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

                                   FORM 10-KSB

[X]  ANNUAL  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF  THE  SECURITIES
     EXCHANGE ACT OF 1934
     For  the  fiscal  year  ended  December  31,  2004

[_]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d)  OF THE SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from               to
                                    -------------    -------------

                        Commission file number:  0-24374

                                 FANTATECH INC.
               ---------------------------------------------------
              (Exact name of small business issuer in its charter)

             Delaware                                        62-1690722
  -------------------------------                  ----------------------------
  (State of other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                       Identification Number)

    Unit B, 11/F, Vienna Mansion, 55 Paterson Street, Causeway Bay, Hong Kong
    -------------------------------------------------------------------------
          (Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (852) 2577 3020

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

Securities  registered  pursuant  to Section 12(g) of the Act: Common Stock, par
value $0.001 per share

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

Check  if  disclosure of delinquent filers in response to Item 405 of Regulation
S-B  is  not contained in this form, and no disclosure will be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

The  issuer's  revenues  for  the  fiscal  year  ended  December  31,  2004 were
$8,395,386.

The  aggregate  market value of the issuer's common stock held by non-affiliates
of  the  issuer was $24,111,886, which was based on a closing bid price of $1.01
on March 31, 2005.

The  issuer  had  30,096,117 shares of common stock issued and outstanding as of
December 31, 2004.

Transitional Small Business Disclosure Format:  Yes [_]  No [X]

Documents incorporated by reference: None.


                                        1
<PAGE>
Cautionary  Statement  Pursuant  to  Safe  Harbor  Provisions  of  the  Private
Securities  Litigation  Reform  Act  of  1995:

This  Annual  Report  on Form 10-KSB for the fiscal year ended December 31, 2004
contains  "forward-looking"  statements within the meaning of Section 27A of the
Securities  Act of 1933, as amended, including statements that include the words
"believes",  "expects",  "anticipates",  or  similar  expressions.  These
forward-looking  statements  include,  among  others,  statements concerning the
Company's  expectations  regarding  sales trends, gross margin trends, operating
costs, the availability of funds to finance capital expenditures and operations,
facility  expansion  plans,  competition,  and other statements of expectations,
beliefs,  future plans and strategies, anticipated events or trends, and similar
expressions  concerning  matters  that  are  not  historical  facts.  The
forward-looking  statements  in this Annual Report on Form 10-KSB for the fiscal
year  ended December 31, 2004 involve known and unknown risks, uncertainties and
other  factors  that could the cause actual results, performance or achievements
of  the  Company  to differ materially from those expressed in or implied by the
forward-looking  statements  contained  herein.


                                        2
<PAGE>
                                     PART I
ITEM 1.   BUSINESS

OVERVIEW

Fantatech,  Inc.  (hereinafter  referred  to  as the "Company", which term shall
include,  when  the  context  so  requires,  its  subsidiaries  and affiliates),
formerly  Lucas  Educational  Systems,  Inc.,  was  incorporated in the State of
Delaware.  The  Company  designs, develops builds, installs and produces hi-tech
entertainment  and amusement attractions for group audiences including all kinds
of  simulation  attractions  and  equipments  as  well  as  3D/4D  theatres.

During  November  2002,  the  Company acquired all of the issued and outstanding
shares  of  Intsys Share Limited ("Intsys") in a reverse acquisition. Intsys was
incorporated  in  the  British  Virgin Islands ("BVI") on April 29, 2002. Intsys
currently owns three subsidiary companies namely: Shenzhen Digitainment Co., Ltd
("SDCL" or "Digitainment") trading under the name of Shenzhen Hytechnology Inc.,
incorporated  in the People's Republic of China (the "PRC" or "China"), Megabase
Investment  Limited  ("Megabase"),  a BVI company and Hytechnology Inc. ("Hytech
US"),  a  Delaware  corporation.  In  addition,  SDCL  owns  40%  of  Fantatech
Development  Inc.  ("FDI").

During May 2002, Intsys acquired a 65.41% interest in SDCL, a then joint venture
company  incorporated  in  the  PRC  and  trading  under  the  name  of Shenzhen
Hytechnology  Inc.  The  former  owners  of  the 65.41% interest in Digitainment
became all of the shareholders of Intsys. The business combination was deemed to
be  a reverse merger and the acquisition of the 65.41% interest in SDCL has been
accounted for at historical cost. SDCL was established in 1998 and is engaged in
design,  development  and  production  of  hi-tech  entertainment  and amusement
products,  including  4D theatre, simulation games, indoor entertainment center,
large  size  indoor  attraction  and  theme  parks.

In  August  2002, Intsys established Hytechnology Limited, ("Hytech HK"), a Hong
Kong  company  in which Intsys owns 99%. Hytech HK has been engaged in the sales
and  marketing  of  the  products  of  Digitainment outside the United States of
America (excluding China). On May 12, 2004, the Company disposed and sold Hytech
HK  to  Top  Link  Hi-Tech  Development (H.K.) Limited ("Top Link"), a Hong Kong
Corporation  ultimately  owned  by  Shenzhen Huaqiang Holdings Ltd. ("SHQ"). The
Chairman  and  President  of  SHQ  are also the Chairman and CEO of the Company.

During  September  2002,  Intsys acquired a 70% equity interest in HyTechnology,
Inc.  ("Hytech  US"),  a  Delaware Corporation, from a third party for $172,000.
HyTech  US is engaged in the sales and marketing of the products of Digitainment
in  the  United  States  of  America.

In  August  2003, SDCL, Shenzhen Huaqiang Industry Company Limited ("SHICL") and
Shenzhen Huaqiang Venture Capital Company Limited ("SHVCCL") incorporated FDI in
PRC.  FDI  is owned 40% by SDCL, 40% by SHICL and 20% by SHVCCL, and is intended
to  engage  in  the sales and marketing of the products of Digitainment in China
and  to  assist  SDCL  to  solicit the cooperation for hi-tech entertainment and
amusement  centers  and  theme parks. Subsequent to the formation of FDI, SHVCCL
(the 20% shareholder) assigned all of its management and control rights to SDCL.
SHICL  and  SHVCCL  are  associates  of  SHQ.

On  June 10, 2004, the Board of Directors of the Company approved that every two
shares  of  the  Company's  common  stock  with  par  value  $0.001  per  share
("Pre-Reverse-Split  Common  Stock")  was  reclassified into one share of common
stock,  par value $0.001 per share ("Post-Reverse-Split Common Stock") effective
on  June  30, 2004. Each fractional share of Post-Reverse-Split common stock was
rounded  up  to  the  next  whole number of share. The reverse split reduced the
Company's  issued  and  outstanding  shares from 40,192,063 shares to 20,096,117
shares.  The  par  value  of  the  Company's  common  stock  was  not  affected.
Retroactive  effect  has  been  given  to  share  and  per  share amounts in the
financial  statements  resulted  from the reverse stock split. Subsequent to the
reverse  stock  split,  the Company's new trading symbol was changed to FNTN.OB.


                                        3
<PAGE>
In  October  2004,  the  Company  entered  into  an  agreement  ("Share Exchange
Agreement")  between  and among Intsys and Topforce Asia Limited ("Topforce"), a
BVI  corporation associated with Shenzhen Yongfengguo Investment and Development
Co., Ltd., the minority shareholder of SDCL. Under the Share Exchange Agreement,
the  Company  acquired  the  remaining  34.59%  of SDCL (the "Acquisition") from
Topforce  by  issuing  10,000,000  shares  of  its  common  stock  and  Topforce
transferred  to Intsys all of the equity interest of Megabase Investment Limited
("Megabase"),  a  BVI corporation, established to hold 34.59% equity interest in
SDCL.  Palisades Capital Group, LLC valued the Acquisition and issued a Fairness
Opinion  expressing  that  the  number of shares issued under the Share Exchange
Agreement  reflected  fairly  the  value  of  the  assets  acquired.

The  following is the organization chart of the Company as of December 31, 2004:

                                 Fantatech Inc.
                                   (Delaware)
                                        |
                                   100% |
                                        |
                              Intsys Share Limited
                                      (BVI)
                                        |
                                        |
      |------------------------------------------------------------------------|
      |                                 |                                      |
 70%  |                   100%          |                                      |
      |                                 |                                      |
 Hytechnology Inc.         Megabase Investment Limited                         |
  (Delaware)                 (BV|)                                             |
                                        |                   65.41%             |
             34.59%                     |                                      |
                                        |                                      |
                                        |-----------------(100%)---------------|
                                          Shenzhen Digitainment Co. Ltd
                                                    (PRC)
                                                      |
                                                 40%  |
                                                      |
                                          Fantatech Development Inc.
                                                    (PRC)

All  of the Company's production and most of its business operations are located
in  the  PRC  and  are  conducted  in Renminbi ("RMB"), which is the currency of
China.  During  the year ended December 31, 2004, the exchange rate has remained
stable  at  approximately  US$1.00  to  RMB  8.30.

The  Company conducts a certain portion of its purchase through related parties,
and  has  additional  continuing  transactions  with  such  parties.


INDUSTRY BACKGROUND

The  entertainment  products  in  earlier decades mainly focused on single-track
rides  such  as roller coasters, rotating horses and corsairs which produced the
novelty  of  rectilinear  or rotating mechanical movement. Though these products
are  still  in use today, the development and maturity of electronic and control
technology  allowed  the  adoption  of  many hi-tech effects using light, sound,
external  decorations,  which  greatly  improved the entertainment experience as
well  as  allowing  increased  safety,  reliability,  enjoyment  and excitement.


                                        4
<PAGE>
The  application  of computers greatly improved the performance of entertainment
facilities  and  further  allowed  the  utilization  of  technologies in digital
control,  sound,  light  and digital imagery and ultimately made it possible for
formation  of  a new generation of integrated entertainment facilities. From the
1970s,  development of simulation technology, followed by the dynamic-simulation
amusement  attraction,  proved  to  be  the outcome of symbiotic applications of
modern hi-tech computer-controlled, hydraulics, digital imagery and Hi-Fi sound.
Also,  computer  networking technology and the Internet are the latest pieces of
technology,  widely supplied to all industries including the amusement industry,
resulting  in  the  reality  of  network-linked  series  of  amusement products.
Computer,  video and film technology based interactive and dynamic entertainment
products  have  become  more  and  more  popular  in the entertainment industry.


