**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, 2007**o
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the transition period from ____________ to ______________**


**Commission
      File Number 0-18731**





**FORLINK
      SOFTWARE CORPORATION, INC.**


(Exact
      name of Registrant as specified in its charter)





**Nevada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **87-0438458**
              (I.R.S.
                Employer
              Identification
                No.)





**9F
                Shenzhou Mansion, No. 31**
              **ZhongGuanCun
                South Road**
              **Haidian
                District, Beijing, P.R. China**
              (Address
                of principal executive offices)
            **N/A**
              (Zip
                Code)





**(0086)
                10 6811 8866**
              (Issuer's
                telephone number, including area code)Securities
                registered pursuant to Section 12(b) of the Act:Title
                of each class
              **None**
            Name
                of each exchange on which registered
              **None**Securities
                registered pursuant to Section 12(g) of the Act:Title
                of Class
              **Common
                Stock, $.001 par value**




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that 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 o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and will not 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 o No x





The
      issuer's revenues for its most recent fiscal year: $9,121,248




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates of the Registrant on March 11, 2008 was approximately
      $2,477,129 .
      The per
      share stock price for computational purposes was $1.40, based on the closing
      sale price per share for the Registrant's common stock on the OTC Bulletin
      Board
      on March 11, 2008. This value is not intended to be a representation as to
      the
      value or worth of the Registrant's common stock. The number of non-affiliates
      of
      the Registrant has been calculated by subtracting the number of shares held
      by
      persons affiliated with the Registrant from the number of outstanding
      shares.





The
      number of shares of the Registrant's common stock, $.001 par value, outstanding
      on March 11, 2008 was 4,641,098 shares.





Transitional
      Business Disclosure Format (Check One). Yes o No x










TABLE
      OF
      CONTENTS


TO
      ANNUAL
      REPORT ON FORM 10-KSB


FOR
      YEAR
      ENDED DECEMBER 31, 2006





PagePART
                IItem
                1.
            Description
                of Business
            
            4Item
                2.
            Description
                of Property
            
            12Item
                3.
            Legal
                Proceedings
            
            13Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            13




PART
                IIItem
                5.
            Market
                for Registrant's Common Equity and Related StockholderMatters
            
            14Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            
            15Item
                7.
            Financial
                Statements
            
            27Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            29Item
                8A.
            Controls
                and Procedures
            
            29Item
                8B.
            Other
                Information
            
            30PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons and Corporate
                Governance; Compliance with Section 16(a) of the Exchange
                Act
            
            31Item
                10.
            Executive
                Compensation
            
            33Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            35Item
                12.
            Certain
                Relationships and Related Transactions; Director
                Independence
            
            36Item
                13.
            Exhibits
            
            37Item
                14.
            Principal
                Accountant Fees and Services
            
            38Signatures
            
            
            39




(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)





2


**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


**PART
      I**





**Item
      1.**  **Description
      of Business.**





**Company
      History and Recent Developments**





Forlink
      Software Corporation, Inc. (the "Company" or the "Registrant" or "Forlink"),
      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"), a limited
      liability company organized under the laws of the People’s Republic of China
      (“PRC” or “China”), 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
      the development and sale of computer software in the People’s Republic of China
      (“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,
      and
      SLAIT became a wholly-owned subsidiary of the Company. The Company also agreed
      to transfer 1,085,000 Renminbi (“RMB”) (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 those of FTCL. On February 13, 2004, SLAIT
      was officially dissolved in accordance with relevant PRC regulations. FTCL
      is
      the major operating company of Forlink 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 All China Logistics Online Co., Ltd. ("All China
      Logistics"), a privately held PRC company and 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 Logistics
      and its sole software solution provider. FTHK is also responsible for directly
      importing from overseas companies certain hardware needed to integrate products,
      which allows us to improve our hardware pass-through profit margin.





On
      June
      14, 2004, Forlink Technologies (Chengdu) Limited ("FTCD") was established as
      a
      limited liability company in Chengdu, PRC and subsequently became a wholly
      owned
      subsidiary of FTHK in September 2004. FTCD is in the business of providing
      software outsourcing services 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. In April 2006, FTHK further invested $130,000 in FTCD. FTCD commenced
      operations in late 2005. The registered capital of FTCD was reduced to $200,000
      in December 2007.




4





In
      compliance with China’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 (RMB 1,000,000) and has been fully paid
      up by March 31, 2005. 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 as 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 registered capital of BFHX. Mr. Yi He is the Chief Executive Officer,
      a director and a major stockholder of Forlink. Mr. Wei Li is the administration
      manager of FTCL.





Through
      BFHX, on September 28, 2004, we invested $36,232 (RMB 300,000) in Huntington
      Network Technologies (Beijing) Co., Ltd. (“HNT”), a privately held PRC company
      that operated the Gmgame.com, an online gaming portal, in exchange for 30%
      equity interests. This investment was intended to enable us to enter a fast
      growing market and utilize our IT expertise to further diversify our revenues.
      HNT was deregistered on December 18, 2007, however, and our investment was
      impaired in 2005 in the amount of $37,516 (RMB 300,000).





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. KFKT was to provide software and
      operation support to IPTV (Internet Protocol Television) operators, but the
      company was dissolved on November 19, 2007. We recorded an investment loss
      of
      $3,792 after the dissolution of BFKT, with our total investment loss in BFKT
      from its establishment to its dissolution in the amount of $16,932.




On
      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 an 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 as the primary beneficiary. QCT and XKT never
      commenced operations since their respective dates of establishment, and both
      companies were deregistered in late 2006. A loss on disposal of XKT and QJT
      of
      $1,195 was incurred. On November 19, 2007, BFKT was officially dissolved and
      an
      investment loss of $3,792 was recorded after dissolution of BFKT. Total
      investment loss in BFKT was $16,932 from its establishment.





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
      PRC limited liability company. Under the terms of the agreement, Forlink
      deployed the “For-online Electronic Trading System”, a proprietary, integrated
      software solution, to support CLCE’s operations, including, but not limited to,
      online trading, online billing and payment, user authentication and customer
      care, in exchange for the 17.5% equity interest. In early 2007, CLCE increased
      its share capital to $1,708,526 (RMB 13,000,000). As we did not subscribe to
      the
      new shares, our shareholding of CLCE as at December 31 2007 had been diluted
      to
      13.46%. CLCE commenced operations fully in early 2007.




5





On
      October 3, 2006, we entered into a Transfer of Right to Invest and Project
      Cooperation Agreement (“Statelink Agreement”) with, and acquired 22.73%
      registered capital in Guangxi Caexpo International Trade and Logistics Co.,
      Ltd.
      (“Guangxi Caexpo”), a PRC limited liability company in the businesses of real
      estate development, advertising and computer distribution, from Statelink
      International Group, Ltd., a company incorporated in the British Virgin Islands
      (“Statelink”) for cash consideration of $2,557,545 (RMB 20,000,000) from BFHX
      and stock consideration of 13,000,000 shares of our restricted common stock.
      Thereafter, we also won a contract from Guangxi Caexpo to build an “Electronic
      Trade and Logistics Information Platform and Call Center” (the “Project”). On
      October 26, 2006, BFHX established Forlink Technologies (Guangxi) Limited
      (“FTGX”), a PRC limited liability company and wholly owned subsidiary, to carry
      out this contract. At the time of incorporation, BFHX injected RMB 20,000,000
      (approximately US$2,557,545) as registered capital to FTGX. The Project was
      completed in the forth quarter of 2007, with the relevant software deployed
      and
      the client has signed the initial inspection report. Although the Project has
      been completed, FTGX will continue operating.





On
      October 12, 2006, we invested $31,969 (RMB 250,000) in Wuxi Stainless Steel
      Exchange Co., Ltd. (“Wuxi Exchange”), a PRC limited liability company, for a
      12.5% equity interest. In addition, we have agreed to deploy a proprietary,
      integrated software solution, estimated at RMB 1,000,000, to support Wuxi’s
      operations, which was deployed in February 2007. On January 14, 2007, the
      Company entered into an agreement with a major shareholder of Wuxi to transfer
      2.5% of the Company’s interest in Wuxi to the major shareholder for cash payment
      of RMB 500,000.





On
      April
      29, 2007, Forlink invested, through BFHX, $138,158 (RMB 1,050,000) in Beijing
      GuoXin Forlink Internet Technologies Limited (“BGXF”), a privately held PRC
      company that operates a finance study website, for a 35% equity interest. The
      investment in BGXF is accounted for under the equity method of accounting due
      to
      Forlink’s significant influence over the operational and financial policies of
      BGXF. BGXF commenced operations on March 9 2008.





On
      July
      12, 2007, Forlink invested in the form of cash through FTGX, $1,063,830 (RMB
      8,000,000) in Nanning Bulk Commodities Exchange Corporation Limited (“NNBCE”), a
      privately held PRC company established on April 29, 2007, for an 80% equity
      interest. NNBCE became a subsidiary of FTGX. NNBCE, which commenced operations
      on March 28, 2008, is in the business of providing logistical e-commerce
      service.





On
      September 5, 2007, Forlink invested $465,425 (3,500,000 RMB), through NNBCE,
      in
      Guangxi Bulk Sugar & Ethanol Exchange Corporation Limited (“GBSEE”), a PRC
      limited liability company established on September 12, 2007, for a 35% equity
      interest. On the same date, All China Logistics was entrusted as nominee owner
      of GBSEE to hold 20% of the fully paid up capital of GBSEE on behalf of NNBCE
      as
      the primary beneficiary. Upon the request of NNBCE, All China Logistics is
      required to transfer its ownership in GBSEE to NNBCE its designees at any time
      for the amount of the fully paid up capital of GBSEE. In accordance with
      Financial Accounting Standards Board (“FASB”) Interpretation No. 46R
“Consolidation of Variable Interest Entities - An Interpretation of ARB No.
      51”
(“FIN 46R”), NNBCE is deemed to hold the primary beneficial interest of an
      approximately 55% equity interest in GBSEE. GBSEE was established to provide
      logistical e-commerce service, but it was dissolved on December 16, 2007 before
      the commencement of any operation NNBCE received payback of its investment
      of
      $410,397 (3,000,000 RMB) in December 2007 and $66,211 (484,000 RMB) in February
      2008, with a balance of $2,189 (16,000 RMB).




6





Forlink
      and its subsidiaries are all operating companies. During the reporting period,
      none of the group companies’ operations were discontinued or dissolved except
      BFKT. Set forth below is a diagram illustrating our corporate structure as
      of
      December 31, 2007:




pg7 logo





**Subsequent
      Events**





On
      December 24, 2007, our board of directors and the holders of a majority of
      our
      issued and outstanding capital stock adopted and approved resolutions to effect
      a one-for-twenty (1-for-20) reverse stock split of the Company’s outstanding
      shares of common stock (the “Reverse Split”). The Reverse Split became effective
      upon the filing of the Certificate of Amendment to our Articles of Incorporation
      on March 7, 2008.





Before
      and immediately following the Reverse Split, the number of shares of the
      Company’s common stock will be as follows (subject to slight adjustment for
      rounding of fractional shares):





Common
                Stock Outstanding
            
            Authorized
                Common StockPre
                Reverse Split
            
            
            92,821,707
            
            
            200,000,0001
                for 20 Reverse Split
            
            
            4,641,085
            
            
            200,000,000





7




**Overview
      of Our Business**





Forlink
      is in the business of providing e-business application solutions and IT
      outsourcing services. Through our subsidiaries, we offer our clients with
      business information management consulting and planning, application software
      design, agency and integrated application services for the third party’s
      software and other online application services. We also offer the “For”-series
      of software products. Our clients are mainly in the telecom and logistics
      industries, as well as government agencies.





We
      have
      also invested in companies in logistics, finance and information technology
      (IT)
      industries. The application platforms used by these companies are supported
      by
      our integrated application systems, software and IT outsourcing services. Up
      to
      now, the e-business application platforms of the Company are used by NNBCE,
      CLCE, BGXF, Wuxi Stainless Steel Exchange Co., Ltd, NBBCE.





Our
      headquarters are located in Beijing, with branch offices in Chengdu, Nanning,
      Shanghai and Guangzhou. We also have a research and development (“R&D”)
      center located in Chengdu.





**Employees**





As
      of
      December 31, 2007, we have 210 employees, of which 208 are full-time.
      Approximately 145 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 an employee stock
      option plan that includes vesting provisions designed to encourage long-term
      employment.





**Products
      and Solutions**





Our
      application solutions are developed on Enterprise Application Integration (EAI)
      platforms. Our current product offerings include:





·
            For-eMarket:
                Forlink electronic trading market. This system helps vendor and vendee
                spare time and money, promotes the goods providers to have more
                opportunities to make a deal.





