,  and persons who own more than 10% of a registered class
of the Company's equity securities,  to file reports of ownership and changes in
ownership  with  the  Securities  and  Exchange  Commission  ("SEC").  Officers,
directors,  and greater than 10%  shareholders are required by SEC regulation to
furnish the Company  with  copies of all  Section  16(a) forms they file.  Based
solely  on  its  review  of  copies  of  such   reports   received   or  written
representations  from certain  reporting  persons,  the Company  believes  that,
during the year ended December 31, 2005,  all Section 16(a) filing  requirements
applicable  to its  officers,  directors  and ten percent  shareholders  were in
compliance with SEC regulations.

Item 10. Executive Compensation.

The following summary  compensation table sets forth the aggregate  compensation
awarded  to,  earned by, or paid to the chief  executive  officer  and the other
executive   officers  at  December  31,  2005,  2004  and  2003,   whose  annual
compensation exceeded $100,000 for the fiscal year ended December 31, 2005, 2004
and 2003:


                                       27
<PAGE>

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                       Annual Compensation
                                                           ---------------------------------------

                 (a)                         (b)             (c)           (d)            (e)
                Name                         Year                                        Other
                And                         Ended                                        Annual
             Principal                     December        Salary         Bonus       Compensation
             Position                         31             ($)           ($)            ($)
--------------------------------------------------------------------------------------------------
<S>                              <C>         <C>           <C>             <C>            <C>
Yi He, Chief Executive Officer (n1)          2005          $37,285         -0-            -0-
                                             2004          $47,226         -0-            -0-
                                             2003          $21,739         -0-            -0-
</TABLE>

<TABLE>
<CAPTION>
                                                  Long Term Compensation
                                          ---------------------------------------
                                                    Awards                Payouts
                                          ---------------------------------------

          (a)                  (b)           (f)             (g)            (h)              (i)
          Name                Year        Restricted                                         All
          And                 Ended         Stock          Shares          LTIP             Other
       Principal            December       Award(s)      Underlying       Payouts       Compensation
        Position               31            ($)           Options          ($)              ($)
----------------------------------------------------------------------------------------------------
<S>                           <C>            <C>             <C>            <C>              <C>
Yi He, Chief Executive        2005           -0-             -0-            -0-              -0-
Officer (n1)                  2004           -0-             -0-            -0-              -0-
                              2003           -0-             -0-            -0-              -0-
</TABLE>

(n1)  Yi He became the Company's Chief Executive Officer on May 15, 2003.

Because no options,  stock appreciation rights or Long-Term Incentive Plans have
been  granted  to any of the  executive  officers,  the  information  and tables
otherwise  required by this Item which relate to such forms of compensation have
been omitted.

Employment Contracts

There are no formal  employment  agreements with any of the Company's  executive
officers.

Compensation of Directors

The Company paid no compensation to its Directors for any services provided as a
Director  during the year ended December 31, 2005.  There are no other formal or
informal  understandings or arrangements relating to compensation;  however, the
Directors  may be reimbursed  for all  reasonable  expenses  incurred by them in
conducting the Company's  business.  These expenses would include  out-of-pocket
expenses for such items as travel, telephone, and postage.


                                       28
<PAGE>

Employee Benefit and Consulting Services Compensation Plans

As of December 31, 2005,  the Company had two  Employee  Benefit and  Consulting
Services Compensation Plans in effect:

1. On June 1, 2000,  the  Company  adopted an employee  benefit  and  consulting
services compensation plan entitled the Forlink Software Corporation, Inc. Stock
Plan. The plan covers up to 1,600,000  shares of common stock.  The plan has not
previously been approved by security holders.

2. On August 16, 2002,  the Company  adopted an employee  benefit and consulting
services compensation plan entitled the Forlink Software Corporation,  Inc. 2002
Stock Plan. The plan covers up to 8,000,000 shares of common stock. The plan has
not previously been approved by security holders.

Under each plan,  the Company may issue common stock and/or  options to purchase
common stock to certain officers, directors and employees and consultants of the
Company  and its  subsidiaries.  The purpose of each plan is to promote the best
interests of the Company and its  shareholders  by providing a means of non-cash
remuneration to eligible  participants who contribute to operating  progress and
earning power of the Company.  Each plan is  administered by the Company's Board
of Directors or a committee  thereof which has the  discretion to determine from
time to time the eligible participants to receive an award; the number of shares
of stock  issuable  directly or to be granted  pursuant to option;  the price at
which the option may be exercised or the price per share in cash or cancellation
of fees or other  payment which the Company or its  subsidiaries  is liable if a
direct issue of stock and all other terms on which each option shall be granted.