BUSINESS SCOPE

The  Company  is in the hi-tech entertainment and amusement business. Apart from
its  ability  in  the  design,  development,  manufacturing  and installation of
hi-tech  simulation  attractions and equipments for group audiences, the Company
also designs and produces special 3D/4D theatre systems. Its optimal integration
team  is  experienced  and  creative  in combining the technologies in computer,
digital  video  and  film,  simulation,  artificial  intelligence  and  system
integration  to produce comprehensive simulation products which can be installed
in  a  wide variety of venues such as hi-tech amusement centers and theme parks,
urban  entertainment  centers,  location  based  entertainment  complex, science
centers  and  shopping  malls.  The Company has successfully marketed and sold a
series  of  hi-tech  amusement and entertainment products as well as 4D theatres
that  are presently operated in different theme parks, entertainment centers and
shopping malls in countries such as USA, Canada, Italy, Israel, Ukraine, Kuwait,
Philippines  and  China.

The  Company  realized  the  impending  increase  of  scientific  and  technical
requirements  for amusement products as well as the developing trend of multiple
technique  application  on  digital  film  and  virtual reality. The Company has
developed  the  capabilities  of  planning,  designing,  producing, and managing
technology based hi-tech entertainment centers or theme parks, and are among the
few hi-tech companies in the world who can create an entire system of large size
indoor  attractions.

The main business scopes of the Company are as follows:

1.   Design, develop and produce hi-tech entertainment and amusement products;

2.   Design and develop hi-tech theme parks and amusement attractions;

3.   Invest and operate indoor and outdoor hi-tech entertainment centers;

4.   Invest and operate large-size hi-tech theme parks.


PRODUCT

The  products  developed  and  produced  by the Company can be divided into four
categories:  FantaWild FunPlex, FantaWild 4D Theater, Large-size attractions and
FantaWild  Theme  Park.

FantaWild FunPlex
-----------------

The  FantaWild  FunPlex is an indoor entertainment center specially designed for
shopping  malls  and  recreation  areas. The size of FunPlex centers are usually
25,000  to 80,000 square feet, and each of the centers can be mounted with up to
50 attractions, which is a unique and exciting family-based entertainment center
with  attractions  catering for the diversified needs of all family members. The
FunPlex  is  normally  organized  into  8  zones/sections: "FantaZone", "Cartoon
City", "VirtuaSports", "MechaZone", "FunPlex Photo Studio", "Dragon of Destiny",
"FantaWild  4D  Theater"  and  "Haunted  House".  Each  section  contains


                                        5
<PAGE>
attraction  that  will provide different entertainment experiences to adults and
parents,  youths  and  teenagers, and young children, respectively. In addition,
there  is a Redemption Center for purchase of game cards and redemption of gifts
with the credit of the card. Each zone is modular and can be expanded or swapped
for another. The Company will continuously develop new attractions and platforms
as well as new content for each platform in order to maintain the attractiveness
of  each  FunPlex  for  repeat  customers.

Each  FunPlex  is managed by a computerized system which generates daily reports
on  revenue,  popular  attractions  and  peak  operating hours, etc. The Company
distributes  FunPlex  by  the  means  of direct sale and revenue sharing through
jointly  control  operations, to which the Company invests part of or all of the
equipment  in  the  FunPlex  and  is  responsible  for  on-site  installation,
maintenance  and updating the content of each attractions during the cooperation
period,  while  its  partner  will  be  responsible  for  the  foundation works,
decoration, advertisement, and daily management as well as the related expenses.
The  Company  will  recoup the capital outlay by collecting an agreed portion of
monthly  revenue,  normally  50%.  In  2004, the Company has launched a total of
eight  "FunPlex"  indoor entertainment centers located in different major cities
in  China.  With  the  completion  of  the  outstanding  contracts on hand as of
December  31,  2004,  the  number of "FunPlex" amusement and entertaining center
will  increase  to  over  18  in  different  Chinese  cities.

FantaWild 4D Theater System
---------------------------

FantaWild  4D  Theater  -  The  Company  manufactures  and installs FantaWild 4D
Theater  systems,  which  are  specially  designed  flat  screen  or  patented
cylindrical screens that provide a wider viewing angle than a normal 3D theater.
The  4D  chairs  can  produce  special  effects such as vibration, falling, wind
blowing,  water  spraying and leg tickling which can also be combined with other
simulation  effects  like  virtual fog, rain, lightning, air bubbles, and smell,
providing  both  visual,  audio  and  sensory  experiences synchronized with the
on-screen  action  according  to  the plots of the movies. To satisfy the visual
requirements  of  the  audiences,  the  Company  also  designs  and manufactures
cylinder-polarizing  glasses  for  the  viewing  of  the  cylindrical  pictures.

The  Company  has  already  successfully installed approximately 30 4-D theaters
worldwide,  including  the  USA,  Canada,  Italy,  Kuwait,  Philippines, Israel,
Ukraine  and  China.

FantaWild  4D  Films  -  The Company has contracted with it's 4D films supplier,
Hyvision  Digital  Film  Inc.  ("Hyvision"),  a  related  company, to create and
develop three to five new independent 4D films a year for exclusive distribution
and  exhibition  at  FantaWild  4D  Theaters. FantaWild 4D Theater customers can
lease  films on a yearly basis through the Company. The current library of these
4D  films  contains  titles  such  as  "Dino-Rampage", "Escape from Bane Manor",
"Strategic  Command", "Deep Sea Adventure", "UFO Space Flight", "An Ode to Life"
and  "Legend  of  Pyramid",  etc,  just  to  name  a  few.

Large Size Attractions
----------------------

Large  size  attractions  are  the main components of a theme park or recreation
facility  which may help to bring in large numbers of tourists and entertainment
revenues.  Currently, there are only a few companies that possess the ability to
design  and  produce a large size attraction due to technical difficulty and the
complicated  development process. The Company has designed and developed various
large  scale simulation attractions which incorporate integrated electric motion
system, large format film projection, screen, audio and lighting devices as well
as  special  programming  of  video  and  motion  control  system  to provide an
integrated  adventure  and  simulation  experience  to  the  audiences.

The  large  size  attractions  developed  by  the  Company  include:  "4D  Ride
Dino-Rampage",  "Floating  Sphere  4D  Theater",  "Try  To  Remember",  "Space
Mountain", "Haunt of Fear", "Those Wacky Bugs" and "The Milky Way Plaza".


                                        6
<PAGE>
4D  Ride  Dino-Rampage is a large-size indoor modern attraction which integrates
the  elements of 3D animated movie clips, crafted dioramas, dynamic motion cars,
disaster  imitation and various performance tricks. The story premise underlying
this  attraction  is  that in the year 2020, a time in which humanity has made a
great  achievement  in  the  field  of  biotechnology,  the Municipal Museum has
performed  a series of experiments regarding the incubations of ancient dinosaur
eggs  and  embryos  that  have  received  worldwide media attention. Just as the
scientists at the museum are on the verge of a breakthrough, an unexpected event
occurs  in  which the genes of the dinosaur embryos mutate radically and develop
into  actual  live,  dinosaurs over the course of one night. The dinosaurs break
out of the museum and proceed to wreak havoc throughout the streets of the city.

The  Floating  Sphere  4D  Theater integrates hi-tech elements such as spherical
theater  screen,  large  rotating  mechanisms  and  on-site special effects. Its
ingenious  and  spectacular  design  marks  the cutting edge of state-of-the-art
technology in the modern entertainment industry and is currently a new milestone
in  the  theater  technology  and  development. It covers about sixteen thousand
(16,000)  square  feet  (82  feet  long)  and  is composed of huge hemispherical
screen,  dynamic  motion-chair  suspending  system,  rotating  platform, special
effects  system  and  3D  animated  movie  content.

During  2004,  the Company completed the construction of 4D Ride Dino-Rampage in
the  City of Beijing, which commenced its operations in November 2004. The other
Dino-Rampage in the City of Tianjin will be completed in October 2005, which was
behind  its  original  schedule  due  to the delay of payment from customer. The
Company has contracted a Floating Sphere 4D Theater to be built in Beijing which
is  expected  to  be  completed  by  end  of  2005.

FantaWild Theme Park
--------------------

FantaWild Theme Park is a hi-tech amusement theme park consisting of large scale
emulated  and  mechanical  attractions  which  can  provide  integrated  and
comprehensive  simulation experiences to visitors. The Company has the necessary
resources  and ability to develop, design and install all the attractions in the
FantaWild  Theme  Park,  which  shall  normally  consist  of  9 to 12 large size
attractions.  Each  single  attraction  in  FantaWild  Theme Park can be sold or
invested  as  separate  item  or  as  a  combination.

The  Company  had  also  contracted a theme park in the City of Chongqing, which
will  consist of 10 to 12 large size attractions and is expected to have a grand
opening  at  the  end  of  2005.


PRODUCT  QUALITY

The  Company  implements  strict  quality  controls  and  management  systems to
maintain  the premium quality of its 3D and 4D entertainment products, including
supplier  authentication,  contract examining, product design, production, test,
after  sale  service  and  etc.  All  the  products  are  developed and produced
according  to  relevant  international  standards. The Company obtained ISO 9000
quality  certification  to  its production and manufacturing management. Through
ongoing  research  and development efforts and its experienced engineering team,
the  Company is in a position to offer high standard 4D theaters systems as well
as  advanced  theme  park  attractions  and  recreational  project  design.


PRODUCTION

The Company's manufacturing plants are located in Shenzhen, China, where most of
its  products  including  software,  hardware,  electronic  control  systems,
mechanics,  etc.  are  developed  and  produced  in-house. The Company also uses
materials  readily  available  from the market, which may include well-developed
software,  computer  accessories  and  parts.  Certain  processes  which involve
intensive  manpower  such  as  metal  works,  decorating  and  packaging will be
sub-contracted  to other third party factories. However, final assembly, testing
and  quality  control  will  be  completed  within  the  Company's  own  plants.