·
            ForCRM:Forlink
                Customer Relations Management System. This system emphasizes the
                requirement of clients, proposes a sales model based on customers
                and
                helps enterprises to customize Customer Relations Management through
                building the system menu and function pattern according to the requirement
                of enterprises.





·
            ForOSS:
                Our solution for Business & Operation Support Systems (BSS/OSS) for
                e-business carriers and telecom carriers. 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.





·
            ForOA:
                Forlink Office Assistance is an effective enterprise office system
                and
                information-shared platform, based on internet services.





·
            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 ForOA,
                ForCRM.





8




**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 Chengdu R&D center was established in February 1998. As of December 31,
      2007, we had 57 employees at the Chengdu R&D Center. Our R&D expenses in
      2007 and 2006 were $690,386 and $ 1,730,760 ,
      respectively.





**Status
      of New Product or Service**





In
      August
      2007, we launched our integrated e-business application platform For-Online
      4.0,
      and based on this platform, we also released new versions of For-eMarket 3.0
      in
      September 2007, ForCRM in October 2007 and ForOA in October 2007.





**Market
      Opportunities**





Based
      on
      our extensive market research and industry insights, we believe that the major
      market opportunities for our business include the following: enterprise
      application integration (EAI); application services provider (ASP); software
      and
      IT outsourcing.





**Our
      Strategy**





As
      a
      professional software-solutions and technology service company, our business
      objective is to become a leading e-business application solutions and online
      application services provider in China. Our operating strategy is to use shared
      core technologies and management systems to identify potential clients, and
      through consistent long-term technology supports, build tight strategic
      partnerships with our clients.





The
      key
      aspects of our strategy include the following:





·
            ***Establish
                a unified and standard software engineering and project management
                system
                to provide assurance for designing high-quality software products
                and
                services.***As
                an important milestone, we have achieved Level 3 (Managed Level of
                Software Process Maturity) of Capability Maturity Model® Integration
                (CMMI), which was certified by Software Engineering Institution.





·
            ***Establish
                a unified e-business application platform and online services
                platform.***We
                provide supports for e-business application technologies and platforms
                in
                different industries, and strive to make available to our clients
                high-quality IT outsourcing services that are cost-effective. To
                that end,
                we have made gradual improvements to the power and reliability of
                our
                For-Online platform since 2004, culminating with the launch in [date]
                2007
                of For-Online 4.0.





·
            ***Participate
                in our clients’ e-business application operations to become their
                strategic partner.***We
                have invested in several companies in logistics, finance, IT industries,
                whose application platforms are supported by our integrated application
                systems, software and IT outsourcing services.These
                companies includeNNBCE,
                CLCE, BGXF, Wuxi Stainless Steel Exchange Co., Ltd,
                NBBCE.





9




**Our
      Competitive Strengths**


·
              ***Professional
                    Software Development and Services System***.


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. We
      have
      passed the ISO9001:2000 international quality assurance system certification
      and
      the CMMI (Capability Maturity Model Integration) Level 2 certification,
      certifying that our software development and services system is in compliance
      with international standards.


·
              ***Fifteen
                    Years of Experience in Industry Applications with Proven Solutions
                    and
                    Products.***


Forlink
      has developed core application software products such as For-eMarket, ForCRM,
      ForOSS and ForROA based on standardized application integration technologies.
      Our customers, strategic partners and suppliers recognize our company as a
      dependable provider of high quality services, solutions and products, and
      frequently recommend us to their business contacts.





·
            ***Established
                Customer
                Relationships.***





Because
      of our successful track 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. 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 clients.


·
              ***A
                    Strong and Stable Management
                    Team.***


The
      current management team has been with Forlink since we commenced business,
      and
      includes pioneers of application integration technologies (AIT) in China. The
      backgrounds of the individuals in our management team offer a depth and breadth
      of experience that is capable of covering all aspects relating to the control
      and development of AIT systems. Beyond expertise in the field, their close
      working relationships with major long-term clients demonstrate a proven ability
      to sustain and cultivate a successful business.





**Our
      Strategic Partners**





Strategic
      partnerships are essential elements of our business model. At this time, we
      have
      four types of partners that contribute to the continuing success of our
      business.





·
            ***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 with the Excellent Sales
                Achievement Prize in 1999 and the Best Co-operation Prize in
                1999.





·
            ***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.





·
            ***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.




10


·
            ***Distribution
                Partners***.
                These partners distribute our solutions and products to our customers.
                Our
                current distribution partner is Beijing Federal.





**Competitive
      Conditions**





The
      market for information technology services in China is rapidly growing and
      changing. We compete primarily with domestic companies. Our principal
      competitors in application integration services are Huawei and AsiaInfo. Our
      principal competitors in the ASP field include UFSOFT, MYCRM, and HAN
      Consulting. Our principal competitors in software outsourcing include Neusoft,
      Dalian HaiHui, and China Software & Technology Corporation. All of these
      companies are leading companies in the Chinese IT industry, and AsiaInfo is
      also
      a listed company on NASDAQ.





**Government
      Regulation**





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





**Dependence
      on Major Customers**





For
      the
      year ended December 31, 2007, approximately 71% of the Company's total net
      revenues were generated by two customers, Beijing Mobile and Guangxi Caexpo.
      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 completed phase one in 2002,
      and phase two in 2006. We are currently developing and maintaining phase three
      of BOSS.





During
      the fiscal years ended December 31, 2005, 2006 and 2007 sales to Beijing Mobile
      Communication Company were $4,122,370, $4,244,266 and $2,969,259 respectively,
      and such sales accounted for, 89%, 70%, 61% and 33% of our revenue for these
      periods, respectively.





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.





Our
      second largest customer was Guangxi Caexpo. We won the contract in 2006 to
      build
      the Electronic
      Trade and Logistics Information Platform and Call Center .
      During
      the fiscal years ended December 31, 2006 and 2007, sales to Guangxi Caexpo
      were
      $721,087 and $4,885,231, accounting for 10% and 54% 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.




11





As
      of
      December 31, 2007, we have been issued 56 patents in the PRC that are
      currently in force. 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.





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
      have
      an office in Chengdu, PRC, which houses FTCD. The building is located at
      B-16B,
      WangFuJing Business Mansion, No.5 HuaXingZheng Street, ChengDu, SiChuan
      Province, 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. In
      2005,
      the title to the building was transferred to FTCD.





We
      currently rent the premises, approximately 2,027 square meters, for our
      headquarters at 9/F Shenzhou Mansion, No. 31 Zhongguancun Street, Haidian
      District, Beijing, China. We have a renewable lease agreement for these premises
      until March 29, 2009. The total rent from March 30, 2007 to March 29, 2009
      is
      $537,059 (RMB 4,086,432).




12





In
      addition, we currently have three regional field support offices in the PRC,
      namely, in Shanghai, Chengdu and Guangzhou. The leases for these offices are
      as
      follows:


Name
              
              
              Rent
                  Period
              
              
              Size
              
              
              Annual
                  RentGuangzhou
                  Office
              
              
              08.2.12-09.2.11
              
              
              92.19
              
              $
              17,853
                  (RMB 116,160)Shanghai
                  Office
              
              
              08.2.28-09.2.27
              
              
              98.44
              
              $
              22,666
                  (RMB 172,466.88)Chengdu
                  R&D Center
              
              
              07.11.22-08.11.21
              
              
              602.59
              
              $
              32,646
                  (RMB 248,400)





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.**





The
      Company is not a party to any legal proceedings and to the Company's knowledge,
      no such proceedings are threatened or contemplated. At this time, the Company
      has no bankruptcy, receivership, or similar proceedings pending.





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





On
      December 24, 2007, our Board of Directors and the holders of a majority of
      the
      outstanding capital stock of the Company adopted and approved resolutions to
      effect a one-for-twenty (1-for-20) reverse stock split of the Company’s
      outstanding shares of common stock (the “Reverse Split”). The Reverse Split took
      effective upon the filing of the Company’s Certificate of Amendment to its
      Articles of Incorporation with the Nevada Secretary of State on March 7, 2008,
      and in connection therewith, and our stock symbol has changed from “FRLK.OB” to
“FLSW.OB”. As a result of the Reverse Split, the total number of outstanding
      shares of the Company’s common stock was reduced from 92,821,707 shares to
      approximately 4,641,085 shares.





13




**PART
      II**





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





Our
      common stock, par value $0.001 per share, is currently trading on the Over
      the
      Counter Bulletin Board system under the symbol "FLSW". There is no assurance
      that our 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
“Businessweek Companies” 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
                BidDecember
                31, 2007
            
            $
            0.11
            
            $
            0.07September
                30, 2007
            
            $
            0.13
            
            $
            0.08June
                30, 2007
            
            $
            0.15
            
            $
            0.08March
                31, 2007
            
            $
            0.22
            
            $
            0.08December
                31, 2006
            
            $
            0.22
            
            $
            0.07September
                30, 2006
            
            $
            0.09
            
            $
            0.02June
                30, 2006
            
            $
            0.07
            
            $
            0.02March
                31, 2006
            
            $
            0.10
            
            $
            0.06


**Holders**





As
      of
      March 14, 2007, there were 98,224,707 shares of the Company's common stock
      outstanding held of record by approximately 550 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**





On
      October 3, 2006, the Company issued a total of 13,000,000 shares of the
      Company’s restricted common stock to Statelink International Group, Ltd.
      (“Statelink”) as a part of the Company’s considerations pursuant to a Transfer
      of Right to Invest and Project Cooperation Agreement . The
      fair
      market value of the Company’s common stock as of October 3, 2006 was $0.08 per
      share. The issuance to Statelink was made pursuant to Section 4(2) of the
      Securities Act of 1933 and Regulation D promulgated thereunder.





**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, 2007.




14




**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.
      Althou gh
      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. We
      undertake no obligation to update publicly any forward-looking statements for
      any reason even if new information becomes available or other events occur
      in
      the future.





**Overview**





We
      are a
      leading provider of software solutions and information technology services
      in
      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. Since its launch, For-Online is quickly becoming an important new channel
      for delivering and distributing our products and services to more customers.
      In
      August 2007, we launched our integrated e-business application platform
      For-Online 4.0, and based on this platform, we also released new versions of
      For-eMarket 3.0 in September 2007, ForCRM in October 2007 and ForOA in October
      2007





In
      addition to our core business, we believe that there are opportunities for
      us to
      expand into new areas and to grow our business not only internally but through
      acquisitions.  During
      fiscal 2007, we acquired equity stakes in three companies.  On
      April
      29, 2007, we acquired 35% equity interest of Beijing GuoXin Forlink Internet
      Technologies Limited (“BGXF”), a privately held PRC company, through our
      subsidiary Beijing
      Forlink Hua Xin Technology Co. Ltd (“BFHX”). BGXF,
      an
      Internet technology company, commenced operations in early March
      2008.





On
      July
      12, 2007, we acquired 80% equity interest of Nanning Bulk Commodities Exchange
      Corporation Limited (“NNBCE”), a privately held PRC company, through Forlink
      Technologies (Guangxi) Limited (“FTGX”), the subsidiary of BFHX. NNBCE is
      engaged in providing logistical e-commerce service but it has not commenced
      operations since its date of incorporation.




On
      September 12, 2007, we acquired 35% equity interest of Guangxi Bulk Sugar &
Ethanol Exchange Corporation Limited (“GBSEE”), a newly set up limited liability
      company in Nanning, PRC, through NNBCE. We are also beneficiary of the 20%
      equity interests of GBSEE being held by All China Logistics Online Co.,
      Ltd., which we have 17.8% equity stake in. GBSEE
      was
      established to provide logistical e-commerce service but the company was
      dissolved before it started its operations.




15





For
      a
      description of all of our acquisitions and other business activities since
      1999,
      please refer to the section titled “Company History and Recent Developments”
under Item 1 (Description of Business) in Part I of this Annual Report.




**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 31,2007
              
              2006Sales
                  of For-series software
              
              $
              4,684,791
              
              $
              2,722,368as
                  a percentage of net sales
              
              
              48
              %
              
              39
              %For-series
                  related system integration
              
              $
              5,145,868
              
              $
              4,195,272as
                  a percentage of net sales
              
              
              52
              %
              
              61
              %


As
      indicated in the foregoing table, sales of For-series software as a percentage
      of net sales increased from 39 %
      in 2006 to 48 %
      in 2007,
      while sales of
      For-series related system integration as a percentage of net sales decreased
      from 61 %
      in 2006 to 52 %
      in 2007. These
      changes were mainly attributable to our strategy of increasing software sales
      and reducing low profit margin hardware projects.





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.





**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.





**Costs
      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.




16





**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, both of which
      are
      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 received full
      exemption from EIT for fiscal years 1999 through 2002, and a 50% EIT reduction
      at the rate of 7.5% for fiscal years 2003 through 2005. As of December, 31,
      2007, FTCL was entitled to an EIT rate of 15%.