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following  table sets forth,  as of March 15, 2006,  the stock  ownership of
each person known to the Company to be the beneficial owner of five percent (5%)
or more of the  Company's  Common  Stock,  each  executive  officer and director
individually and all executive and directors of the Company as a group.

<TABLE>
<CAPTION>
      Name and Address of                             Amount and              Percent Owned
         Beneficial Owner                              Nature of            Beneficially and
                                                      Beneficial                of Record
                                                       Ownership                  (n2)
                                                         (n1)
      --------------------------------------------------------------------------------------
<S>                                                   <C>                         <C>
      Yi He *                                         25,800,000                  33.5%

      Hongkeung Lam *                                 10,500,000                  13.7%

      Guoliang Tian *                                     -0-                       --

      Yu Fang *                                           -0-                       --

      Jing Zeng                                        5,760,000                   7.5%
      9/F Fang Yuan Mansion
      No. 56 Zhongguancun South Rd Yi Haidian
      District, Beijing, China

      All officers and directors of the               36,300,000                  47.2%
      Company as a group (four persons)
</TABLE>


                                       29
<PAGE>

* An officer  and/or  director of the Company.  The address for each officer and
director is in care of the Company at 9/F Fang Yuan Mansion, No. 56 Zhongguancun
South Rd Yi Haidian District, Beijing, China.

      (n1)  Unless  otherwise  indicated,  all  shares  are  directly  owned and
            investing power is held by the persons named in the table.

      (n2)  Based upon 76,924,707 shares of Common Stock outstanding as of March
            15, 2006.

Equity Compensation Plan Information

      The following  information  concerning the Company's  equity  compensation
plan is as of the end of the year ended December 31, 2005:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                Number of securities to       Weighted-average       Number of securities
                                be issued upon exercise      exercise price of       available for future
                                of outstanding options,    options, warrants and     issuance under equity
                                  warrants and rights              rights              compensation plans
                                                                                     (excluding securities
                                                                                    reflected in column (a))
       Plan category                      (a)                        (b)                       (c)
------------------------------------------------------------------------------------------------------------
<S>                                    <C>                       <C>                       <C>
Equity compensation plans
approved by security holders                 N/A                       N/A                       N/A
------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders                                3,031,000                 $    0.10                 4,685,000
------------------------------------------------------------------------------------------------------------
Total                                  3,031,000                 $    0.10                 4,685,000
------------------------------------------------------------------------------------------------------------
</TABLE>

As of December 31, 2005,  the Company had two  Employee  Benefit and  Consulting
Services Compensation Plans in effect:

1. On June 1, 2000,  the  Company  adopted an employee  benefit  and  consulting
services compensation plan entitled the Forlink Software Corporation, Inc. Stock
Plan. The plan covers up to 1,600,000  shares of common stock.  The plan has not
previously been approved by security holders.

2. On August 16, 2002,  the Company  adopted an employee  benefit and consulting
services compensation plan entitled the Forlink Software Corporation,  Inc. 2002
Stock Plan. The plan covers up to 8,000,000 shares of common stock. The plan has
not previously been approved by security holders.

Under each plan,  the Company may issue common stock and/or  options to purchase
common stock to certain officers, directors and employees and consultants of the
Company  and its  subsidiaries.  The purpose of each plan is to promote the best
interests of the Company and its  shareholders  by providing a means of non-cash
remuneration to eligible  participants who contribute to operating  progress and
earning power of the Company.  Each plan is  administered by the Company's Board
of Directors or a committee  thereof which has the  discretion to determine from
time to time the eligible participants to receive an award; the number of shares
of stock  issuable  directly or to be granted  pursuant to option;  the price at
which the option may be exercised or the price per share in cash or cancellation
of fees or other  payment which the Company or its  subsidiaries  is liable if a
direct issue of stock and all other terms on which each option shall be granted.


                                       30
<PAGE>

Item 12. Certain Relationships and Related Transactions.