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<PAGE>
The  Company's  production  processes  are  carried  out  and  handled among the
following  departments:

-    Research and Development Center
-    Mechanic Design Department
-    Electric Design Department
-    Structure Design Department
-    Automatic-control Design Department
-    Product Assembly Center
-    Quality Control Center

The  Company  also  creates  and  produces  entertainment  contents such as game
software  and  4D  films  for  its  attractions.


TRANSPORTATION AND DISTRIBUTION

The Company's production plants are conveniently located in Shenzhen, a southern
major  city  in  China  with  well-developed  transportation  network  and
infrastructure.  Most  of  the products or equipment manufactured by the Company
are  transported  to  its customers through various means including rail, truck,
ship  or  plane,  depending  on  the  urgency of the project and location of the
customer.  The Company has not encountered any type of difficulties in arranging
the  delivery  of  its  products  to  its  customers within or outside of China.


RAW MATERIALS

Typical raw materials used by the Company for its production include:
-    Computer hardware including main board, CPU, hard disk, RAM and other parts
-    Electronic components
-    Optical projectors
-    Optical or mechanical transducers
-    Screens and displaying equipment
-    Air pressure containers
-    Hydraulic systems
-    Fiber or plastic parts
-    Metal components or parts

The  Company  purchases raw materials from both large international corporations
such  as Intel, Seagate Technology Inc., as well as local suppliers in China. As
there  are  many suppliers for those raw materials and components, which are not
unique,  the  Company  has not experienced any supply interruptions or shortage.

The  Company  also  designs  and  makes  for  internal use some of the parts and
control  boards  required  for  its  specially  developed  products.


MARKETING AND SALES

The  sales  and  marketing  strategies of the Company revolve principally around
developing  a  reputable  brand  identity and ongoing customer relationships, in
addition  to  continuously innovating and improving the quality of its products.
Products  are  marketed through a direct sales force and marketing staff located
principally in Hong Kong and Shenzhen, China. The Company participates in all of
the  major  international amusement and entertainment exhibitions such as IAAPA,
Euro  Amusement  Show,  TPFC etc. to promote and market directly its proprietary
products  to  the  international  markets.


                                        8
<PAGE>
Most  of  the Company's revenues are generated from sales to customers in China,
which  is  a  fast growing market. On June 1, 2004, SDCL and FDI entered into an
Agreement  that SDCL engaged FDI, its 40% owned associated company, as its sales
agent  for  the  marketing  and  distribution  of  its  amusement and simulation
equipment  as  well  as  3D/4D  theatre  in China. With its stronger shareholder
background  and  relatively  greater  amount  of registered capital, FDI is well
received  by different potential customers in China in the hi-tech amusement and
4-D  theatre  businesses.

Based  on  the  Agency  Agreement  signed  between SDCL and FDI on June 1, 2004,
commencing  January 1, 2005 and thereafter, FDI will be entitled to a commission
ranging  from 10% to 20% of the contract price, depending on the gross margin of
the specific contract and the size of the related project under the contract. In
addition, a 5% advertising and promotional incentive will be provided to FDI for
each  contract  solicited  by  FDI.  The agreed commission and incentive will be
transferred  to  FDI  through  its  purchase from SDCL the related equipment and
products.  FDI  will  be responsible for its own operating costs including staff
salaries,  marketing  and  promotional  expenses,  general office administrative
expenses as well as the associated sales taxes and income tax. The Agreement can
be  terminated  at  any  time  with  60  days  notice  to  the  other  party.

In  addition,  the  Agreement  also  provided  that FDI may include in its sales
contract  a  cooperation  regarding the operation of hi-tech amusement centers "
FantaWild  FunPlex"  or "FantaWild Theme Park" when the proposed operating venue
is  suitable  for  the business. However, FDI will only act as the agent in such
part  of  the  contract  on  behalf of SDCL. FDI will have no direct or indirect
economic  or  legal  interest in those revenue sharing operations, which will be
solely  the business of SDCL who will be responsible to contribute the equipment
and  fixed assets required for the cooperation. All the revenues generating from
such  cooperated  businesses  will  be  received  by  SDCL,  and all the related
expenses  as  stipulated  in  such  cooperation contracts will be borne by SDCL.

In  order to give FDI the necessary motivation and platform to better market and
promote  SDCL's  products,  SDCL  agreed that for the year of 2004 an aggregated
commission  of  20%  plus an advertising and promotional incentive of 15% on the
total  amount  of contract (direct sale of equipment) obtained during the period
from  June  1,  2004  to  December  31,  2004  was  granted  to  FDI.


CUSTOMERS

The  Company's  products  are sold to customers in different countries including
recreation-oriented  companies, theme/amusement parks, entertainment centers and
individual  investors.  During  2004  and  2003, approximately 9% and 21% of the
Company's  contracted  sales,  respectively,  were  from  outside  of PRC, which
included  USA,  Canada,  Italy,  Israel,  Ukraine,  Kuwait  and  Philippines.

Three  customers accounted for approximately 18.4%, 17.8% and 14.2% of sales for
the  year  ended December 31, 2004 as compared to approximately 26.1%, 12.3% and
10.4%  for  the  year  ended  December  31,  2003.  As  of  December  31,  2004,
approximately  80%  (2003:  85%)  of  accounts  receivable  were  from  trade
transactions  with  four  customers,  of  which  one  customer  accounted  for
approximately  33%  (2003:  44%)  of  the  accounts  receivable  balance.

The Company does not believe that it has a material reliance on any one customer
because  most of the contracted sales will be completed within one to two years,
and  the  Company will continue to target the development of the revenue sharing
operations of "FantaWild FunPlex" and large size theme park attractions in order
to  diversify  its  regular  source  of  revenue.


REGULATION

The  Company  is from time to time subject to various production and labor laws,
environmental  and  pollution  control  regulations,  taxation and other related
rules  as  promulgated  by  the  local  Chinese  government  relating  to  its
manufacturing  operation,  production  facilities,  as  well  as  its  business
operations


                                        9
<PAGE>
in  China.  The products manufactured by the Company are also subject to various
product  safety  requirements  as  stipulated by the local authorities where the
equipment  is  being  installed.

Management  of  the  Company believes that the Company is in compliance with all
major  governmental  laws  and  regulations  as  related  to  its  products  and
facilities; and does not expect any material expenditure in 2005 with respect to
the  fulfillment  of  any  such  regulations.


RESEARCH AND DEVELOPMENT

The  Company  considers  itself  in  the  hi-tech  industry  specializing  in
entertainment  product  development  and  design  with  proprietary expertise in
computer  technology,  video  and  film  technology,  simulation,  artificial
intelligence,  and  system  integration.  The  ongoing  research and development
("R&D")  program  involves creating new products and modifying existing products
to  meet  market demands and redesigning existing products to reduce the cost of
manufacturing.  The  R&D department is staffed with experienced design engineers
specialized  in  various aspects. The cost of R&D has been charged to operations
as it is incurred. In 2004 and 2003, the Company expended approximately $841,918
and  502,831,  respectively,  in  labor  and  materials  costs  for  R&D.


STRATEGY AND COMPETITION

The  Company's  strategy  is to enhance its brand identity and awareness, and to
attain  a  greater  economies  of scale in terms of its production operations as
well  as its direct investment in "Fantawild FunPlex and Theme Park", which will
be  built upon its research and development capabilities and the strength of the
experienced  integration  team  with  keen  commitment  to  develop  innovative,
cutting-edge 3D, 4D and other interactive simulation entertainment products that
will  define  the next generation standard in the hi-tech entertainment industry
in  China.

The  Company  competes  with  a  number  of  video game developers, digital film
developers,  game  machine  providers,  indoor attraction manufacturers and also
certain content providers servicing the entertainment markets. Management of the
Company considers SimEx-Iwerks as a major competitor in the 4D theatre field. In
order  to  increase  its competitive edge, the Company concentrates its focus on
the  development  of  cylindrical 4D theater, especially the floating sphere 4-D
theater.  Moreover,  the Company is emphasizing its integrated and comprehensive
abilities  in  designing,  developing  and  producing  multiple types of hi-tech
entertainment  products, including 4D theaters, indoor entertainment centers and
large  size  indoor  or  outdoor  attractions.

In  addition,  the  Company  also  participates  in  the  operation  of  its own
entertainment  centers  and  theme  parks through direct investment. The FunPlex
that  are  operated  by the Company can continuously obtain updated programs and
contents  to  maintain  its  attractiveness.

The R&D and production base of the Company are located in an area which offers a
relatively  the  low  cost  structure.  Accordingly, the Company can provide its
products  at  a  competitive  price.


PATENTS AND TRADEMARKS

The  Company has registered its patent in the area of stereo cylindrical imaging
with  the  US  Patent  and  Trademark  Office  ("USPTO").  In  addition,  other
inventions,  such  as  new  type  entertainment  simulation means and apparatus,
interactive  exercise  bicycle  etc.  have been submitted to the USPTO and State
Intellectual  Property Office of PRC for registration. The trademark "FantaWild"
has  been  registered  in  U.S.  and  PRC.


                                       10
<PAGE>
EMPLOYEES

As of March 2005 and 2004, the Company employed the followings:

<TABLE>
<CAPTION>
      Function                       2005     2004
     ----------                    --------  ------
<S>                                <C>       <C>
(1) Management and administration        77      30
(2) Engineering and production          229     123
(3) Research and development            126     170
(4) Sales and marketing                  39      20
                                    -------  ------
                                        471     343
                                       ====    ====
</TABLE>

All  employees  are  primarily based in Shenzhen while some managerial and sales
staff  work  occasionally  in  other  Chinese  cities  or overseas for different
projects.  Each  full-time  Chinese employee is a member of a local trade union.
Labor  relations have remained positive and the Company has not had any employee
strikes  or major labor disputes. Unlike trade union in western countries, trade
unions  in  most  parts  of  China  are  organizations  mobilized jointly by the
government  and  the  management  of  the  corporation.