Pursuant
      to an approval document dated January 19, 2004 issued by the State Tax Bureau,
      BFHX received full exemption from EIT for fiscal years 2004 through 2006. As
      of
      December 31, 2007, BFHX was entitled to an EIT rate of 7.5%.





Hong
      Kong
      profits tax is calculated at 17.5% on the estimated assessable profits of FTHK
      for the period. The EIT rates for FTCD, BFKT and NNBCE range from 9% to 33%.
      No
      provision for EIT and Hong Kong profits tax were made for FTCL, BFHX, FTCD,
      FTGX, NNBCE and FTHK as they have not gained taxable income for the
      periods.




Revenue
      from the sale of hardware procured in China together with the related system
      integration is subject to a 17% value added tax (“VAT”). However, companies that
      develop their own software and have the software registered are generally
      entitled to a VAT refund. If the net amount of the VAT payable exceeds 3% of
      software sales, the excess portion of the VAT is refundable upon our application
      to the  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 United
      States Dollars (USD) and our
      financial records are maintained and the financial statements prepared in USD .
      The
      functional currency of FTHK is Hong
      Kong
      Dollars (HKD) and the
      financial records are maintained and the financial statements prepared in HKD .
      The
      functional currency of FTCL, BFHX, FTGX 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.




17





The
      financial statements of our operations based outside of the United States have
      been translated into USD 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 USD ,
      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 RMB 8.28 to 8.11 in late July 2005.





The
      following table shows the exchange rates and the weighted average rates ruling
      for the years ended December 31, 2007 and 2006:





**US$**
            
            **HK$**
            
            **RMB****Exchange
                rate as of December 31,**
            
            
            **2007**
            
            
            1
            
            
            7.84
            
            
            7.32**2006**
            
            
            1
            
            
            7.75
            
            
            7.82**Weighted
                average rates ruling for**
            
            
            **2007**
            
            
            1
            
            
            7.84
            
            
            7.60**2006**
            
            
            1
            
            
            7.75
            
            
            7.98





**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 r equires
      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.





***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;




18




·
            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.





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.


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 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 does not have
      the
      contractual right to take possession of our software at any time during the
      hosting period without significant penalty, SOP 97-2 does not apply to these
      contracts in accordance with EITF 00-3. Accordingly, these contracts would
      be
      accounted for pursuant to SAB 104.




19




***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 customers’ 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.





***Recent
      Accounting Pronouncements***





In
      February 2006, the FASB issued FAS 155, Accounting for Certain Hybrid Financial Instruments (FAS155), an amendment of FAS 140 and FAS 133. FAS155 permits the
      Company to elect to measure any hybrid financial instrument at fair value (with
      changes in fair value recognized in earnings) if the hybrid instrument contains
      an embedded derivative that would otherwise be required to be bifurcated and
      accounted for separately under
      FAS 133. The election to measure the hybrid instrument at fair value is made
      on
      an instrument-by-instrument basis and is irreversible. The Statement will be
      effective for all instruments acquired, issued, or subject to a re-measurement
      event occurring after the beginning of the Company’s fiscal year that begins
      after September 15.2006, with earlier adoption permitted as of the beginning
      of
      the Company’s 2006 fiscal year, provided that financial statements for any
      interim period of that fiscal year have not yet been issued. We do not expect
      the adoption of FAS155 will have a material impact on our financial position
      or
      results of operations.




In
      March
      2006, the FASB issued FAS 156 *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* (FAS
      156), an amendment to portions of FAS 133, FAS 140 and FTB 87-3. FAS 156
      requires that all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable. It also
      permits, but does not require, the subsequent measurement of servicing assets
      and servicing liabilities at fair value. Derivative instruments used to mitigate
      the risks inherent in servicing assets and servicing liabilities must be
      accounted for at faire value. Under FAS 156 an election can also be made for
      subsequent fair value measurement for servicing assets and servicing liabilities by
      class ,
      thus
      simplifying the accounting and provide for income statement recognition of
      potential offsetting changes in the fair value of servicing assets, servicing
      liabilities and related derivative instruments. This Statement will be effective
      beginning the first fiscal year that begins after September
      15, 2006. We do not
      expect the adoption of FAS 156 will have a material impact on our financial
      position or results of operations.




20





In
      July
      2006, the FASB issued FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes-an interpretation of FASB Statement No.
      109* ( FIN48).
      This Interpretation provides guidance for recognizing and measuring uncertain
      tax positions, as defined in SFAS No. 109, *Accounting
      for Income Taxed* .
      FIN 48
      prescribes a threshold condition that a tax position must meet for any of the
      benefit of the uncertain tax position to be recognized n the financial
      statements. Guidance is also provided regarding derecognition, classification
      and disclosure of these uncertain
      tax positions .
      FIN 48
      is effective for fiscal years beginning after December 15,
      2006. We do
      not expect that this Interpretation will have a material impact on our financial position ,
      results
      of operations or cash flows.





In
      June
      2006, the EITF reached consensus on and ratified EITF Issue 06-03, *How
      Taxes Collected from Customers and Remitted to Governmental Authorities Should
      Be Presented in the Income Statement* (EITF
      06-03). The scope of this Issue includes any tax assessed by a governmental
      authority that is directly imposed on a revenue-producing transaction between
      a
      seller and a customer and may include, but is not limited to, sales, use, value
      added, and some excise taxes. The Task Force concluded that the presentation
      of
      taxes within the scope of the Issue on either a gross (  ( included
      in revenues and costs ) or a net ( excluded from revenues ) basis is an
      accounting policy decision that should be disclosed pursuant to Opinion 22.
      In
      addition, for any such taxes that are reported on a gross basis, a company
      should disclose the amounts of those taxes in interim and annual financial
      statements for each period for which an income statement is presented if those
      amounts are significant. The disclosure of those taxes can be done on an
      aggregate basis. The consensus in this Issue should be applied to financial
      reports for interim and annual reporting periods beginning after December 15,
      2006. We believe the adoption of EITF
      06-03 will not have a material impact on our method for recording and reporting
      these types of taxes in our consolidated financial statements, as the Company’s
      policy is to exclude all such taxes form revenue.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (SAB) 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements* .
      SAB 108
      provides guidance on how prior year misstatements should be taken into
      consideration when quantifying misstatements in current year financial
      statements for purposes of determining whether the current year’s financial
      statements are materially misstated. SAB
      108
      is effective for fiscal years ending on or after November 15, 2006. We adopted
      the provision of SAB 108 in fiscal year 2006, which had no impact on our
      financial statements.





In
      September 2006, the FASB issued FAS 157, Fair Value Measurements (FAS 157).
      FAS
      157 defines fair value, establishes a framework for measuring fair value in
      accordance with generally accepted accounting principles, and expands
      disclosures about fair value measurements. The provisions of FAS 157 are
      effective for the fiscal year beginning after November 15, 2007. We are
      currently evaluating the impact of the provisions of FAS 157.





In
      September 2006, the FASB issued FAS 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement
      Plans* ( FAS
      158).
      FAS 158 requires employers to fully recognize the obligations associated with
      single-employer defined benefit pension, retiree healthcare and other
      postretirement plans in their financial statements. The requirement set forth
      in
      FAS 158 that we recognize the funded status of a benefit plan, and the
      disclosure requirements of FAS 158 are effective as of the end of the fiscal
      year ending after December 15, 2006 for entities with publicly traded equity
      securities. The requirement to measure plan assets and benefit obligations
      as of
      the date of the employer’s fiscal year-end statement of financial position is
      effective for fiscal years ending after December 15, 2008. The adoption of
      FAS
      158 did not have any effect on our financial position at December 31,
      2006.




21





On
      February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities: Including an amendment of FASB
      Statement No. 115” (“SFAS 159”). SFAS 159 permits all entities to elect to
      measure many financial instruments and certain other items at fair value with
      changes in fair value reported in earnings. SFAS 159 is effective as of the
      beginning of the first fiscal year that begins after November 15, 2007, with
      earlier adoption permitted.





In
      December 2007, the FASB issued SFAS No. 160, “ *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No. 51”.* The
      objective of this Statement is to improve the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards. This Statement is effective for fiscal years, and interim periods
      within those fiscal years, beginning on or after December 15, 2008 (that is,
      January 1, 2009, for entities with calendar year-ends). Earlier adoption is
      prohibited. The effective date of this Statement is the same as that of the
      related Statement 141(R).





On
      December 21, 2007, SEC issued Staff Accounting Bulletin (“SAB”) No. 110. This
      staff accounting bulletin ("SAB") expresses the views of the staff regarding
      the
      use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in
      developing an estimate of expected term of "plain vanilla" share options in
      accordance with Statement of Financial Accounting Standards No. 123 (revised
      2004), *Share-Based
      Payment* .
      In
      particular, the staff indicated in SAB 107 that it will accept a company's
      election to use the simplified method, regardless of whether the company has
      sufficient information to make more refined estimates of expected term. At
      the
      time SAB 107 was issued, the staff believed that more detailed external
      information about employee exercise behavior (e.g., employee exercise patterns
      by industry and/or other categories of companies) would, over time, become
      readily available to companies. Therefore, the staff stated in SAB 107 that
      it
      would not expect a company to use the simplified method for share option grants
      after December 31, 2007. The staff understands that such detailed information
      about employee exercise behavior may not be widely available by December 31,
      2007. Accordingly, the staff will continue to accept, under certain
      circumstances, the use of the simplified method beyond December 31,
      2007.





The
      Company does not anticipate that the adoption of these statements will have
      a
      material effect on the Company's financial condition and results of operations.





**Consolidated
      Results of Operations**





**Year
      Ended December 31, 2007 Compared to Year Ended December 31,
      2006**





***Net*** ***Sales***





Our
      net
      sales increased
      32% to $9,121,248 in 2007, from $6,917,640 in 2006. Sales of For-series software
      increased 7 2%
      to $4,684,791 in 2007, from $2,722,368 in 2006.  The
      increase in net sales was mainly attributable to our strategy of increasing
      software sales and reducing low profit margin hardware projects. Nevertheless,
      sales of For-series related system integration still increased 23% to $5,145,869
      in 2007 from $4,195,272 in 2006.





***Cost
      of*** ***Sales*** ***.***





Our
      cost
      of sales increased 44%
      to
      $4,186,187 in 2007, from $2,914,754 in 2006. The
      increase was comparable with the increase of sales.




22





***Gross*** ***Profit*** ***.***





Gross
      profit increased
      23% to $4,935,061 in 2007, from $4,002,886 in 2006. Gross profit margin was 54% in
      2007, compared with 58% in 2006.





***Operating*** ****** ***Expense*** ***s*** ***.***





Total
      operating expenses year-over-year were maintained at comparable levels, with
      $3,907,523 in 2007 and $3,910,507 in 2006. This situation resulted largely
      from
      the offset of an increase in selling expenses versus a decrease in research
      and
      development expenses.





Selling
      expenses increased 88% to $1,540,494 in 2007, from $818,146 in
      2006.
      This increase was primarily due to our increased advertising expenses and sales
      efforts to market our fast growing For-Online application service provider
      services, our IT outsourcing services, as well as our enterprise application
      integration services.





Research
      and development expenses decreased 60% to $690,386 in 2007, from $1,730,760
      in
      2006, as a result of the reorganization efforts in our R&D department as we
      focused on reducing
      costs and improving efficiency in 2007.





General
      and administrative expenses increased
      23% to $1,676,644 in 2007, from $1,361,601 in 2006. The increase
      was primarily due to the
      additional costs to meet new compliance requirements such as Sarbanes-Oxley
      Act
      compliance.





***Operating*** ***(*** ***Loss*** ***)/Profi*** ***t***





We
      recorded an operating profit of
      $1,027,538 in 2007
      as
      compared to an
      operating profit of $ 92,279
      in
      2006, an increase of 1,012%. The increase was
      largely due to two
      reasons. Firstly, the net sale s
      increased by 32% from $6,917,640 in 2006 to $9,121,248 in 2007 .
      Secondly, the sale percentage of For-series software, which has a higher profit
      margin than For-series related system integration, increased from 39% in 2006
      to
      48% in 2007.





***Other
      Income***





Our
      other
      income decreased 32% to $143,321 in 2007, from $210,724 in 2006, as a result
      of
      decreased VAT refund. Our other income is derived entirely from VAT refund
      associated with our software sales.





***Net
      (*** ***Loss*** ***)*** ***/Profit***





We
      recorded a net income
      of $1,508,389 in 2007, or basic and diluted profit of $0.02 per share, as compared
      to net income
      of $305,497
      in 2006, or basic and diluted loss
      of $0.00
      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.