During the last two fiscal  years,  the  Company  did not enter into any related
transactions in which an officer,  director, or beneficial owner of more than 5%
of the Company's voting securities had a material interest.

Item 13. Exhibits.

Exhibit
Number      Description
------      -----------

3.1         Articles  of  Incorporation,  as amended  and  currently  in effect.
            (Incorporated by reference to Exhibit No. 3.1 of the Form 10-QSB for
            the quarter ended March 31, 2000, and filed on May 13, 2000.)

3.2         Bylaws dated May 11, 2000. (Incorporated by reference to Exhibit No.
            3.2 of the Form 10-QSB for the quarter  ended  March 31,  2000,  and
            filed on May 13, 2000.)

10.1        Forlink  Software  Corporation,  Inc. Stock Plan dated June 1, 2000.
            (Incorporated   by  reference  to  Exhibit  10.1  of  the  Company's
            Registration  Statement on Form S-8 (file no.  333-41700) filed July
            19, 2000.)

10.2        Forlink Software Corporation,  Inc. 2002 Stock Plan dated August 16,
            2002.  (Incorporated  by reference to Exhibit 10.2 of the  Company's
            Registration  Statement  on Form S-8  (file  no.  333-100645)  filed
            October 21, 2002.)

21.1        List of Subsidiaries.  (Incorporated by reference to Exhibit 21.1 of
            the  Company's  Annual  Report  of Form  10-KSB  for the year  ended
            December 31, 2003.)

31.1        Section  302  Certification  by the  Corporation's  Chief  Executive
            Officer. (Filed herewith.)

31.2        Section  302  Certification  by the  Corporation's  Chief  Financial
            Officer. (Filed herewith.)

32.1        Section  906  Certification  by the  Corporation's  Chief  Executive
            Officer. (Filed herewith.)

32.2        Section  906  Certification  by the  Corporation's  Chief  Financial
            Officer. (Filed herewith.)


                                       31
<PAGE>

Item 14. Principal Accountant Fees and Services.

The  Company's  Board of Directors  reviews and approves  audit and  permissible
non-audit  services  performed by BDO McCabe Lo Limited ("BDO"),  as well as the
fees charged by BDO for such services.  In its review of non-audit  service fees
and its appointment of BDO as the Company's independent  accountants,  the Board
of Directors  considered  whether the  provision of such  services is compatible
with  maintaining  BDO's  independence.  All of the  services  provided and fees
charged by BDO in 2005 and 2004 were pre-approved by the Board of Directors.

Audit Fees

The  aggregate  fees billed for  professional  services  rendered by BDO for the
audit of our  annual  financial  statements  and the  reviews  of the  financial
statements  included in our  quarterly  reports on Form 10-QSB for fiscal  years
2005 and 2004 were $69,680 and $55,500, respectively.

Audit-Related Fees

There  were no other fees  billed by BDO  during  the last two fiscal  years for
assurance and related  services that were reasonably  related to the performance
of the audit or review of the Company's  financial  statements  and not reported
under "Audit Fees" above.

Tax Fees

There were no aggregate fees billed for  professional  services  rendered by BDO
for tax compliance services in fiscal years 2005 and 2004.

All Other Fees

There  were no other fees  billed by BDO  during  the last two fiscal  years for
products and services provided by BDO.

                            [SIGNATURES PAGE FOLLOWS]


                                       32
<PAGE>

                                   SIGNATURES

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

                                        FORLINK SOFTWARE CORPORATION, INC.
                                        (Registrant)


Date: March 31, 2006                    By: /s/ Yi He
                                            ------------------------------------
                                            Yi He
                                            Chief Executive Officer


Date: March 31, 2006                    By: /s/ Hongkeung Lam
                                            ------------------------------------
                                            Hongkeung Lam
                                            Chief Financial and Accounting
                                            Officer

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


                                        By: /s/ Yi He
                                            ------------------------------------
                                             Yi He, Director

                                        Date:  March 31, 2006


                                        By: /s/ Hongkeung Lam
                                            ------------------------------------
                                             Hongkeung Lam, Director

                                        Date:  March 31, 2006


                                        By: /s/ Guoliang Tian
                                            ------------------------------------
                                             Guoliang Tian, Director

                                        Date:  March 31, 2006


                                        By: /s/ Yu Fang
                                            ------------------------------------
                                             Yu Fang, Director

                                        Date:  March 31, 2006


                                       33