GOVERNMENTAL REGULATION ON OPERATIONS IN CHINA

The  Company's  principal executive office is located in Hong Kong, China. Major
business  operations  are  mainly conducted in the Company's China office in the
City of Shenzhen. Accordingly, the Company's business operations must conform to
the  Chinese  governmental  rules  and  regulations.

The Chinese Legal System

The  practical  influence  of  the  PRC  legal  system on the Company's business
operations  in  China  can  be  viewed  from  two  separate  but  intertwined
perspectives.  Firstly,  as  a  matter  of substantive law, the Foreign Invested
Enterprise  ("FIE")  laws  applicable  to  SDCI's  and FDI's operations in China
provide  legal  protection  from  unnecessary  governmental  interference.  In
addition,  these  laws  guarantee  the  full  entitlement  of  the  benefits  as
stipulated in the Corporate Articles and Contracts to those FIE investors. These
laws,  however,  do  impose  standards  concerning  corporate  formation  and
governance,  which  are not qualitatively different from the general corporation
laws of the United States. Similarly, the PRC accounting laws mandate accounting
practices,  which  are  mostly  consistent with US Generally Accepted Accounting
Principles. The Chinese accounting laws require that an annual "statutory audit"
be  performed  in accordance with PRC accounting standards and that the books of
account  of  FIE  are  maintained  in  accordance  with Chinese accounting laws.
Article  14  of  the PRC Wholly Foreign-Owned Enterprise ("WFOE") Law requires a
WFOE  to  submit  certain  periodic  fiscal reports and statements to designated
financial and tax authorities, failing which the enterprise may have to risk the
revocation  of  its  business  license.

Secondly, while the enforcement of substantive rights may appear less clear than
the  established procedures in United States, the FIEs and WFOEs are regarded as
Chinese  registered  companies,  which  enjoy  the  same status as other Chinese
registered  companies  in  business-to-business  dispute  resolution.  As  the
statutory  terms  of  the  Articles  of  Association  provide  that all business
disputes  pertaining  to FIEs are to be resolved by the Arbitration Institute of
the  Stockholm  Chamber  of  Commerce applying the Chinese substantive laws, the
Chinese  minority partner in the Company's joint venture companies like FDI will
not  assume a privileged position regarding such disputes. Any award rendered by
this arbitration tribunal is, by the express terms of the respective Articles of
Association,  enforceable  in  accordance with the "United Nations Convention on
the  Recognition  and Enforcement of Foreign Arbitral Awards (1958)." Therefore,
although  no  assurances  can  be given, the Chinese legal infrastructure, while
different  in  operation  from its United States counterpart, should not present
any  significant  impediment  to  the  operation  of  FIEs.


                                       11
<PAGE>
Economic Reform Issues

Although  the  majority  of  productive assets in China are owned by the Chinese
government,  in  the  past several years the government has implemented economic
reform  measures  that emphasize decentralization and encourage private economic
activity.  Since  these  economic  reform  measures  may  be  inconsistent  or
ineffectual,  there  are  no  assurances  that:

-    The Company will be able to capitalize on economic reforms;
-    The Chinese government will continue its pursuit of economic reform
     policies;
-    The economic policies, even if pursued, will be successful;
-    Economic policies will not be significantly altered from time to time; and
-    Business operations in China will not become subject to the risk of
     nationalization.

Negative impact upon economic reform policies or nationalization could result in
investment  loss  in  the  Company's  common  stock.

Since  1979,  the  Chinese government has reformed its economic systems. As many
reforms  are  unprecedented or experimental, they are expected to be refined and
improved  continuously. Other factors, such as political changes, changes in the
rates  of  economic growth, unemployment or inflation, or the disparities in per
capita  wealth  between regions within China, could lead to further readjustment
of  the  reform  measures. This refining and readjustment process may negatively
affect  the  operations  of  the  Company's  PRC  subsidiaries.

Over  the  last  few  years,  China's economy has registered a high growth rate.
Recently, there have been indications that rates of inflation have increased. In
response,  the  Chinese  government  has taken measures to curb this excessively
expansive economy. These measures have included restrictions on the availability
of  domestic  credit,  which  may  reducing the purchasing capability of certain
customers  of the Company, and limited re-centralization of the approval process
for  purchases  of  some  foreign products. These austere measures alone may not
succeed  in slowing down the economy's excessive expansion or control inflation,
and  may  result in severe dislocations of resources in the Chinese economy. The
Chinese  government  may  adopt additional measures to further combat inflation,
including  the  establishment  of  freezes  or restraints on certain projects or
markets.

To  date  reforms  to  China's  economic  system have not adversely impacted the
Company's  operations and are not expected to affect the operations adversely in
the  foreseeable  future; however, there can be no assurance that the reforms to
China's  economic system will continue or that the Company will not be adversely
affected by changes in China's political, economic, and social conditions and by
changes  in  policies  of  the  Chinese  government, such as changes in laws and
regulations,  measures  which may be introduced to control inflation, changes in
the  rate  or  method  of  taxation,  imposition  of  additional restrictions on
currency  conversion  and  remittance abroad, and reduction in tariff protection
and  other  import  restrictions.

China's Accession into the World Trade Organization ("WTO")

On  November  11, 2001, China signed an agreement to become a member of the WTO,
the  international  body  that  sets most trade rules, further integrating China
into the global economy and significantly reducing the barriers to international
commerce.  China  has agreed upon its accession to the WTO to reduce tariffs and
non-tariff  barriers,  remove  investment  restrictions,  provide  trading  and
distribution  rights  for  foreign  firms.  The tariff rate reductions and other
enhancements will enable the Company to develop better investment strategies. In
addition,  the  WTO's  dispute  settlement  mechanism  provides  a  credible and
effective  tool  to enforce members' commercial rights. Also, with China's entry
to the WTO, it is believed that the relevant laws on foreign investment in China
will  be  amplified  and  will  follow  common  international  practices.


                                       12
<PAGE>
ITEM 2.   DESCRIPTION OF PROPERTIES.

The  Company's  principal  executive  office is situated at Unit B, 11/F, Vienna
Mansion,  55  Paterson  Street,  Causeway  Bay,  Hong  Kong  which  is  leased
free-of-rent from a related company controlled by SHQ. Major business operations
are  conducted  mainly  in  Shenzhen,  China and the current operating leases on
several  premises  for  factory  and  office  are  as  follows:

<TABLE>
<CAPTION>
                           Area (approx.)    Expiration     Approximate
Location          Usage    (Square meter)  Date of Leases  Annual Rental
<S>             <C>        <C>             <C>             <C>
Shenzhen, PRC   Factory            11,169       July 2018  $      182,600
Shenzhen, PRC   Office              1,771       Sep  2005  $       76,812
Shenzhen, PRC   Warehouse           1,200       May  2005  $       17,349
Shenzhen, PRC   Storage                94       Apr  2006  $       15,975
Shenzhen, PRC   Storage                87       Sep  2007  $       10,434
Beijing, PRC    Office                 45       Nov  2007  $        4,819
Las Tunas, USA  Office                 30       Sep  2005  $       10,680
</TABLE>

ITEM 3.   LEGAL PROCEEDINGS.

As  of  the  fiscal  year  ended  December 31, 2004, and the date of this 10-KSB
report,  the  Company  is  not  a  party  to  any  pending or to the best of the
knowledge  of  the  management,  any  threatened  legal proceedings. None of the
directors,  officers or affiliates, or owner of record of more than five percent
(5%)  stockholders of the Company, or any associate of such director, officer or
stockholder  is  a  party  adverse  to or has a material interest adverse to the
Company  in  reference  to  pending  litigation.


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

During  the three months ended December 31, 2004, no matters were submitted to a
vote  of  the  Company's  security  holders.



                                     PART II


ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)  Market Prices of Common Stock

The  Company's  common  stock  is  traded on the Over-The-Counter Bulletin Board
under  the  symbol  "FNTN.OB".  During 2004 and 2003, trading activity in common
stock was generally limited and sporadic, and should not be deemed to constitute
an  "established  public  trading  market".

The  following  table sets forth the range of the adjusted closing prices of the
Company's  common  stock  as  quoted  during  the periods indicated. Such prices
reflect  prices, adjusted for stock splits, between dealers in securities and do
not  include any adjustments for retail mark-up, mark-down or commission and may
not  necessarily  represent actual transactions. The information set forth below
was  obtained  from  Yahoo  Finance.


                                       13
<PAGE>
<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                            -------   -------
FISCAL YEAR ENDED DECEMBER 31, 2004
-----------------------------------
<S>                                                         <C>       <C>
Three months ended March 31, 2004                           $   0.42  $   0.40
Three months ended June 30, 2004                            $   2.50  $   0.55
Three months ended September 30, 2004                       $   0.55  $   0.55
Three months ended December 31, 2004                        $   0.55  $   0.18



FISCAL YEAR ENDED DECEMBER 31, 2003
-----------------------------------
Three months ended March 31, 2003                           $   0.44  $   0.35
Three months ended June 30, 2003                            $   0.44  $   0.41
Three months ended September 30, 2003                       $   0.45  $   0.41
Three months ended December 31, 2003                        $   0.45  $   0.40
</TABLE>

Reverse stock split

On  June 10, 2004, the Board of Directors of the Company approved that every two
shares  of  the  Company's  common  stock  with  par  value  $0.001  per  share
("Pre-Reverse-Split  Common  Stock")  was  reclassified into one share of common
stock,  par value $0.001 per share ("Post-Reverse-Split Common Stock") effective
on  June  30, 2004. Each fractional share of Post-Reverse-Split common stock was
rounded  up  to  the  next  whole number of share. The reverse split reduced the
Company's  issued  and  outstanding  shares from 40,192,063 shares to 20,096,117
shares. The par value of the Company's common stock was not affected. Subsequent
to  the  reverse  stock  split,  the Company's new trading symbol was changed to
FNTN.