23




Our
      accounts receivable balance at December 31, 2007 was $1,618,697, as compared
      to
      $1,886,251 at the end of 2006. The decrease is mainly attributable to better
      collection from our two major clients: China Mobile and Guangxi Caexpo. The
      balance of accounts receivable from China Mobile decreased to $80,933 at
      December 31, 2007 from $736,654 at December 31, 2006; the balance of accounts
      receivable from Guangxi Caexpo decreased to $361,203 at December 31, 2007 from
      $842,062 at December 31, 2006. Our
      inventory position at the end of 2007 was $498,356, as compared to $34,182
      at
      the beginning of the year. At the end of 2007, we had several inventory items
      in
      the process of delivery to Guangxi Caexpo. This caused the 2007 year-end
      inventory to
      be larger
      than usual.





We
      ended
      the year with a cash position of $2,400,901. We had positive operating cash
      flow
      of $1,303,934, primarily due to net profit and increase in customer deposits.





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 2008.
      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.





**Off-Balance
      Sheet Arrangements**





As
      of
      December 31, 2007 , we have
      not entered into any off-balance sheet arrangements with any individuals or
      entities.





**Contractual
      Obligations**





As
      of
      December 31, 200 7,
      we had
      commitments under non-cancelable operating leases requiring annual minimum
      rental payments as follows:


**December
                31,****2007**January
                1, 2008 to December 31, 2008
            
            $
            351,289January
                1, 2009 to December 31, 2009
            
            
            111,750January
                1, 2008 to December 31, 2010
            
            
            47,931January
                1, 2010 to December 31, 2011
            
            
            393$
            511,363





**Related
      Party Transactions**





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




24





The
      amounts due to stockholders as of December 31, 2007 and December 31, 2006,
      in
      the amount of $333,524 and $819,491, respectively, represented advances to
      the
      Company from Mr.
      Yi
      He.





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 (RMB 1,000,000) and the fully paid up
      capital was $36,232 (RMB 300,000) 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 (RMB 90,000)
      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.





The
      sales
      to All China, Guangxi Caexpo and BGXF in 2007 are $167,255, $4,878,812 and
      $112,313 respectively. By the end of December 31, 2007, the accounts receivable
      to All China, Guangxi Caexpo and BGXF are $237,264, $361,203 and $111,144
      respectively.





**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 OU* *R
      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 reforms
      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.




25





*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. In July
      2005, the Chinese government announced that it would no longer peg its currency
      exclusively to US dollar but
      instead would switch to a
      managed floating exchange rate based on market supply and demand with reference
      to a basket of currencies determined by the People’s Bank of China. The exchange
      rate of RMB to USD changed
      from RMB 8.28 to
      RMB 7.82 in
      late December 2006.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.




26




**Item
      7.**  **Financial
      Statements.**





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





27


**Forlink
      Software Corporation, Inc.**




**Index
      to Consolidated Financial Statements**




PagesReport
                of Independent Registered Public Accounting Firm
            
            
            F-1Consolidated
                Balance Sheets
            
            
            F-2Consolidated
                Statements of Operations
            
            
            F-3Consolidated
                Statements of Stockholders’ Equity
            
            
            F-4Consolidated
                Statements of Cash Flows
            
            
            F-5Notes
                to Consolidated Financial Statements
            
            
            F-6
                - F-23





28




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 sheet of Forlink Software
      Corporation Inc as of December 31, 2007, and the related consolidated statements
      of income, stockholders’ equity and comprehensive income, and cash flows for the
      year then ended. Forlink Software Corporation Inc’s management is responsible
      for these financial statements. Our responsibility is to express an opinion
      on
      these financial statements based on our audit. The financial statements of
      Forlink Software Corporation Inc as of December 31, 2006, were audited by other
      auditors whose report dated March 25, 2007, expressed an unqualified opinion
      on
      those statements.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, 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 financial statements referred to above present fairly, in all
      material respects, the financial position of Forlink Software Corporation Inc
      as
      of December 31, 2007, and the results of its operations and its cash flows
      for
      the year then ended in conformity with accounting principles generally accepted
      in the United States of America.






/s/
                Kenne Ruan, CPA, P.C.Woodbridge,
                ConnecticutMarch
                14, 2008





F-1


**Forlink
      Software Corporation, Inc.**





**Consolidated
      Balance Sheets**





(Expressed
      in US Dollars)


**December
                31,**
            
            **December
                31,****2007**
            
            **2006****Current
                assets**Cash
                and cash equivalents
            
            $
            2,400,901
            
            $
            427,195Accounts
                receivable
            
            
            1,618,697
            
            
            1,886,251Other
                receivables, deposit and prepayments
            
            
            530,431
            
            
            242,888Inventories
            
            
            498,356
            
            
            34,182Deferred
                Taxes Assets
            
            
            384Total
                current assets
            
            
            5,048,769
            
            
            2,590,516Property,
                plant and equipment
            
            
            659,826
            
            
            728,710Long
                term investments
            
            
            4,912,944
            
            
            4,322,289Goodwill
            
            
            1,684,023
            
            
            1,684,023Total
                assets
            
            $
            12,305,562
            
            $
            9,325,538**Liabilities
                and stockholders' equity****Current
                liabilities**Short
                term borrowings
            
            
            -
            
            
            -Accounts
                payable
            
            $
            1,598,507
            
            $
            155,204Amounts
                due to stareholders
            
            
            325,251
            
            
            819,491Customer
                deposits
            
            
            1,735,981
            
            
            2,634,705Other
                payables and accrued expenses
            
            
            303,366
            
            
            549,424Income
                tax payable
            
            
            1,540
            
            
            -Other
                tax payable
            
            
            860,498
            
            
            187,436Deferred
                Taxes Debt
            
            
            18,298Total
                current liabilities
            
            $
            4,843,441
            
            $
            4,346,260**Commitments
                and contingencies**Minority
                interest
            
            $
            269,772
            
            $
            -**Stockholders'
                equity**Common
                stock, par value $0.001 per share; 200,000,000 and 100,000,000 shares
                authorized; 99,121,707and 98,224,707 shares issued and 92,821,707and
                89924707 shares outstanding, respectively
            
            $
            99,122
            
            $
            98,225Treasury
                stock
            
            
            (163,800
            )
            
            (215,800
            )Additional
                paid-in capital
            
            
            10,177,812
            
            
            9,908,715Accumulated
                losses
            
            
            (3,517,748
            )
            
            (5,026,137
            )Accumulated
                other comprehensive income
            
            
            596,964
            
            
            214,275Total
                stockholders' equity
            
            $
            7,192,350
            
            $
            4,979,278**Total
                liabilities and stockholders' equity**
            
            $
            12,035,791
            
            $
            9,325,538




See
      accompanying notes to consolidated financial statements.




F-2


**Forlink
      Software Corporation, Inc.**





**Consolidated
      Statements of Operations**





(Expressed
      in US Dollars)


**Year
                ended**
              **December****31,
                2007**
            
            **Year
                ended**
              **December****31,
                2006**Net
                sales
            
            $
            9,121,248
            
            $
            6,917,640Cost
                of sales
            
            
            (4,186,187
            )
            
            (2,914,754
            )Gross
                profit
            
            
            4,935,061
            
            
            4,002,886Selling
                expenses
            
            
            (1,540,494
            )
            
            (818,146
            )Research
                and development expenses
            
            
            (690,386
            )
            
            (1,730,760
            )General
                and administrative expenses
            
            
            (1,676,644
            )
            
            (1,361,601
            )Operating
                profit / (loss)
            
            
            1,027,538
            
            
            92,379Investment
                income
            
            
            349,284
            
            
            -Loss
                on disposal of subsidiaries
            
            
            (3,792
            )
            
            (1,195
            )Interest
                income
            
            
            32,149
            
            
            3,589Interest
                expenses
            
            
            (24,699
            )
            
            -Other
                income, net
            
            
            143,321
            
            
            210,724Profit
                before income taxes
            
            
            1,523,801
            
            
            305,497Income
                tax
            
            
            (18,737
            )
            
            -Consolidated
                profit
            
            
            1,505,064
            
            
            305,497Net
                loss attributable to minority interest
            
            
            (3,325
            )
            
            -Net
                consolidated profit
            
            $
            1,508,389
            
            $
            305,497Gain/Loss
                per share
            
            $
            0.02
            
            $
            -Weighted
                average common shares outstanding -basic
                and diluted
            
            $
            92,252,786
            
            $
            80,130,186




See
      accompanying notes to consolidated financial statements.





F-3


**Forlink
      Software Corporation, Inc.**





**Consolidated
      Statement of Stockholders’ Equity**





(Expressed
      in US Dollars)





**Common
                Stock**
            
            
            
            
            
            **Accumulated**
            
            **Retained****Number**
              **of
                Share**
              **Issued**
            
            **Number
                of**
              **Share**
              **Outstanding**
            
            **Number
                of**
              **Treasury**
              **Stock**
            
            **Amount**
            
            **Treasury**
              **Stock**
            
            **Additional**
              **Paid-in**
              **Capital**
            
            **other
                comprehensive income**
            
            **Profits/**
              **(Accumulated**
              **Losses)**
            
            **Total**
              **Stockholders’**
              **Equity**
            
            **Comprehensive
                Income/**
              **(Losses)**Balance,
                December 31, 2005
            
            
            85,224,707
            
            
            76,924,707
            
            
            8,300,000
            
            $
            85,225
            
            $
            (215,800
            )
            $
            8,949,810
            
            $
            78,605
            
            $
            (5,331,634
            )
            $
            3,566,206
            
            $Shares
                issued
            
            
            13,000,000
            
            
            13,000,000
            
            
            -
            
            
            13,000
            
            
            -
            
            
            958,905
            
            
            -
            
            
            -
            
            
            971,905Net
                profit for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            305,497
            
            
            305,497
            
            
            305,497Translation
                reserve
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            135,670
            
            
            -
            
            
            135,670
            
            
            135,670Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            441,167Balance,
                December 31, 2006
            
            $
            98,224,707
            
            $
            89,924,707
            
            $
            8,300,000
            
            $
            98,225
            
            $
            (215,800
            )
            $
            9,908,715
            
            $
            214,275
            
            $
            (5,026,137
            )
            $
            4,979,278Shares
                issued
            
            
            897,000
            
            
            2,897,000
            
            
            (2,000,000
            )
            
            897
            
            
            52,000
            
            
            269,097
            
            
            
            
            
            
            
            
            321,994Net
                profit for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,508,389
            
            
            1,508,389
            
            
            1,508,389Translation
                reserve
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            382,689
            
            
            
            
            
            382,689
            
            
            382,689Comprehensive
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            1,891,078Balance,
                December 31, 2007
            
            $
            99,121,707
            
            $
            92,821,707
            
            $
            6,300,000
            
            $
            99,122
            
            $
            (163,800
            )
            $
            10,177,812
            
            $
            596,964
            
            $
            (3,517,748
            )
            $
            7,192,350




See
      accompanying notes to consolidated financial statements.





F-4


**Forlink
      Software Corporation, Inc.**





**Consolidated
      Statements of Cash Flows**


**(Decrease)/Increase
      in Cash and Cash Equivalents**





(Expressed
      in US Dollars)




**Year
                Ended December 31,****2007**
            
            **2006****Cash
                flows from operating activities****Net
                income**
            
            
            1,508,389
            
            
            305,497Adjustment
                to reconcile net income to net cash provided by (used in) operating
                activities:Proceeds
                from transferred of treasury stock
            
            
            232,294Depreciation
                of property, plant and equipment
            
            
            213,495
            
            
            205,000Loss
                on disposal of property, plant and equipment
            
            
            (38,814
            )
            
            8,047Loss
                from equity method investee
            
            
            (228,326
            )Loss
                on disposal from subsidiaries
            
            
            (29,103
            )
            
            1,195dividend
                from cost method investee
            
            
            (88,063
            )effect
                of Deferred Taxes
            
            
            17,914Charge
                in:Account
                Receivables
            
            
            396,396
            
            
            (962,900
            )Other
                receivables, deposits & prepayments
            
            
            (270,952
            )
            
            285,975Inventories
            
            
            (461,839
            )
            
            231,879Account
                Payable
            
            
            1,432,702
            
            
            (639,597
            )Amounts
                due to stockholders
            
            
            (550,216
            )Customers
                deposits
            
            
            (1,078,690
            )
            
            1,960,011Other
                payables & accrued expenes
            
            
            (283,587
            )
            
            244,105Income
                tax payable
            
            
            1,540Other
                taxes payable / recoverable
            
            
            660,259
            
            
            213,084**et
                cash used in operating activities**
            
            
            1,433,398
            
            
            1,852,296**Cash
                flows from investing activities**Acquisition
                of property, plant & equipments
            
            
            12,551
            
            
            (30,945
            )Disposal
                of subsidiary
            
            
            478,142
            
            
            (1,195
            )Cash
                payment associated with long term investments
            
            
            (724,044
            )
            
            (2,589,514
            )Cash
                dividend from cost method investee
            
            
            88,063Cash
                Received from disposal property, plant& equipments
            
            
            6,030**Net
                cash used in investing activities**
            
            
            (139,258
            )
            
            (2,621,654
            )**Cash
                flow from financing activities**Proceeds
                from short term borrowings
            
            
            
            
            
            (246,609
            )(Advances
                to) / Repayments from stockholders
            
            
            
            
            
            660,230Proceeds
                from issuance of common stock under Plan 2002
            
            
            897Increase
                in treasury stock
            
            
            52,000Decerase
                in additional paid in capital
            
            
            269,097Capital
                contribution from minority interest
            
            
            269,772**Net
                cash generated from financing activities**
            
            
            591,766
            
            
            413,621**Effect
                of exchange rate changes on cash and cash
                equivalents**
            
            
            87,800
            
            
            193,151**Net
                increase (decrease) in cash and cash equivalents**
            
            
            1,973,706
            
            
            (162,586
            )**Cash
                and cash equivalents at the beginning of year**
            
            
            427,195
            
            
            589,781**Cash
                and cash equivalents at the end of year**
            
            
            2,400,901
            
            
            427,195**Supplementtal
                disclosure of cash flow information**Income
                tax paid
            
            $
            6,527
            
            $
            -Interest
                paid
            
            $
            -
            
            $
            -




See
      accompanying notes to consolidated financial statements.