Issuance of common stock as acquisition consideration

On  October  18,  2004,  the  Company entered into an agreement ("Share Exchange
Agreement")  between  and  among  the  Company, Intsys and Topforce Asia Limited
("Topforce"),  a  British  Virgin  Islands  ("BVI") corporation. Under the Share
Exchange  Agreement,  the  Company  acquired  the  remaining 34.59% of SDCL (the
"Acquisition").  Pursuant  to  the  terms  of  the Share Exchange Agreement, the
Company  issued  10,000,000  shares  of  its  common  stock  in exchange for the
remaining  34.59%  equity  interest  of  SDCL.

(b)  Shareholders

Common  shares  are  issued in registered form. As of March 31, 2005, there were
30,096,117  shares  of  common  stock  issued  and  outstanding  as  held  by
approximately  426  shareholders  on  record.  Securities  Transfer Corporation,
Dallas,  Texas  is  the  registrar  and  transfer  agent  for  the common stock.

(c)  Dividends

The  Company  has  never declared or paid any cash dividends on its common stock
and  does  not  anticipate  paying any cash dividends in the foreseeable future.
Management  of  the Company currently intends to retain future earnings, if any,
to  finance operations and the expansion of businesses. Any future determination
to pay dividends will be at the discretion of the board of directors and will be
based  upon  the  Company's  financial  condition,  operating  results,  capital
requirements,  plans  for  expansion,  restrictions  imposed  by  any  financing
arrangements  and  any other factors that the board of directors deems relevant.


                                       14
<PAGE>
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

OVERVIEW

Effective  November  6,  2002,  the  Company acquired Intsys, which, through its
subsidiaries  and  affiliates,  is  engaged  in  the  development  of  hi-tech
entertainment and amusement products, including 4D theater, digital film, indoor
entertainment  centers  (FunPlex) and large size indoor attractions, intelligent
low  voltage  engineering,  theme site projects and the exploitation, design and
production  of  computer systems integration projects. Intsys is an intermediate
holding  company  which  was formed solely to effect the acquisition of a 65.41%
interest  of  SDCL  in  May  2002. In August 2002, Intsys formed Hytech HK which
engaged  in  the  sales  and  marketing  of the products of SDCL outside the USA
(excluding  China).  In  September  2002, Intsys acquired 70% equity interest in
Hytech US, a Delaware corporation, from a third party for $172,000. Hytech US is
engaged  in  the  sales  and  marketing  of  the  products  of  SDCL in the USA.

In  August  2003, SDCL, Shenzhen Huaqiang Industry Company Limited ("SHICL") and
Shenzhen  Huaqiang  Venture  Capital Company Limited ("SHVCCL") formed Fantatech
Development, Inc. ("FDI") in PRC. FDI is owned 40% by SDCL, 40% by SHICL and 20%
by  SHVCCL, and is intended to engage in the sales and marketing of the products
of  Digitainment  in  China  and  to  assist SDCL to solicit the cooperation for
hi-tech  entertainment  and amusement centers and theme parks. Subsequent to the
formation  of  FDI,  SHVCCL (the 20% shareholder) assigned all of its management
and  control  rights  to  SDCL.  SHICL  and  SHVCCL  are  associates  of  SHQ.

The  investment  in  FDI  was  accounted  for  as a controlled subsidiary of the
Company  and  the  consolidated  financial  statements  include  the  results of
operations  of  FDI.  For  accounting purposes, the acquisition of Intsys by the
Company  was treated as a recapitalization of Intsys with Intsys as the acquirer
(reverse  acquisition).

Most  of  our  customers are located in the PRC, and sales to such customers are
generally  on  an  open  account  basis with deposit collected in advance. Three
customers  accounted  for  approximately 18.4%, 17.8% and 14.2% of sales for the
year ended December 31, 2004 as compared to approximately 26.1%, 12.3% and 10.4%
for the year ended December 31, 2003. As of December 31, 2004, approximately 80%
(2003:  85%)  of  accounts  receivable  were  from  trade transactions with four
customers,  of which one customer accounted for approximately 33% (2003: 44%) of
the  accounts  receivable  balance.

The  Company  purchased  raw  materials  and  certain  components from different
suppliers  located in the PRC. During the year ended December 31, 2004 and 2003,
the  top five vendors accounted for approximately 40.4% and 28% of the Company's
total  purchases, respectively, and out of which 27% and 10.4% was from Hyvision
Digital  Co.,  Ltd,  a  related  party.

During  the  year  ended  December  31,  2004,  there were six FunPlex commenced
operations  in  different PRC cities including Changzhi, Dalian, Nanjing, Wuhan,
Beijing.  With  the  other  two  Funplex  located  in  the  cities of Zhuhai and
Chenzhou, the Company currently operates eight revenue sharing FunPlex in China.
A  4D Ride Dino-Rampage also commenced its operation in Bejing in November 2004.
The  Dino  Rampage in Tianjin has been scheduled to open in October 2005. During
the  month  of  February  2005, two more FunPlex were put into operations in the
cities of Datong and Dongguan. As of March 2005, the Company has been contracted
to  build  in  the  city  of  Chongqing  a  theme  park with 10 to 12 large size
attractions.  A  Floating Sphere 4D theatre is also currently under construction
and  scheduled  to  complete  in  December  2005

The consolidated financial statements of the Company include the accounts of the
Company  and  its  wholly-owned  and  majority-owned  subsidiaries. All material
intercompany  balances  and  transactions  are  eliminated on consolidation. The
consolidated  financial  statements  have  been  prepared  in  accordance  with
generally  accepted accounting principles in the United States and are presented
in  U.S.  Dollars ("$"). The functional currency of the Company's PRC operations
is  the  Renminbi  ("RMB").  The  accounts of foreign operations are prepared in
their  local  currency  and are translated into USD using the applicable rate of


                                       15
<PAGE>
exchange. Transactions denominated in currencies other than the U.S. Dollars are
translated  into  U.S. Dollars at the applicable exchange rates. Monetary assets
and liabilities denominated in other currencies are translated into U.S. Dollars
at  the  applicable  rate  of  exchange at the balance sheet date. The resulting
translation  gains  or  losses  are  credited  or  charged  to  the consolidated
statements  of  operations.


CONSOLIDATED RESULTS OF OPERATIONS

Fiscal Years Ended December 31, 2004 and 2003:

The  audited  consolidated  statements  of  operations for the fiscal year ended
December  31,  2003  have  been  adjusted  retroactively in order to reflect the
effect  of  the  disposal  of  Hytech  HK  and to provide comparison for segment
performance. This adjustment had no effect on the operating results for the year
concerned.

REVENUE
For  the  year ended December 31, 2004, net sales were $8,395,386 as compared to
net sales of $4,679,362 for the year ended December 31, 2003. Approximately 3.7%
and 1.5% of the net sales in 2004 and 2003, respectively, were from the revenues
generated  from  the  revenue  sharing  operations.

During  the  year  ended  December  31,  2004, net contracted sales increased by
$3,479,562  or 75.5% to $8,088,290, as compared to $4,608,728 for the year ended
December  31,  2003.  This  was primarily due to the substantial increase in the
number of project contracted attributable to the successful marketing strategies
implemented  by  the Company. During the year of 2004, approximately 9.3% of the
Company's contracted sales were from customers outside of PRC as compared to 21%
in  2003.  Currently,  the  contract  amount and project size in relation to the
sales  to  PRC  customers  were  on  average  larger  than  customers from other
countries.

During  the year ended December 31, 2004, the Company recorded revenues from its
revenue  sharing  operations  totaling  $307,096 as compared to $70,634 in 2003,
representing  an  increase  of  $236,462  or  334.8%.  The  increase  was mainly
attributable  to  the increase in the number of FunPlex opening during 2004. Six
new  FunPlex  were  added  in  2004,  making the total number of revenue sharing
operations  into  nine  as  at  the  end  of  2004.

GROSS PROFIT
For the year ended December 31, 2004, total gross profit was $3,225,428 or 38.4%
of  total net sales, as compared to total gross profit of $1,696,927 or 36.3% of
total net sales for the year ended December 31, 2003. Net of the effect from the
revenue  sharing  operations,  gross  profit  margin improved by 4.2%, which was
primarily  due  to  the slightly better contribution provided from certain large
amount  contracts  entered  in  2004.

During  the  year ended December 31, 2004, total gross loss from revenue sharing
operations  was  $4,744  or  -1.5% of the total segment revenues, as compared to
total  gross  profit  of  $48,918 or 69.3% of the total segment revenues for the
year  ended  December  31, 2003. The slight loss recorded in 2004 on the revenue
sharing  operations was attributable to the less than full year operation of the
six  new FunPlex invested and launched by the Company in the year of 2004, while
the  initial  operating  expenses  were incurred a few months earlier than their
formal  opening.

SELLING AND MARKETING EXPENSES
Selling  and  marketing expenses increased by $350,336 or 116.7% to $650,411 for
the  year  ended December 31, 2004 from $300,075 for the year ended December 31,
2003.  This  was  primarily  due  to  the increase in marketing, promotional and
exhibition  expenses  in  2004.

GENERAL AND ADMINISTRATIVE EXPENSES
General  and  administrative expenses ("G&A expenses") consist of the management
office  operating  costs  of SDCl, FDI, Hytech US, and the costs associated with
the  operation  of  the  Company's  executive  offices,


                                       16
<PAGE>
and  the  legal  and  accounting costs associated with the operation of a public
company.  For  the  year  ended  December  31,  2004,  G&A expenses increased by
$651,592  or 74.6% to $1,525,227 as compared to the G&A expenses of $873,635 for
the  year ended December 31, 2003. The increase is primarily due to the increase
in  legal  &  professional,  insurance,  utility and salary and rental expenses.

INCOME FROM OPERATIONS
Income  from  operations  for  the  fiscal  year  2004  increased by $526,573 to
$1,049,790, as compared to the income from operations of $523,217 for the fiscal
year  2003. The increase in operating income was attributable to the increase in
total  net  sales.

MINORITY INTEREST
The  Company recorded a minority interest of $45,062 and $124,998 for the fiscal
years  2004 and 2003, respectively. During the year ended December 31, 2004, the
Company acquired the remaining 34.59% minority interest in SDCL and disposed its
99% interest in Hytech HK, which had reduced the portion of minority interest in
the  Company.  In  2004,  the minority interests represented effectively the 60%
shareholding  in  FDI,  while  the  minority  interests  in 2003 represented the
effective  shareholding in Hytech US of 30%, Hytech HK of 1%, SDCL of 34.59% and
FDI  of  73.84%  (60%  plus  34.59%  on  40%).

OTHER INCOME (EXPENSES)
For the year ended December 31, 2004, interest income was $67,916 as compared to
interest  income  of $56,409 for the year ended December 31, 2003, due primarily
to  the  increase in average bank interest rate and average bank deposit balance
in  2004.

For the year ended December 31, 2004, interest expense was 30,257 as compared to
interest  expense  of  $88,036 for the year ended December 31, 2003, as a result
the  decrease  in  average  bank  borrowing  outstanding  amount  in  2004

Other income was $163,289 in 2004 as compared to other expense of $3,053 for the
year of 2003. The increase in other income was attributable to the discretionary
incentive  subsidy  of  approximately  $72,000  granted  to  SDCL from the local
government,  as well as an increase in the sub-letting rental income received by
SDCL  in  2004.

The  loss  on disposal of fixed assets of $41,481 was mainly attributable to the
obsolescence  of  one  set  of  FantaWild  4D theatre due to the relocation of a
FunPlex  to  other  Chinese  city. There was no loss on disposal of fixed assets
recorded  in  2003

INCOME TAX EXPENSE
The  Company  is subject to income taxes on an entity basis on income arising or
derived  from  the tax jurisdiction in which each entity is domiciled. Fantatech
Inc. and Hytechnology Inc. are both Delaware corporations and are subject to the
corporation income taxes of the United State of America. Intsys and Megabase are
not  liable  for  income  taxes  in  BVI.  The  Company's  PRC  subsidiaries and
associates  are  subject to Enterprise Income Tax in the PRC at a rate of 15% on
net  income.  However,  based  on the local tax rules, SDCL is entitled to a tax
holiday for the first two years of its operations (years 1999 to 2000) and a 50%
reduction of the rate for the third through eighth years (years 2001 to 2006) of
operations  due  to its high technology content of businesses. The provision for
taxes  on  earnings  of the PRC subsidiaries, calculated based on the prevailing
accounting standards in PRC, for the years ended December 31, 2004 and 2003 were
$88,767  and  $38,060, respectively. No other significant deferred tax assets or
liabilities  existed  at  December  31,  2004.

DISCONTINUED OPERATIONS
The  Company  recorded loss from operations of Hytech HK of $284 and $56,304 for
the  year  ended December 31, 2004 and 2003, respectively. A gain on disposal of
$1,277  in  relation  to  Hytech  HK  was  recorded  in  2004.


                                       17
<PAGE>
NET INCOME
The  Company  recorded  a  net  income of $1,076,421 and $269,147 for the fiscal
years  ended December 31, 2004 and 2003, respectively. This was primarily due to
the  considerable  increase  in  contracted  sales  in  2004.


FINANCIAL CONDITION, LIQUIDITY, CAPITAL RESOURCES

Operating
---------
For  the  fiscal year ended December 31, 2004, the Company's operations provided
cash  resources  of  $686,860,  as  compared  to  $1,936,914  for the year ended
December 31, 2003, primarily as a result of an decrease in cash flows related to
inventories,  deposit  and prepayment, short term note receivable, related party
payable  and  costs  and estimated earnings in excess of billings on uncompleted
contracts,  offset  in  part  by  a  decrease  in  cash flow related to deposits
received,  related party payables, account payable and other accrued liabilities
and  billings  in  excess  of  costs  and estimated earnings. The Company's cash
balance  decreased by $1,161,925 to $4,078,891 at December 31, 2004, as compared
to  $5,240,816  at  December 31, 2003. The Company's net working capital surplus
decreased  by  $2,551,399  to  $3,405,573  at  December 31, 2004, as compared to
$5,956,972 at December 31, 2003, and the Company had a current ratio at December
31, 2004 of 1.43:1, as compared to 2.96:1 at December 31, 2003.

The  costs  and estimated earnings in excess of billings increased by $1,496,479
or  163.1%  to  $2,414,118  at  December  31,  2004,  as compared to $917,639 at
December  31, 2003, which was attributable to the increase in number of projects
under  construction.  It  was  offset  in part by an increase in the billings in
excess  of  costs  and estimated earnings by $1,629,408 at December 31, 2004, as
compared  to  $nil  at  December  31,  2003.

Deposit and prepayment increased by $730,682 or 104.7% to $1,428,410 at December
31,  2004,  as compared to $697,728 at December 31, 2003, which was attributable
to  the  increase in the Company's business activities and thus the deposits for
subcontracting  works.

During  the  year ended December 31, 2004, the Company received payment from its
customer totaling $554,217 in the form of bills receivable, which was a banker's
postdated  cashier  order.  The  bills  were  maturing  in  April and June 2005,
respectively, and the customer had compensated the Company the relevant interest
costs  associated  with  the  bills.

Deposit  received  from  customers increased by $1,244,335 or 197.5% at December
31,  2004,  as compared to $630,000 at December 31, 2003, due to the increase in
contracted  sales  which  terms  usually  demand  deposits  from  customers.

During  the  year ended December 31, 2004, the total amount of accounts payable,
accrued  liabilities  and  other  payables  reduced  by  $732,707 or 34.7% to an
aggregate  of  $1,379,341  at  December  31,  2004, as compared to $2,112,048 at
December  31,  2003,  which was due to the increase in settlement of outstanding
liabilities  by  the  Company.

The  amount  receivable  from  related  party increased by $346,718 or 264.7% to
$477,701  at December 31, 2004, as compared to $130,983 at December 31, 2003 due
primarily  to  the  increase  in trade receivable due from Hytech HK. The amount
payable  to  related  party  also increased by $350,588 or 116.9% to $650,588 at
December  31, 2004, as compared to $300,000 at December 31, 2004 attributable to
the  increase  in  amount  payable to Hytech HK in relation to the settlement of
administrative  expenses on behalf of the Company. These amounts were originally
offset on consolidation but reflected herein due to the disposal of Hytech HK in
2004.

Investing
---------
Additions  to property, plant and equipment for the year ended December 31, 2004
aggregated  $3,697,051,  in  which $26,529,432 was for investment in the revenue
sharing  FunPlex  operations. In addition, there was an increase of construction
in  progress  of $595,257 or 35.8% as compared to $1,660,740 in the year 2003 as


                                       18
<PAGE>
the  Company  has  devoted more resources on the new projects of FunPlex, Sphere
floating  4D  theater  and  4-D  Ride Dino Rampage. As at December 31, 2004, the
Company had capital expenditure requirement of approximately $5,000,000 in order
to  complete the contracts on hand. The Company believes that it will be able to
fund  expected  capital  expenditures  through  internal  cash flow and external
resources.

Financing
---------
During  the  year  ended  December  31, 2004, the Company's short term bank loan
increased by $2,433,735, reflecting new borrowings from local bank. There was no
bank  loan  outstanding  at  December  31, 2003. The bank loans bear interest at
fixed rate of 5.31% per annum with interest payable monthly and the principal is
due  for  repayment  in  September  2005.  The  loan  was guaranteed by Shenzhen
Huaqiang  Holdings  Limited  ("SHQ"),  a  related  party  to  the  Company.

The  Company anticipates that, based on currently plans and assumptions relating
to  its  existing  operations, its projected cash flow from operations, combined
with  cash on hand, bank lines of credit, and other external credit sources, and
the  credit facilities provided by affiliates or related parties, are sufficient
to  support the Company's working capital requirement for its planned operations
for  the next twelve months. Depending on the future rate of growth, the Company
may seek additional capital in the future to support its expansion in operations
and  acquisitions.


CRITICAL ACCOUNTING POLICIES

The  discussion and analysis of the Company's financial condition and results of
operations  is  based  upon  its  audited  financial statements, which have been
prepared  in  accordance  with  accounting  principals generally accepted in the
United  States.  The  Company  prepares its consolidated financial statements in
accordance with accounting principles generally accepted in the United States of
America.  The  preparation  of  these  financial  statements requires the use of
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. Management periodically evaluates the estimates and
judgments  made,  including  those  related  to  revenue  and  cost recognition,
inventories,  income  taxes  and  impairment  of  assets. Management bases their
estimates and judgments on historical experience and on various factors that are
believed  to  be  reasonable  under the circumstances. Actual results may differ
from  these  estimates  as  a  result  of  different  assumptions or conditions.

The following critical accounting policies affect the more significant judgments
and  estimates  used  in the preparation of the Company's consolidated financial
statements.

Revenue and cost recognition:

The  Company  principally derives its revenue from (1-a) the design, development
and  construction of 4-dimension cylindrical screen system, digital video, theme
sites  and  similar  computer system integration projects; and (1-b) the sale of
entertainment and amusement products, and (2) admission fees shared from revenue
sharing  operations.

(1-a)     Long-term construction contract revenue and costs
Long-term  construction contract revenue and costs are recognized as revenue and
expenses  in the statement of operations by reference to the stage of completion
of  a  contract  (i.e.  the percentage of completion method) when the outcome of
that  contract  can be estimated reliably. The stage of completion of a contract
is  determined  based on the proportion that costs incurred to the balance sheet
date  bear  to  total estimated costs.  A loss on a contract is recognized as an
expense  immediately  when  it is probable that total contract costs will exceed
total  the  contract  revenue.

Costs  attributable  to  un-priced  change  orders  would be treated as costs of
contract  performance in the period in which the costs are incurred if it is not
probable  that  the  costs  will  be  recovered through a change in the contract
price.  If  it  is probable that the costs will be recovered through a change in
the  contract  price,


                                       19
<PAGE>
they  would  be  treated as costs of contract performance in the period in which
they are incurred, and contract revenue would be recognized to the extent of the
costs incurred. If it is probable that the contract price will be adjusted by an
amount that exceeds the costs attributable to the change order and the amount of
the  excess can be reliably estimated, the original contract price would also be
adjusted  for  that  amount  when  the costs are recognized as costs of contract
performance  if  its  realization  is  probable.