F-5





**NOTE
      1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**





Forlink
      Software Corporation, Inc. (the "Company" or the "Registrant" or "Forlink"),
      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"), a limited
      liability company organized under the laws of the People’s Republic of China
      (“PRC” or “China”), 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
      the development and sale of computer software in the People’s Republic of China
      (“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,
      and
      SLAIT became a wholly-owned subsidiary of the Company. The Company also agreed
      to transfer 1,085,000 Renminbi (“RMB”) (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 those of FTCL. On February 13, 2004, SLAIT
      was officially dissolved in accordance with relevant PRC regulations. FTCL
      is
      the major operating company of Forlink 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 All China Logistics Online Co., Ltd. ("All China
      Logistics"), a privately held PRC company and 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 Logistics
      and its sole software solution provider. FTHK is also responsible for directly
      importing from overseas companies certain hardware needed to integrate products,
      which allows us to improve our hardware pass-through profit margin.





On
      June
      14, 2004, Forlink Technologies (Chengdu) Limited ("FTCD") was established as
      a
      limited liability company in Chengdu, PRC and subsequently became a wholly
      owned
      subsidiary of FTHK in September 2004. The main business is providing software
      outsourcing services 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.
      In April 2006, FTHK further invested $130,000 in FTCD. FTCD commenced operations
      in late 2005. The registered capital of FTCD was reduced to $200,000 in December
      2007, which amount was fully paid as of December 2007.





In
      compliance with China’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 (RMB 1,000,000) and has been fully paid
      up by March 31, 2005. 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 as 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 registered capital of BFHX. Mr. Yi He is the Chief Executive Officer,
      a director and a major stockholder of Forlink. Mr. Wei Li is the administration
      manager of FTCL.




F-6





Through
      BFHX, on September 28, 2004, we invested $36,232 (RMB 300,000) in Huntington
      Network Technologies (Beijing) Co., Ltd. (“HNT”), a privately held PRC company
      that operated the Gmgame.com, an online gaming portal, in exchange for 30%
      equity interests. This investment was intended to enable us to enter a fast
      growing market and utilize our IT expertise to further diversify our revenues.
      HNT was deregistered in December 2007, however, and our investment was impaired
      in 2005 in the amount of $37,516 (RMB 300,000).





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. KFKT was to provide software and
      operation support to IPTV (Internet Protocol Television) operators, but the
      company was dissolved on November 19, 2007. We recorded an investment loss
      of
      $3,792 after the dissolution of BFKT, with our total investment loss in BFKT
      from its establishment to its dissolution in the amount of $16,932.




On
      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 an 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 as the primary beneficiary. QCT and XKT never
      commenced operations since their respective dates of establishment, and both
      companies were deregistered in late 2006. A loss on disposal of XKT and QJT
      of
      $1,195 was incurred. On November 19, 2007, BFKT was officially dissolved and
      an
      investment loss of $3,792 was recorded after dissolution of BFKT. Total
      investment loss in BFKT was $16,932 from its establishment.





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
      PRC limited liability company. Under the terms of the agreement, Forlink
      deployed the “For-online Electronic Trading System”, a proprietary, integrated
      software solution, to support CLCE’s operations, including, but not limited to,
      online trading, online billing and payment, user authentication and customer
      care, in exchange for the 17.5% equity interest. In early 2007, CLCE increased
      its share capital to $1,708,526 (RMB 13,000,000). As we did not subscribe to
      the
      new shares, our shareholding of CLCE as at December 31 2007 had been diluted
      to
      13.46%. CLCE commenced operations fully in early 2007.





On
      October 3, 2006, we entered into a Transfer of Right to Invest and Project
      Cooperation Agreement (“Statelink Agreement”) with, and acquired 22.73%
      registered capital in Guangxi Caexpo International Trade and Logistics Co.,
      Ltd.
      (“Guangxi Caexpo”), a PRC limited liability company in the businesses of real
      estate development, advertising and computer distribution, from Statelink
      International Group, Ltd., a company incorporated in the British Virgin Islands
      (“Statelink”) for cash consideration of $2,557,545 (RMB 20,000,000) from BFHX
      and stock consideration of 13,000,000 shares of our restricted common stock.
      Thereafter, we also won a contract from Guangxi Caexpo to build an “Electronic
      Trade and Logistics Information Platform and Call Center” (the “Project”). On
      October 26, 2006, BFHX established Forlink Technologies (Guangxi) Limited
      (“FTGX”), a PRC limited liability company and wholly owned subsidiary, to carry
      out this contract. At the time of incorporation, BFHX injected RMB 20,000,000
      (approximately US$2,557,545) as registered capital to FTGX. FTGX will continue
      operating after the completion of the project.





On
      October 12, 2006, we invested $31,969 (RMB 250,000) in Wuxi Stainless Steel
      Exchange Co., Ltd. (“Wuxi Exchange”), a PRC limited liability company, for a
      12.5% equity interest. In addition, we have agreed to deploy a proprietary,
      integrated software solution, estimated at RMB 1,000,000, to support Wuxi’s
      operations, which was deployed in February 2007. On January 14, 2007, the
      Company entered into an agreement with a major shareholder of Wuxi to transfer
      2.5% of the Company’s interest in Wuxi to the major shareholder for cash payment
      of RMB 500,000.





On
      April
      29, 2007, Forlink invested, through BFHX, $138,158 (RMB 1,050,000) in Beijing
      GuoXin Forlink Internet Technologies Limited (“BGXF”), a privately held PRC
      company that operates a finance study website, for a 35% equity interest. The
      investment in BGXF is accounted for under the equity method of accounting due
      to
      Forlink’s significant influence over the operational and financial policies of
      BGXF. BGXF commenced operations on March 9 2008.




F-7





On
      July
      12, 2007, Forlink invested in the form of cash through FTGX, $1,063,830 (RMB
      8,000,000) in Nanning Bulk Commodities Exchange Corporation Limited (“NNBCE”), a
      privately held PRC company, for an 80% equity interest. NNBCE became a
      subsidiary of FTGX. NNBCE, set up on April 29, 2007, will be engaged in
      providing logistical e-commerce service once the company commences
      operations.




On
      September 5, 2007, Forlink invested $465,425 (3,500,000 RMB), through NNBCE,
      in
      Guangxi Bulk Sugar & Ethanol Exchange Corporation Limited (“GBSEE”), a PRC
      limited liability company established on September 12, 2007, for a 35% equity
      interest. On the same date, All China Logistics was entrusted as nominee owner
      of GBSEE to hold 20% of the fully paid up capital of GBSEE on behalf of NNBCE
      as
      the primary beneficiary. Upon the request of NNBCE, All China Logistics is
      required to transfer its ownership in GBSEE to NNBCE its designees at any time
      for the amount of the fully paid up capital of GBSEE. In accordance with
      Financial Accounting Standards Board (“FASB”) Interpretation No. 46R
“Consolidation of Variable Interest Entities - An Interpretation of ARB No.
      51”
(“FIN 46R”), NNBCE is deemed to hold the primary beneficial interest of an
      approximately 55% equity interest in GBSEE GBSEE was established to provide
      logistical e-commerce service, but it was dissolved on December 16, 2007 before
      the commencement of any operation NNBCE received payback of its investment
      of
      $410,397 (3,000,000 RMB) in December 2007 and $66,211 (484,000 RMB) in February
      2008, with a balance of $2,189 (16,000 RMB).





Forlink
      and its subsidiaries are all operating companies.





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





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. Set
      forth
      below is a diagram illustrating our corporate structure as of December 31,
      2007:










F-8




**NOTE
      2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT 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 that include
      the
      financial statements of Forlink and its subsidiaries, namely, FTCL, FTHK, BFHX,
      FTCD, FTGX, and NNBCE. All inter-company transactions and balances have been
      eliminated.





Minority
      interests 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 Company for the years are
      also
      separately presented in the income statement.





**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.





**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 FTCL, BFHX, FTCD, FTGX, and NNBCE
      is Renminbi (RMB) and their financial records are maintained, and their
      financial statements are prepared, in RMB.





Foreign
      currency transactions during the period are translated into each company’s
      denominated currency at the exchange rates 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 the yearend 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$, yearend 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
      inter-bank 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 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
      2005.





The
      exchange rates used as of December 31, 2007 and 2006 are US$1:HK$7.84:RMB7.32,
      and US$1:HK$7.75:RMB7.82, respectively. The weighted average rates ruling for
      the years ended December 31, 2007 and 2006 are US$1:HK$7.84:RMB7.60, and re
      US$1:HK$7.75:RMB7.98, respectively.




F-9





**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.





**Cash
      and Cash Equivalents**





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





**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 customers’ 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.





**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
            
            20Computer
                equipment
            
            5Office
                equipment
            
            5Motor
                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.




F-10





**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.





**Long
      term investments**





The
      Company’s long term investments consist of (1) equity investments which are
      accounted for in accordance with 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 8.





**Fair
      Values of Financial Instruments**





The
      carrying amounts of financial instruments (cash and cash equivalents,
      investments, accounts receivable and accounts payable) approximate their fair
      values as of December 31, 2007 and 2006 because of the relatively short-term
      maturity of these instruments.





**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.





**Revenue
      Recognition**





The
      Company generally provides services under multiple element arrangements, which
      include software license fees, hardware and software sales, and the 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




F-11




·
            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.





Revenue
      from non-software, multiple-element arrangements is recognized in accordance
      with Emerging Issues Task Force No. 00-21, “Revenue Arrangements with Multiple
      Deliverables” (“EITF No. 00-21”). Under EITF 00-21, the Company recognizes
      revenue from the multiple-deliverables which has value to the customer on a
      stand-alone basis. Deliverables in an arrangement that do not meet the
      separation criteria in EITF 00-21 are treated as one unit of accounting for
      purposes of revenue recognition.





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 rateably over the maintenance period.





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





For
      hardware transactions where software is incidental, the Company does
      not apply separate accounting guidance to the hardware and software
      elements. The Company applies 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 rateably 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 has determined that these set-up activities do not
      constitute a separate unit of accounting, and accordingly the related set-up
      fees are recognized rateably over the term of the contract.





The
      Company is considering 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 does
      not
      have the contractual right to take possession of the Company’s software at any
      time during the hosting period without significant penalty, SOP 97-2 would
      not
      apply to these contracts in accordance with EITF 00-3. Accordingly, these
      contracts would be accounted for pursuant to SAP 104.





**Stock
      Based Compensation**





Effective
      January 1, 2006, we adopted Statement of Financial Accounting Standards 123(R), *Share-Based
      Payment* (SFAS
      123(R)), using the modified prospective application transition method. Before
      we
      adopted SFAS 123(R), we accounted for share-based compensation in accordance
      with Accounting Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* .




F-12




SFAS
      123(R) requires the Company to record the cost of stock options and other
      equity-based compensation in its income statement based upon the estimated
      fair
      value of those rewards. The Company elected to use the modified prospective
      method for adoption, which requires compensation expense to be recorded for
      all
      unvested stock options and other equity-based compensation beginning in the
      first quarter of adoption. Accordingly, prior periods have not been restated
      to
      reflect stock based compensation. On January 1, 2006, the Company adopted SFAS
      123(R) using the modified prospective method, and the adoption of this standard
      did not have a material impact on the Company’s consolidated financial
      statements because most of the Company’s outstanding stock options were vested
      as of December 31, 2005 and the unvested portion of the stock options was
      considered immaterial.





SFAS
      123(R) also requires the Company to estimate forfeitures in calculating the
      expense relating to share-based compensation as opposed to recognizing
      forfeitures as an expense reduction as they incur. The adjustment to apply
      estimated forfeitures to previously share-based compensation was considered
      immaterial by the Company and as such was not classified as a cumulative effect
      of a change in accounting principle. As of January 1, 2006, the Company had
      no
      unrecognized compensation cost remaining associated with existing stock option
      grants. Also, the Company made no modifications to outstanding stock option
      grants prior to the adoption of Statement No. 123(R), and there were no
      changes in valuation methodologies or assumptions compared to those used by
      the
      Company prior to January 1, 2006.





In
      November 2005, the FASB issued FSP No. 123(R)-3, “Transition Election
      Related to Accounting for the Tax Effects of Share-Based Payment Awards.” The
      Company adopted the alternative transition method provided in the FSP for
      calculating the tax effects of share-based compensation pursuant to FAS 123(R)
      in the fourth quarter of fiscal 2006. The alternative transition method includes
      simplified methods to establish the beginning balance of the Additional Paid-in
      Capital (“APIC”) pool related to the tax effects of employee share-based
      compensation, and to determine the subsequent impact on the APIC pool and
      Consolidated Statements of Cash Flows of the tax effects of employee share-based
      compensation awards that are outstanding upon adoption of FAS 123(R). The
      adoption did not have a material impact on the Company’s results of operations
      and financial position.





In
      February 2006, the FASB issued FASB Staff Position No. FAS 123(R)-4,
“Classification of Options and Similar Instruments Issued as Employee
      Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent
      Event.” This position amended SFAS 123(R) to incorporate that a cash settlement
      feature that can be exercised only upon the occurrence of a contingent event
      that is outside the employee’s control does not meet certain conditions in SFAS
      123(R) until it becomes probable that the event will occur. The guidance in
      this
      FASB Staff Position was required to be applied upon initial adoption of
      Statement No. 123(R). The Company does not have any option grants that
      allow for cash settlement.





The
      Company did not adopt any new share-based compensation plans in 2007. 897,000
      stock options issued under the Company’s 2002 Stock Plan were exercised during
      the year 2007.





**Advertising
      costs**





All
      advertising costs incurred in the promotion of the Company’s products and
      services are expensed as incurred. Advertising expenses were insignificant
      for
      2007 and 2006.





**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
      not
      be realized.





In
      July,
      2006, the FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109* (FIN
      48) *.* This Interpretation provides guidance for recognizing and measuring uncertain
      tax positions, as defined in SFAS No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      prescribes a threshold condition that a tax position must meet for any of the
      benefit of the uncertain tax position to be recognized in the financial
      statements. Guidance is also provided regarding derecognition, classification
      and disclosure of these uncertain tax positions.




F-13




**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.




**Recent
      Accounting Pronouncements**


.


In
      September 2006, the FASB issued FAS 157, *Fair
      Value Measurements* (FAS
      157). FAS 157 defines fair value, establishes a framework for measuring fair
      value in accordance with generally accepted accounting principles, and expands
      disclosures about fair value measurements. The provisions of FAS 157 are
      effective for the fiscal year beginning after November 15, 2007.





On
      February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities: Including an amendment of FASB
      Statement No. 115” (“SFAS 159”). SFAS 159 permits all entities to elect to
      measure many financial instruments and certain other items at fair value with
      changes in fair value reported in earnings. SFAS 159 is effective as of the
      beginning of the first fiscal year that begins after November 15, 2007, with
      earlier adoption permitted.





In
      December 2007, the FASB issued SFAS No. 160, “ *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of ARB No. 51”.* The
      objective of this Statement is to improve the relevance, comparability, and
      transparency of the financial information that a reporting entity provides
      in
      its consolidated financial statements by establishing accounting and reporting
      standards. This Statement is effective for fiscal years, and interim periods
      within those fiscal years, beginning on or after December 15, 2008 (that is,
      January 1, 2009, for entities with calendar year-ends). Earlier adoption is
      prohibited. The effective date of this Statement is the same as that of the
      related Statement 141(R).





On
      December 21, 2007, SEC issued Staff Accounting Bulletin (“SAB”) No. 110. This
      staff accounting bulletin ("SAB") expresses the views of the staff regarding
      the
      use of a "simplified" method, as discussed in SAB No. 107 ("SAB 107"), in
      developing an estimate of expected term of "plain vanilla" share options in
      accordance with Statement of Financial Accounting Standards No. 123 (revised
      2004), *Share-Based
      Payment* .
      In
      particular, the staff indicated in SAB 107 that it will accept a company's
      election to use the simplified method, regardless of whether the company has
      sufficient information to make more refined estimates of expected term. At
      the
      time SAB 107 was issued, the staff believed that more detailed external
      information about employee exercise behavior (e.g., employee exercise patterns
      by industry and/or other categories of companies) would, over time, become
      readily available to companies. Therefore, the staff stated in SAB 107 that
      it
      would not expect a company to use the simplified method for share option grants
      after December 31, 2007. The staff understands that such detailed information
      about employee exercise behavior may not be widely available by December 31,
      2007. Accordingly, the staff will continue to accept, under certain
      circumstances, the use of the simplified method beyond December 31,
      2007.





The
      Company does not anticipate that the adoption of these statements will have
      a
      material effect on the Company's financial condition and results of operations.





**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 conditions
      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 included 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, $48,033 (2006: $48,033) for doubtful accounts as
      of
      December 31, 2007 is required.




F-14





**NOTE
      4 - OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS**





**December
                31,**
            
            **December
                31,****2007**
            
            **2006**Other
                receivables
            
            $
            711,571
            
            $
            98,807Deposits
            
            
            73,275
            
            
            137,779Prepayments
            
            
            59,071
            
            
            6,302$
            843,917
            
            $
            242,888




**NOTE
      5 - INVENTORIES**




**December
                31,**
            
            **December
                31,****2007**
            
            **2006**Computer
                hardware and software
            
            $
            29,765
            
            $
            34,182Work-in-progress
            
            
            468,591
            
            
            -$
            498,356
            
            $
            34,182





All
      the
      inventories were purchased for identified system integration
      contracts.





Work-in-progress
      includes payroll and other operating expenses associated with various contracts
      in progress.




**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 those
      prevailing for comparable transactions with others. Listed below is a summary
      of
      material relationships or transactions with the Company’s stockholders,
      directors, senior officers and other affiliates:





**Amounts
      due to stockholders**





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





As
      of
      December 31, 2007 and 2006, the amounts due to stockholders represented advances
      from stockholders of $333,524 and 819,491, respectively.





F-15




**Related
      Party Transactions**





Sales
            
            Receivable
            
            Customer
                DepositRelated
                party
            
            Year
                Ended Dec 31,
            
            As
                of Dec 31,
            
            As
                of Dec 31,2007
            
            2006
            
            2007
            
            2006
            
            2007
            
            2006All
                China
            
            $
            167,255
            
            $
            721,087
            
            $
            237,264
            
            $
            842,062
            
            $
            -
            
            $
            -Guangxi
                Caexpo
            
            
            4,878,812
            
            
            466,165
            
            
            361,203
            
            
            -
            
            
            -
            
            
            1,847,486BGXF
            
            
            112,313
            
            
            -
            
            
            111,144
            
            
            -
            
            
            -GBSEE
            
            
            -
            
            
            -
            
            
            68,306
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            5,158,380
            
            $
            1,187,252
            
            $
            777,917
            
            $
            842,062
            
            
            
            
            $
            $1,847,486





**NOTE
      7 - PROPERTY, PLANT AND EQUIPMENT, NET**





**December
                31,**
            
            **December
                31,****2007**
            
            **2006**Building
            
            $
            214,173
            
            $
            186,817Computer
                and office equipment
            
            
            1,188,353
            
            
            1,052,659Motor
                vehicles
            
            
            170,999
            
            
            181,6221,573,525
            
            
            1,421,098Less:
                Accumulated depreciation
            
            
            (913,699
            )
            
            (692,388
            )$
            659,826
            
            
            728,710




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. In 2005, the title to the building
      was
      transferred to Forlink Technologies (Chengdu) Limited.




**NOTE
      8 - LONG TERM INVESTMENTS**





**December
                31,**
            
            **December
                31,****2007**
            
            **2006**Equity
                investments
            
            $
            353,776
            
            $
            -Cost
                investments
            
            
            4,476,934
            
            
            4,322,289$
            4,830,710
            
            
            4,322,289




F-16




In
      December 2003, 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
      has recorded 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. The investment was made through the Company’s subsidiary, 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. For the year ended December 31, 2007 and year ended December 31, 2006,
      the Company did not receive any distributions from HNTB’s net results, as the
      investment was impaired in full in 2005 of $37,516 and the company was
      deregistered.





On
      October 24, 2005, the Company set up 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
      Company-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. As of December 31, 2007 and 2006, the Company’s share of
      the joint venture’s profit (loss) was $212,385 and ($1,816), respectively.





On
      October 3, 2006, the Company acquired 22.73% of registered capital in Guangxi
      Caexpo International Trade and Logistics Co., Ltd. (“Guangxi Caexpo”), a private
      held PRC company, from Statelink International Group, Ltd., a company
      incorporated in the British Virgin Islands (“Statelink”). Consideration paid to
      Statelink for this acquisition included a cash payment of $2,557,545 (RMB
      20,000,000) by BFHX and 13,000,000 shares of the Company’s restricted common
      stock. The acquisition cost of the common shares issued to Statelink is based
      on
      a per share price of $0.075, which is the average market price of the Company’s
      common shares over a 10-day period before and after the terms of the acquisition
      were agreed to. The overall acquisition cost of this acquisition was $3,529,450.
      The Company recorded the investment at cost because it does not have the ability
      to exercise significant influence over Guangxi Caexpo; in fact, Guangxi Caexpo’s
      strategic and business decisions are dominated by other major
      shareholders.





On
      October 12, 2006, the Company entered into a definitive agreement to acquire
      12.5% of registered capital in Wuxi Stainless Steel Exchange Co., Ltd. (“Wuxi”),
      a private held PRC company. In exchange for the 12.5% registered capital, the
      Company was to deploy a proprietary, integrated software solution (“software”),
      estimated at RMB 1,000,000, by reference to the similar products sold to third
      parties in 2006, to support Wuxi’s operations, plus RMB 250,000 cash payment to
      Wuxi. In 2006, the Company contributed cash of $31,969 (RMB 250,000), but the
      software has not yet been deployed to Wuxi as of December 31, 2007. The Company
      recorded the investment at cost because it does not have the ability to exercise
      significant influence over Wuxi. On January 14, 2007, the Company entered into
      a
      Share Transfer Agreement with a major shareholder of Wuxi to transfer 2.5%
      interest in Wuxi held by the Company to the major shareholder for a cash payment
      of RMB 500,000. After this transfer, the Company continues to hold 10% equity
      interest in Wuxi.





On
      April
      29, 2007, the Company invested $138,158 in a privately held PRC company, Beijing
      GuoXin Forlink Internet Technologies Limited (“BGXF”), for a 35% equity
      interest. The Company’s investment was made through BFHX. The investment in BGXF
      is accounted for under the equity method of the accounting due to the Company’s
      significant influence over the operational and financial policies of BGXF.
      As of
      December 31, 2007, BGXF did not commence operations.





On
      September 17, 2007, the Company invested $99,734 in a privately held PRC
      Company, Ningbo Bulk Commodities Exchange Corporation Limited (“NBBCE”), for a
      25% equity interest. The Company’s investment was made through BFHX. The Company
      recorded the investment at cost because it does not have the ability to exercise
      significant influence over NBBCE. In fact, NBBCE’s strategic and business
      decisions are dominated by another major shareholder.





**NOTE
      9 - GOODWILL**





Goodwill
      represents the excess of the acquisition cost of Beijing Slait Science &
Technology Development Limited Co. (“Slait”) over the estimated fair value of
      net assets acquired as of August 27, 2001 as described in Note 1.




F-17





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





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. As 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.





Since
      December 31, 2003, the Company completed the annual impairment test at December
      31 of each year. 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, 2005, 2006, and 2007.




**NOTE
      10 - OTHER PAYABLES AND ACCRUED EXPENSES**





**December
                31,**
            
            **December
                31,****2007**
            
            **2006**Other
                payables
            
            $
            161,846
            
            $
            352,796Accrued
                salaries & wages
            
            
            141,073
            
            
            152,632Other
                accrued expenses
            
            
            447
            
            
            43,996$
            303,366
            
            $
            549,424





**NOTE
      11 - MINORITY INTEREST**





The
      minority interest balance of $269,772 represents cash provided by minority
      shareholders of NNBCE.