(1-b)     Sale of entertainment and amusement products
Revenue from the sale of entertainment and amusement products is recognized when
the  products  are  delivered  to  the  customers.  Revenue  is adjusted for the
deduction  of  any  sales  returns  and  discounts.

(2)       Revenue generated from admission fees shared from revenue sharing
operations

Income  is  recognized  when  the  agreed percentage of revenue from the revenue
sharing  operations  is  due  and  receivable. The Company recorded $307,096 and
$70,634  as  revenues  from  its  revenue sharing operations for the years ended
December  31,  2004  and  2003.

Income taxes:

The  Company  accounts  for  income tax using Statements of Financial Accounting
Standards  ("SFAS") No. 109 "Accounting for Income Taxes". SFAS No. 109 requires
an  asset  and  liability  approach  for  financial accounting and reporting for
income taxes and allows recognition and measurement of deferred tax assets based
upon  the  likelihood  of realization of tax benefits in future years. Under the
asset  and  liability  approach,  deferred  taxes  are  provided for the net tax
effects  of  temporary  differences  between  the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.  A  valuation  allowance  is provided for deferred tax assets if it is
more  likely  than not these items will either expire before the Company is able
to  realize  their  benefits,  or  that  future  deductibility  is  uncertain.

Inventories:

Inventories consist of raw materials, work-in-process, and finished goods, which
are  held  for  resale  and  are  used  in  the  production of entertainment and
amusement production equipment that the Company sells and rents. Inventories are
stated  at  the lower of cost, on a first-in, first-out basis, or net realizable
value.  Costs  of  raw materials include purchases and related costs incurred in
bringing  the  products  to  their  present  location  and  condition.

Asset Impairment:

The  Company  reviews  its  long-lived  assets  and identifiable intangibles for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount  of  the asset may not be recoverable. In performing the review
for  recoverability,  the  Company  estimates  the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected  future  cash flows (undiscounted and without interest charges) is less
than  the  carrying  amount  of  the  asset,  an  impairment loss is recognized.
Otherwise,  an  impairment  loss is not recognized. Measurement of an impairment
loss  for  long-lived  assets and identifiable intangibles would be based on the
fair  value  of the asset. During the years ended December 31, 2004 and 2003, no
impairment  charges  were  recorded.


CONTRACTUAL OBLIGATIONS

The  following  table  summarizes  the  Company's  contractual obligations as of
December  31,  2004:


                                       20
<PAGE>
<TABLE>
<CAPTION>
CONTRACTUAL OBLIGATIONS             PAYMENTS DUE BY PERIOD
-----------------------   ----------------------------------------
                             2005        2006-09        2010-18
                          -----------   -----------   ------------
<S>                      <C>           <C>           <C>
Operating Leases         $    268,000  $    735,000  $   1,441,000
</TABLE>

OFF-BALANCE SHEET ARRANGEMENTS

As  of  December  31,  2004,  the  Company  does  not have any off-balance sheet
arrangements.


INFLATION AND CHANGING PRICES

The  fluctuations of currency exchange rates between Renminbi ("RMB") and United
States  ("US")  dollar could adversely affect the Company's businesses which are
conducted  primarily  in  China, and the sale of its products to corporations in
China  are  settled in RMB. The Chinese government controls its foreign reserves
through  restrictions  on  imports  and conversion of RMB into foreign currency.
Although  the  RMB to US dollar exchange rate has been very stable since January
1,  1994  and  the  Chinese  government has stated its intention to maintain the
stability  of  the  value  of  RMB,  therefore,  there  can be no assurance that
exchange rates will remain stable in the future. The RMB may appreciate in value
against  the  US  dollar.  Exchange  rate  fluctuations may adversely affect the
Company's  revenue  denominated  in  RMB  arising  from the sales of products in
China,  which  are  translated  into US dollar for financial reporting purposes.

RECENT ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements
--------------------------------

In  January  2003,  (as  revised  in  December  2003)  The  Financial Accounting
Standards  Board  ("FASB")  issued  Interpretation  No.  46,  "Consolidation  of
Variable  Interest  Entities", an interpretation of Accounting Research Bulletin
("ARB")  No.  51,  "Consolidated  Financial  Statements".  Interpretation No. 46
addresses  consolidation  by business enterprises of variable interest entities,
which  have  one  or  both  or  the  following  characteristics:  (i) the equity
investment  at  risk  is  not  sufficient  to  permit  the entity to finance its
activities  without additional subordinated support from other parties, which is
provided  through  other  interest  that will absorb some or all of the expected
losses  of  the  entity;  (ii)  the  equity  investors  lack  one or more of the
following  essential  characteristics  of  a controlling financial interest: the
direct  or  indirect  ability  to  make  decisions about the entities activities
through  voting  rights  or  similar  rights;  or  the  obligation to absorb the
expected  losses  of  the  entity if they occur, which makes it possible for the
entity  to  finance  its  activities; the right to receive the expected residual
returns  of  the entity if they occur, which is the compensation for the risk of
absorbing  the  expected  losses.

Interpretation  No.  46, as revised (46R), also requires expanded disclosures by
the  primary  beneficiary  (as  defined) of a variable interest entity and by an
enterprise  that  holds  a  significant variable interest in a variable interest
entity  but  is  not  the  primary  beneficiary.

Interpretation  No. 46R, applies to small business issuers no later than the end
of  the first reporting period that ends after December 15, 2004. This effective
date  includes  those  entities  to  which Interpretation 46 has previously been
applied.  However,  prior  to  the required application Interpretation No. 46, a
public  entity  that is a small business issuer shall apply Interpretation 46 or
this  Interpretation to those entities that are considered to be special-purpose
entities  no  later  that  as of the end of the first reporting period that ends
after  December  15,  2003.  Interpretation No. 46R may be applied prospectively
with  a  cumulative-effect


                                       21
<PAGE>
adjustment  as  of  the  date  on  which  it  is  first  applied or by restating
previously  issued  financial  statements  for  one  or  more  years  with  a
cumulative-effect adjustment as of the beginning of the first year restated. The
implementation  of  the  provisions  of  Interpretation  No.  46R did not have a
significant  effect  on  the  Company's  consolidated  financial  statement
presentation  or  disclosure.

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting For Certain Financial
Instruments  with  Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments with characteristics of
both  liabilities  and equity that, under previous pronouncements, issuers could
account  for  as  equity.  The new accounting guidance contained in SFAS No. 150
requires  that  those  instruments  be  classified as liabilities in the balance
sheet.

SFAS  No.  150  affects  the issuer's accounting for three types of freestanding
financial  instruments.  One  type  is  mandatorily redeemable shares, which the
issuing company is obligated to buy back in exchange for cash or other assets. A
second  type includes put options and forward purchase contracts, which involves
instruments  that do or may require the issuer to buy back some of its shares in
exchange  for  cash  or  other  assets.  The  third type of instruments that are
liabilities under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to a variable
such  as  a  market  index,  or  varies inversely with the value of the issuers'
shares.  SFAS  No.  150  does  not  apply  to  features  embedded in a financial
instrument  that  is  not  a  derivative  in  its  entirety.

Most  of  the  provisions  of  SFAS  No.  150  are  consistent with the existing
definition  of  liabilities  in  FASB  Concepts  Statement  No.  6, "Elements of
Financial Statements". The remaining provisions of this Statement are consistent
with  the  FASB's  proposal  to  revise  that  definition  to  encompass certain
obligations  that  a  reporting  entity  can  or  must settle by issuing its own
shares.  This  Statement  shall  be  effective for financial instruments entered
into  or  modified  after  May  31, 2003 and otherwise shall be effective at the
beginning  of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of a non-public entity, as to which
the effective date is for fiscal periods beginning after December 15, 2004.  The
implementation  of  the  provisions  of  SFAS No. 150 did not have a significant
effect  on  the  Company's  consolidated  financial  statement  presentation  or
disclosure.

In  November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
151,  Inventory  Costs-  an  amendment  of ARB No. 43, Chapter 4. This Statement
amends  the  guidance  in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
the  accounting for abnormal amounts of idle facility expense, freight, handling
costs,  and  wasted  material  (spoilage).  Paragraph  5  of  ARB 43, Chapter 4,
previously  stated  that  "under some circumstances, items such as idle facility
expense,  excessive  spoilage,  double  freight,  and rehandling costs may be so
abnormal  as  to  require  treatment  as  current period charges" This Statement
requires  that those items be recognized as current-period charges regardless of
whether  they  meet  the criterion of "so abnormal." In addition, this Statement
requires  that  allocation  of  fixed  production  overheads  to  the  costs  of
conversion  be  based  on the normal capacity of the production facilities. This
Statement  is  effective  for  inventory  costs  incurred  during  fiscal  years
beginning  after June 15, 2005. Management does not believe the adoption of this
Statement  will  have  any  immediate  material  impact  on  the  Company.

On  December  16,  2004,  the  FASB  published Statement of Financial Accounting
Standards  No. 123 (Revised 2004), Share-Based Payment ("SFAS 123R").  SFAS 123R
requires  that  compensation cost related to share-based payment transactions be
recognized in the financial statements.  Share-based payment transactions within
the  scope  of  SFAS  123R  include  stock  options,  restricted  stock  plans,
performance-based awards, stock appreciation rights, and employee share purchase
plans.  The provisions of SFAS 123R are effective as of the first interim period
that  begins  after  June 15, 2005.  Accordingly, the Company will implement the
revised  standard  in  the  third  quarter  of  fiscal year 2005. Currently, the
Company  accounts  for its share-based payment transactions under the provisions
of  APB  25,  which does not necessarily require the recognition of compensation
cost  in  the  financial statements. Management is assessing the implications of
this  revised  standard,  which  may  materially impact the Company's results of
operations  in  the  third  quarter  of  fiscal  year  2005  and  thereafter.