**NOTE
      12 - INCOME TAX**





According
      to the relevant PRC tax rules and regulations, FTCL and BFHX, 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 State Tax Bureau respectively, FTCL was fully exempted
      from EIT for fiscal years 1999, 2000, 2001 and 2002. FTCL received a 50% EIT
      reduction at the rate of 7.5% for fiscal years 2003, 2004 and 2005. As of
      December 31, 2007, FTCL was entitled to an EIT rate of 15%.





Pursuant
      to an approval document dated January 19, 2004 issued by the State Tax Bureau,
      BFHX was fully exempted from EIT for fiscal years 2004, 2005 and 2006. As of
      December 31, 2007, BFHX was entitled to an EIT rate of 7.5%.





Hong
      Kong
      profits tax is calculated at 17.5% on the estimated assessable profits of FTHK
      for the period. The EIT rates for FTCD, BFKT and NNBCE range from 9% to 33%.
      No
      provision for EIT and Hong Kong profits tax were made for FTCL, BFHX, FTCD,
      FTGX, NNBCE and FTHK as they have not gained taxable income for the
      periods.




F-18





On
      January 1, 2007, the Company adopted FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109* (FIN
      48) *.* This Interpretation provides guidance for recognizing and measuring uncertain
      tax positions, as defined in SFAS No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      prescribes a threshold condition that a tax position must meet for any of the
      benefits of the uncertain tax position to be recognized in the financial
      statements. Guidance is also provided regarding derecognition, classification
      and disclosure of these uncertain tax positions. The Company classified all
      interest and penalties related to tax uncertainties as income tax expense.
      The
      Company’s liability for income taxes includes the liability for unrecognized tax
      benefits, interest and penalties which relate to tax years still subject to
      review by taxing authorities. Audit periods remain open for review until the
      statute of limitations has passed. The completion of review or the expiration
      of
      the statute of limitations for a given audit period could result in an
      adjustment to our liability for income taxes. Any such adjustment could be
      material to the Company’s results of operations for any given quarterly or
      annual period based, in part, upon the results of operations for the given
      period. As of December 31, 2007, the Company does not have any liability for
      uncertain tax positions. The adoption of FIN 48 did not have a material impact
      on the Company’s results operations, financial position or
      liquidity.




On
      March
      16, 2007, the 5th Plenary Session of the 10th National People's Congress passed
      the Corporate Income Tax Law of the PRC ("the New Corporate Income Tax Law"),
      which will take effect on January 1, 2008. Beginning on that date, the EIT
      rate
      is expected to gradually increase to the standard rate of 25% over a five-year
      transition period. However, the New Corporate Income Tax Law does not specify
      how the existing preferential tax rate will gradually increase to the standard
      rate of 25%. Also, under the New Corporate Income Tax Law, certain high
      technology enterprises will continue to be entitled to a reduced tax rate of
      15%. However, the implementation rules regarding the preferential tax policies
      (e.g. the details on how the taxpayer can qualify as a high-tech enterprise
      under the New Corporate Income Tax Law) have yet to be made public.
      Consequently, the Company is not able to make an estimate of the expected
      financial effect of the New Corporate Income Tax Law on its deferred tax assets
      and liabilities. The expected financial effect, if any, will be reflected in
      the
      Company's 2007 annual financial statements. The enactment of the New Corporate
      Income Tax Law is not expected to have any financial effect on the amounts
      accrued in the balance sheet in respect of current tax payable.





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:





**YE
                2007**
            
            **YE
                2006****USD**
            
            **USD**Provision
                of income taxes at statutory tax rate of 15%
            
            
            227,725
            
            
            45,825Tax
                holidays and concessions
            
            
            (18,214
            )
            
            (88,754
            )Effect
                of different tax rate of a subsidiary operating in Hong
                Kong
            
            
            (11,115
            )
            
            (1,917
            )Permanent
                difference
            
            
            7,066
            
            
            (11,397
            )Increase
                in valuation allowance
            
            
            (186,816
            )
            
            55,961Others
            
            
            91
            
            
            283**Effective
                tax**
            
            
            18,737
            
            
            -





**NOTE
      13 - OTHER TAXES RECOVERABLE/(PAYABLE)**





Other
      taxes payable comprise mainly of the 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 $98,692 and $210,329 for the years ended December
      31, 2007 and 2006, respectively.









**NOTE
      14 - COMMITMENTS AND CONTINGENCIES**





**Operating
      Lease Commitment**





During
      the years ended December 31, 2007 and 2006, the Company incurred lease expenses
      amounting to $489,583 and $545,850 respectively. As of December 31, 2007 and
      2006, the Company had commitments under non-cancelable operating leases,
      requiring annual minimum rentals as follows:




**December
                31,**
            
            **December
                31,****2007**
            
            **2006**January
                1, 2007 to December 31, 2007
            
            $
            -
            
            $
            164,309January
                1, 2008 to December 31, 2008
            
            
            351,289
            
            
            3,227January
                1, 2009 to December 31, 2009
            
            
            111,750
            
            
            -January
                1, 2008 to December 31, 2010
            
            
            47,931January
                1, 2010 to December 31, 2011
            
            
            393$
            511,363
            
            $
            167,536




**NOTE
      15 - STOCK PLAN**




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 “2002 Plan”). The total number of shares of common stock
      reserved for issuance by Forlink either directly as stock awards or underlying
      options granted under the 2002 Plan shall not be more than 8,000,000. Under
      the
      terms of the 2002 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.





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





**Number
                of shares**
            
            **Weighted
                average exercise price**Granted
                on September 7, 2004
            
            
            3,315,000
            
            $
            0.10Exercised
            
            
            (15,000
            )
            
            ($0.10
            )Forfeited
                or Cancelled
            
            
            0
            
            $
            0.00Outstanding
                at December 31, 2004
            
            
            3,300,000
            
            $
            0.10Exercised
            
            
            (136,500
            )
            
            ($0.10
            )Forfeited
                or Cancelled
            
            
            (132,500
            )
            
            ($0.10
            )Outstanding
                at December 31, 2005
            
            
            3,031,000
            
            $
            0.10Exercised
            
            
            0
            
            $
            0.00Forfeited
                or Cancelled
            
            
            (1,734,000
            )
            
            ($0.10
            )Outstanding
                at December 31, 2006
            
            
            1,297,000
            
            $
            0.10Exercised
            
            
            (897,000
            )
            
            ($0.10
            )Forfeited
                or Cancelled
            
            
            0
            
            $
            0.00Outstanding
                at December 31, 2007
            
            
            400,000
            
            $
            0.10Fully
                vested and exercisable at December 31, 2007
            
            
            200,000
            
            $
            0.10




F-19




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 with a
      5-year vesting period were granted to an employee, and 2,515,000 options with
      a
      3-year vesting period were granted to selected employees. Of the 2,515,000
      options with the 3-year vesting period, 2,385,000 options was to expire on
      December 30, 2006 (the “December 2006 Options”), while the remaining 130,000
      options expired on June 30, 2007 (the “June 2007 Options”). The expiration date
      for 800,000 options with the 5-year vesting period is June 30, 2009 (the “June
      2009 Options”). On September 7, 2004, January 1, 2005, January 1, 2006 and
      January 1, 2007, 854,500 of the December 2006 Options, 400,000 of the June
      2009
      Options, 130,000 of the June 2007 Options, 626,000 of the December 2006 Options
      and 200,000 of the June 2009 Options were vested to employees respectively.
      The
      market price of the stock as of September 7, 2004 and January 1, 2005 was $0.10
      per share. In December 2006, the Company extended the expiration date of the
      December 2006 Options by one month to the end of January 2007, but there was
      no
      additional compensation expense as the Company considered the amount was
      immaterial. On January 29, 2007, 367,000 options of the December 2006 Options
      and 400,000 of the June 2009 options were exercised. On July 6, 2007, 130,000
      options of the June 2007 Options were exercised.




The
      following table summarizes the cumulative activities up to December 31, 2007
      of
      the options issued under the 2002 Plan with different expiration
      dates:




Granted
            
            Exercised
            
            Forfeited
                or
              Cancelled
            
            Outstanding
                at
              December
                31, 2007December
                2006 Options
            
            
            2,385,000
            
            
            518,500
            
            
            1,866,500
            
            
            0June
                2007 Options
            
            
            130,000
            
            
            130,000
            
            
            0
            
            
            0June
                2009 Options
            
            
            800,000
            
            
            400,000
            
            
            0
            
            
            400,0003,315,000
            
            
            1,048,500
            
            
            1,866,500
            
            
            400,000





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. At December 31, 2007, all future compensation
      expenses were recognized.





There
      was
      no aggregate intrinsic value of options outstanding and exercisable as of
      December 31 2007 and December 31, 2006. The aggregate intrinsic value represents
      the intrinsic value, based on options with an exercise price less than the
      market value of the Company’s stock on December 31 2007 and December 31, 2006,
      which would have been received by the option holders had those option holders
      exercised those options at of that date.





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 option.





**The
                value of Options****December
                2006 Options**
            
            **June
                2007**
              **Options**
            
            **June
                2009**
              **Options**Risk-free
                interest rate
            
            
            2.17
            %
            
            2.28
            %
            
            2.66
            %Expected
                lives (in years)
            
            
            1.167
            
            
            1.417
            
            
            2.417Dividend
                yield
            
            
            0
            %
            
            0
            %
            
            0
            %Expected
                volatility
            
            
            100
            %
            
            100
            %
            
            100
            %




F-20




**NOTE
      16 - CONCENTRATION OF CUSTOMERS**





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




**Years
                Ended December 31,****2007**
            
            **2006**Net
                sales derived from-
                Customer A
            
            
            2,969,259
            
            
            4,244,266-
                Customer B
            
            
            4,885,231
            
            
            721,087-
                Customer C
            
            
            *
            
            
            *%
                to total net sales-
                Customer A
            
            
            33
            %
            
            61
            %-
                Customer B
            
            
            54
            %
            
            10
            %-
                Customer C
            
            
            *
            
            
            *Account
                receivable from - Customer A
            
            
            80,933
            
            
            736,654-
                Customer B
            
            
            361,203
            
            
            842,062-
                Customer C
            
            
            515,119
            
            
            *%
                to total accounts receivable - Customer A
            
            
            *
            
            
            39
            %-
                Customer B
            
            
            23
            %
            
            45
            %-
                Customer C
            
            
            33
            %
            
            *




*
      less
      than 10%





F-21





**Note
      17 - SUBSEQUENT EVENT**





On
      December 24, 2007, our Board of Directors and the holders of a majority of
      the
      outstanding capital stock of the Company adopted and approved resolutions to
      effect a one-for-twenty (1-for-20) reverse stock split of the Company’s
      outstanding shares of common stock (the “Reverse Split”). The Reverse Split took
      effective upon the filing of the Company’s Certificate of Amendment to its
      Articles of Incorporation with the Nevada Secretary of State on March 7, 2008,
      and in connection therewith, and our stock symbol has changed from “FRLK.OB” to
“FLSW.OB”.





Immediately
      before and following the Reverse Split, the number of shares of the Company’s
      common stock was as follows (subject to slight adjustment for rounding of
      fractional shares):





Common
                Stock Outstanding
            
            Authorized
              Common
                StockPre
                Reverse Split
            
            
            92,821,707
            
            
            200,000,0001
                for 20 Reverse Split
            
            
            4,641,085
            
            
            200,000,000





F-22


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





As
      reported in a Form 8-K Current Report filed with the Commission on January
      16,
      2008, the Company changed its independent accountants from BDO McCabe Lo
      Limited, Certified Public Accountants (“BDO”) to Kenne Ruan, CPA, P.C.,
      effective January 16, 2006.





**Item
      8A.**  **Controls and Procedures.**




**Evaluation
      of Disclosure Controls and Procedures**




Our
      management evaluated our disclosure controls and procedures (as defined in
      Rule
      13a-15(e) or Rule 15a-15(e) under the Securities Exchange Act of 1934, as
      amended (the “Exchange Act”)) and internal control over financial reporting. The
      evaluation was conducted under the supervision and with the participation of
      our
      Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the
      effectiveness of the design and operation of our disclosure controls and
      procedures (“Disclosure Controls”) as of the end of the period covered by this
      report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation,
      our CEO and CFO concluded that our Disclosure Controls were effective as of
      the
      end of the period covered by this report. In addition, no change in internal
      control over financial reporting occurred during the year ended December 31,
      2007, that has materially affected, or is reasonably likely to materially
      affect, such internal control over financial reporting. It should be noted
      that
      any system of controls is based in part upon certain assumptions designed to
      obtain reasonable (and not absolute) assurance as to its effectiveness, and
      there can be no assurance that any design will succeed in achieving its stated
      goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance
      that the disclosure controls and procedures were effective as of December 31,
      2007.




**Management’s
      Report on Internal Control Over Financial Reporting**




Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
      under the Exchange Act. The Company’s internal control over financial reporting
      is a process designed to provide reasonable assurance regarding the reliability
      of financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting principles in the
      United States of America.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with internal control policies or procedures may deteriorate.




Management
      assessed the effectiveness of the Company’s internal control over financial
      reporting as of December 31, 2007. In making this assessment, management used
      the criteria set forth by the Committee of Sponsoring Organizations of the
      Treadway Commission (COSO) in *Internal
      Control - Integrated Framework* .
      Management’s assessment included evaluating the design of the Company’s internal
      control over financial reporting and testing of the operational effectiveness
      of
      the Company’s internal control over financial reporting. Based on our
      assessment, we concluded that, as of December 31, 2007, the Company’s internal
      control over financial reporting was effective based on the criteria issued
      by
      COSO in *Internal
      Control - Integrated Framework* .




This
      report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by our registered public
      accounting firm pursuant to temporary rules of the Securities and Exchange
      Commission that permit us to provide only management’s report in this annual
      report.




29





**Item
      8B. Other Information.**





None.





30


**PART
      III**





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





As
      of
      December 31, 2007 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:





Name
            
            Age
            
            Position
            
            SinceYi
                He
            
            41
            
            Chief
                Executive Officer, Chairman of the Board of Directors
            
            August
                2001Hongkeung
                Lam
            
            55
            
            Chief
                Financial Officer, Chief Accounting Officer, Secretary and
                Director
            
            August
                2001Guoliang
                Tian
            
            68
            
            Director
            
            May
                2003Yu
                Fang
            
            61
            
            Director
            
            May
                2003Zhenying
                Sun
            
            51
            
            Director
            
            November
                2006





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, and the Chief Executive Officer
      since May 2003. Mr. He is the founder of Beijing SLAIT Science & Technology
      Development Limited Co., where he served as Chairman and President from January
      1998 to August of 2001. 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
      the Chief Financial Officer, Chief Accounting Officer, Secretary and 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 expertise
      and
      studies 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 expertise and studies 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.




31





**Zhenying
      Sun** has been
      a director of the Company since November 2006. Ms. Sun is currently the
      President of New West International, Inc., a real estate development and trading
      company, and she has held this position since 2001. Ms. Sun is also a director
      of Statelink International Group, Inc. From 2003 until the present, Ms. Sun
      has
      also served as the Finance Director of Nanning New West Property &
Investment Ltd. Ms. Sun graduated with a degree in accounting from Beijing
      Xicheng Finance & Trade School in 1990. Ms. Sun also graduated with a degree
      in accounting from the Machine Industry Management Staff College, which she
      attended from 1990 to 1992.





**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, 200 7,
      all
      Section 16(a) filing requirements applicable to its officers, directors and
      ten
      percent shareholders were in compliance with SEC regulations.





32




**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 other
      executive officers whose annual compensation exceeded $100,000, for the fiscal
      year ended December 31, 2007 and 2006:





**SUMMARY
                COMPENSATION TABLE**Name
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
              ($)Yi
              He, Chief Executive
            
            
            2007
            
            
            108,105
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            108,105Officer
                and Director1
            
            
            2006
            
            
            18,566
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            18,566




1
            Yi
                He became the Company’s Chief Executive Officer on May 15, 2003. Mr. He is
                not compensated for his services as a director of the Company.





**Outstanding
      Equity Awards at Fiscal Year-End Table**





**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END****OPTION
                AWARD**
            
            **STOCK
                AWARD**Name
            
            Number
                of Securities Underlying Unexercised Options
              (Exercisable)
              (#)
            
            Number
                of Securities Underlying Unexercised Options
              (Unexercisable)
              (#)
            
            Equity
                Incentive Plan Awards:Number
                of Securities Underlying Unexercised Unearned Options
              (#)
            
            Option
                Exercise Price
              ($)
            
            Option
                Exercise Date
            
            Number
                of Shares or Units of Stock That Have Not Vested(#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested($)
            
            Equity
                Incentive Plan Awards
              Number
                of Unearned Shares, Units or Other Rights That Have Not
                Vested
              (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not VestedYi
                He
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-







**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, 2007. 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. For the fiscal year
      2007, none of the directors received reimbursement payments from the Company.




33





**Employee
      Benefit and Consulting Services Compensation Plans**





As
      of
      December 31, 2007, the Company had one Employee Benefit and Consulting Services
      Compensation Plans in effect:





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.





34




**Item
      11.**  **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters.**





The
      following table sets forth certain information with respect to the beneficial
      ownership of our commonstock
      as
      ofMarch
      11,
      2008,by:
      (i)
      each person known to beneficially own more than five percent of our common
      stock; (ii) each of our officers, directors and nominees for election as
      director; and (iii) all of our directors and executive officers as a
      group.





The
      number of shares beneficially owned by each director or executive officer is
      determined under rules of the SEC, and the information is not necessarily
      indicative of beneficial ownership for any other purpose. Under the SEC rules,
      beneficial ownership includes any shares as to which the individual has the
      sole
      or shared voting power or investment power. In addition, beneficial ownership
      includes any shares that the individual has the right to acquire within 60
      days.
      Unless otherwise indicated, each person listed below has sole investment and
      voting power (or shares such powers with his or her spouse). In certain
      instances, the number of shares listed includes (in addition to shares owned
      directly), shares held by the spouse or children of the person, or by a trust
      or
      estate of which the person is a trustee or an executor or in which the person
      may have a beneficial interest.





**Title
                of Class**
            
            **Name
                and Address of Beneficial Owner**
            
            **Amount
                and Nature of Beneficial Ownership****3**
            
            **Percentage
                Owned**
              **Beneficially****5**Common
                Stock
            
            
            Yi
                He1
            
            
            1,290,001
            
            
            27.8
            %Common
                Stock
            
            
            Hongkeung
                Lam1
            
            
            525,000
            
            
            11.3
            %Common
                Stock
            
            
            Guoliang
                Tian1
            
            
            -0-
            
            
            —Common
                Stock
            
            
            Yu
                Fang1
            
            
            -0-
            
            
            —Common
                Stock
            
            
            Zhenying
                Sun1
            
            
            650,000
            4
            
            14.0
            %Common
                Stock
            
            
            Jing
                Zeng2
            
            
            288,000
            
            
            6.2
            %Common
                Stock
            
            
            Statelink
                International Group, Ltd.2
            
            
            650,000
            4
            
            14.0
            %Common
                Stock
            
            
            All
                officers and directors of the Company as a group (five
                persons)
            
            
            2,465,001
            
            
            53.1
            %





1 An
      officer and/or director of the Company. The address for each officer and
      director is in care of the Company at 9/F Shenzhou Mansion, No. 31 Zhongguancun
      Street, Haidian District, Beijing, China.





2 A
      beneficial owner of more than five percent of the Company’s common stock. The
      address for each beneficial owner is in care of the Company at 9/F Shenzhou
      Mansion, No. 31 Zhongguancun Street, Haidian District, Beijing,
      China.





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





4 These
      shares of Common Stock are held directly by Statelink International Group,
      Ltd.,
      of which Ms. Sun is the controlling person and has both voting and dispositive
      power over these shares.





5 Based
      upon 4,641,098 shares of Common Stock outstanding as of March 11, 2008.





35




**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, 2007:





Plan
                category
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
              (a)
            
            Weighted-average
                exercise price of options, warrants and rights
              (b)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/AEquity
                compensation plans not approved by security holders
            
            
            1,297,000
            
            $
            0.10
            
            
            4,685,000Total
            
            
            1,297,000
            
            $
            0.10
            
            
            4,685,000




As
      of
      December 31, 2007, the Company had two Employee Benefit and Consulting Services
      Compensation Plans in effect:





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
      12.**  **Certain
      Relationships and Related Transactions, and Director
      Independence.**





**Transactions
      with Related Person**




The
      Company, from time to time, received from or made repayments to Mr.
      Yi
      He, who is a major stockholder and a member of our management. The amounts
      due
      from/to stockholders do not bear any interest and do not have clearly defined
      terms of repayment. The
      amounts due from stockholders as of December 31, 2007 and December 31, 2006,
      represented travel advances to Mr. Yi He.  The
      amounts due to stockholders as of December 31, 2007 and December 31, 2006,
      represented advances from stockholders.




36





As
      a
      result of the entry of a Transfer of Right to Invest and Project Cooperation
      Agreement with the Company on October 3, 2006, Statelink International Group,
      Ltd. acquired 13,000,000 shares of the Company’s restricted common stock, or
      13.2% of the Company’s issued and outstanding common stock as of December 31,
      2006.





Other
      than the transactions described above, we have not entered into any transactions
      with our officers, directors, persons nominated for these positions, beneficial
      owners of 5% or more of our common stock, or family members of these persons
      wherein the amount involved in the transaction or a series of similar
      transactions exceeded $120,000.





**Director
      Independence**





The
      Company has determined that the following directors are independent under the
      independence standards of NASDAQ Marketplace Rule 4200(a)(15): Guoliang Tian,
      Yu
      Fang and Zhengying Sun. In determining independence, the Board reviews and
      seeks
      to determine whether directors have any material relationship with the Company,
      direct or indirect, which would interfere with the exercise of independent
      judgment in carrying out the responsibilities of a director. The Board reviews
      business, professional, charitable and familial relationships of the independent
      directors in determining independence.





**Item
      13.**  **Exhibits.**


Exhibit
                Number
              
              Description3.1
              
              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.)3.3
              
              Text
                  of Amendment to Bylaws of Forlink Software Corporation, Inc. (Incorporated
                  by reference to Exhibit 3.3 of the Company’s Form 8-K filed on January 18,
                  2007)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.)10.3
              
              Transfer
                  of “Right to Invest” and Project Cooperation Agreement dated October 3,
                  2006, by and between the Company and Statelink International Group,
                  Ltd.
                  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report
                  on Form 8-K (file no. 000-18731) filed October 10,
                  2006.)21.1
              
              List
                  of Subsidiaries.
  37
  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.)





**Item
      14. Principal Accountant Fees and Services.**





**Change
      of Auditor**





The
      Company’s preceding principal independent auditor was BDO McCabe Lo Limited,
      Certified Public Accountants (“BDO”). BDO performed the audit for the fiscal
      year ended December 31, 2006 and it reviewed the Company’s unaudited financial
      statements through the quarter ended September 30, 2007. BDO was dismissed
      as
      the Company’s principal independent auditor effective January 16, 2008. On
      January 16, 2008, we engaged Kenne Ruan, CPA, P.C. (“Kenne Ruan”) to audit the
      Company’s financial statements for the fiscal year ended December 31, 2007. The
      following are the services provided and the amount billed.





**Audit
      Fees**





The
      aggregate fees billed for professional services rendered by BDO for reviews
      of
      the financial statements included in our quarterly reports on Form 10-QSB during
      fiscal year 2007 were $32,400. The aggregate fees billed for professional
      services rendered by Kenne Ruan for the audit of our 2007 annual financial
      statements and the reviews of the financial statements included in our quarterly
      reports on Form 10-QSB for fiscal year 2007 were $82,400.





**Audit-Related
      Fees**





There
      were no other fees billed by Kenne Ruan 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 Kenne Ruan
      for tax compliance services in fiscal years 2007 and 2006.





**All
      Other Fees**





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





**Pre-Approval
      Policy and Procedures**





The
      Company’s Board of Directors reviews and approves audit and permissible
      non-audit services performed by Kenne Ruan, as well as the fees charged by
      Kenne
      Ruan for such services. In its review of non-audit service fees and its
      appointment of Kenne Ruan as the Company’s independent accountants, the Board of
      Directors considered whether the provision of such services is compatible with
      maintaining Kenne Ruan’s independence. All of the services provided and fees
      charged by Kenne Ruan were pre-approved by the Board of Directors.





***[SIGNATURES
      PAGE FOLLOWS]***




38


**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, 2008
            By:
            /s/
              Yi
              HeYi
                He
              Chief
                Executive Officer




Date:
              March 31, 2008
            By:
            /s/
              Hongkeung LamHongkeung
                  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 HeYi
                  He, DirectorDate: March31, 2008




By:
            /s/
              Hongkeung LamHongkeung
                  Lam, DirectorDate: March31, 2008




By:
            /s/
              Guoliang TianGuoliang
                  Tian, DirectorDate: March31, 2008




By:
            /s/
              Yu
              FangYu
                    Fang, DirectorDate: March31, 2008




By:
            /s/
              Zhenying SunZhenying
                    Sun, DirectorDate: March31, 2008




39