                                       22
<PAGE>
On  December  16,  2004, FASB issued Statement of Financial Accounting Standards
No.  153,  Exchanges  of Nonmonetary Assets, an amendment of APB Opinion No. 29,
Accounting for Nonmonetary Transactions (" SFAS 153"). This statement amends APB
Opinion  29  to  eliminate  the  exception  for nonmonetary exchanges of similar
productive  assets  and  replaces  it  with a general exception for exchanges of
nonmonetary  assets  that do not have commercial substance. Under SFAS 153, if a
nonmonetary  exchange  of similar productive assets meets a commercial-substance
criterion  and fair value is determinable, the transaction must be accounted for
at  fair  value  resulting  in  recognition  of  any  gain  or loss. SFAS 153 is
effective  for  nonmonetary transactions in fiscal periods that begin after June
15,  2005.  The  Company  does  not  anticipate  that the implementation of this
standard  will  have  a  material  impact  on its financial position, results of
operations  or  cash  flows.


ITEM 7.   FINANCIAL STATEMENTS.

(a)  Financial Statements

The following financial statements are set forth at the end hereof.

1.   Report of Independent Registered Public Accounting Firm

2.   Consolidated Balance Sheets as of December 31, 2004 and 2003

3.   Consolidated Statements of Operations for the Years Ended December 31,
     2004 and 2003

4.   Consolidated Statements of Changes in Stockholders' Equity for the
     Years Ended December 31, 2004 and 2003

5.   Consolidated Statements of Cash Flows for the Years Ended December 31,
     2004 and 2003

6.   Notes to Consolidated Financial Statements for the Years Ended
     December 31, 2004 and 2003


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

Effective  February  2,  2004,  the  Company dismissed Thomas Leger & Co. L.L.P.
("TLC")  as  the  Company's  independent  accountants  and  retained  Weinberg &
Company,  P.A.  ("Weinberg")  as  the  Company's  independent  accountants.  The
dismissal  of  TLC and the engagement of Weinberg were approved by the Company's
Board  of  Directors.  The  reports  of  TLC  on the financial statements of the
Company  as  of and for the fiscal years ended December 31, 2002 did not contain
an  adverse opinion, or disclaimer of opinion; and was not qualified or modified
as  to  uncertainty,  audit  scope,  or  accounting  principles.

TLC  was  the  independent  accountants  for  the Company from November 30, 2002
through  February  2, 2004. During their engagement, there were no disagreements
between  the  Company  (and  its  subsidiaries) and TLC concerning any matter of
accounting  principles or practices, financial statement disclosure, or auditing
scope  or procedure, which disagreements, if not resolved to the satisfaction of
TLC,  would  have  caused  it  to  make  reference  to the subject matter of the
disagreements  in  connection  with  its  reports.

In  addition,  there  were  no  events  as described under Item 304(a)(1)(iv) of
Regulation  S-B  during  the  period from November 30, 2002 to December 31, 2004


                                       23
<PAGE>
ITEM 8A   CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

Disclosure  controls  and  procedures  are  designed  to ensure that information
required  to  be  disclosed in the reports filed or submitted under the Exchange
Act  of  1934  is  recorded, processed, summarized and reported, within the time
periods  specified  in  the  rules  and  forms  of  the  Securities and Exchange
Commission.  Disclosure  controls  and  procedures  include, without limitation,
controls  and  procedures  designed  to ensure that information include, without
limitation, controls and procedures designed to ensure that information required
to  be  disclosed  in  the  reports  filed  under  the  Exchange  Act of 1934 is
accumulated  and  communicated  to  the  Company's  management,  including  its
principal  executive  and  financial  officers,  as appropriate, to allow timely
decisions  regarding  required  disclosure.

As  of  the end of the period covered by this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including  its  principal  executive  and  financial officer of the
effectiveness  of  the design and operation of the Company's disclosure controls
and  procedures. Based upon and as of the date of that evaluation, the Company's
principal  executive  and  financial  officer  concluded  that  the  Company's
disclosure  controls  and  procedures  are  effective to ensure that information
required to be disclosed in the reports that Company files and submits under the
Exchange  Act  of  1934  is  recorded, processed, summarized and reported as and
required.

(b)  Changes in Internal Control

There  were  no  changes  in the Company's internal controls or in other factors
that  could have significantly affected those controls subsequent to the date of
the  Company's  most  recent  evaluation.


ITEM 8B   OTHER INFORMATION

The  Company has no information required to be disclosed in a report on Form 8-K
during the three months ended December 31, 2004 covered by this Form 10-KSB, but
not  reported.

During  the  three  months  ended December 31, 2004, the Company filed a current
report  on  Form  8-K  on  October  18,  2004,  regarding the acquisition of the
remaining  34.59% interest in Digitainment from the minority shareholder through
Megabase  Investment  Limited  by issuance of 10,000,000 shares of the Company's
common  stock.



                                    PART III

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

During  the  fiscal  year  ended  December 31, 2004 and 2003, there were changes
regarding  directors  and  executive  officers  of  the  Company  as  follows:

On April 15, 2003, Ms. Fengming Peng tendered her resignation as Chief Financial
Officer  of  the Company and the Board of Directors of the Company appointed Ms.
Fuxiao  Wang  in  her  place.

On  June  19,  2003, Mr. Liechong Li resigned as Director of the Company and the
Board  of  Directors appointed Mr. Zhigang Rong as Director with effect from the
same  date.

On November 26, 2003, Ms. Fuxiao Wang resigned as Chief Financial Officer of the
Company  and  the  Board of Directors appointed Mr. Carl Yuen as Chief Financial
Officer  with  effect  from  the  same  date.


                                       24
<PAGE>
On  December  9,  2003, Mr. Jianguo Cheng resigned from Secretary of the Company
and  the  Board  of  Directors  of  the  Company  appointed  Mr. Zhigang Rong as
Secretary  with  effect  from  the  same  date.

On  August 12, 2004, Mr. Xiaojun Xie and Mr. Jun Zhao were elected and appointed
as the directors of the Company. An Audit Committee and a Compensation Committee
were  also  established,  each  with  three  committee members consisting of Mr.
Xiaojun  Xie,  Mr.  Jun  Zhao  and  Mr.  Xinan Hu. In addition, Mr. Jun Zhao was
nominated  as  the  Audit  Committee  financial  expert.

On April 11, 2005, Mr. Xinan Hu and Mr. Zhigang Rong resigned as Director of the
Company  and the Board of Directors appointed Mr. Aiguo Deng and Mr. Hui Zhao as
the  directors of the Company to fill the vacancies. Mr. Zhigang Rong remains to
act  as  the  Secretary  of  the  Company.

The  following table and text sets forth the names and ages of all our directors
and executive officers and the key management personnel as of December 31, 2004.
The  Board  of  Directors  is comprised of only one class of members. All of the
directors  will  serve  until  the next annual meeting of stockholders and until
their  successors  are  elected  and  qualified,  or  until their earlier death,
retirement,  resignation  or removal. Executive officers serve at the discretion
of  the  Board of Directors, and are appointed to serve until the first Board of
Directors meeting following the annual meeting of stockholders. Also provided is
a  brief  description  of the business experience of each director and executive
officer  and  the  key  management  personnel  during the past five years and an
indication  of directorships held by each director in other companies subject to
the  reporting  requirements  under  the  Federal  securities  laws.

<TABLE>
<CAPTION>
Name                 Age        Position held
--------------  --------------  -------------------------------------------
<S>             <C>             <C>
Jinqiang Zhang        63        Director and Chairman
Guangwei Liang        41        Director, Vice Chairman and CEO
Ming Li               48        Director and COO
Aiguo Deng            69        Director
Hui Zhao              37        Director
Xiaojun Xie           43        Director , Audit and Compensation Committee
Jun Zhao              38        Director  Audit and Compensation Committee
Zhigang Rong          41        Secretary
Carl Yuen             31        CFO
</TABLE>

JINQIANG ZHANG
Mr.  Zhang  has served as a Director and Chairman since November 2002. Mr. Zhang
has  over  30  years of experience in the manufacturing industry. Since 1980, he
has held high positions with various large electronic manufacturing corporations
in  China.  During  the  past 10 years, he has been involved in large-scale fund
raising  activities,  property development and hi-technology project investments
etc.  He  is  also  the  Chairman of Shenzhen Huaqiang Holdings Company Limited.

GUANGWEI LIANG
Mr.  Liang  has  served as a Director, Vice-Chairman and Chief Executive Officer
since  November  2002.  Mr.  Liang has over 15 years experience in manufacturing
industry.  He  holds a Bachelors Degree in Computer Science and Application from
Shenzhen  University, a Masters Degree in Law and a Doctoral Degree in Economics
from  Wuhan  University.  Since  1986, he has served in the management level for
several  electronics corporations in China. He is also the President of Shenzhen
Huaqiang  Holdings Company Limited, a Director of Hyvision Digital Film Inc. and
Shenzhen  Huaqiang  Industry  Company  Limited.

MING LI
Mr. Li has served as a Director and Chief Operating Officer since November 2002.
Mr.  Li  has  over  20  years  experience  in  manufacturing  and  hi-technology
industries.  From  1984  to  1988,  he  participated  in  a  visiting program in
Stevenson  Polytechnic  in  the  United  States  and  worked  for  several  US
corporations.  Since  1998,  he  has  served  in  the  management  level  for
hi-technology  corporations  in China. He is also a Director of Hyvision Digital
Film  Inc.  and  Shenzhen  Huaqiang  Industry  Company  Limited.


                                       25
<PAGE>
AIGUO DENG
Mr. Deng was appointed a Director of the Company on April 11, 2005. Mr. Deng has
extensive experience in the electronic and programming industries in China. He
has more than 40 years experience in electronic, computer, programming and
manufacturing industries. Mr. Deng holds various senior consulting and
management positions in several electronic and software development Groups in
China. He is currently the Chairman of the Shenzhen Software and Programs
Manufacturers' Association

HUI ZHAO
Mr. Zhao was appointed a Director of the Company on April 11, 2005. Mr. Zhao
graduated from the Beijing University of Aeronautics and Astronautics with major
in Manufacturing Engineering. During the last 10 years, Mr. Zhao has served in
the management level for various technological, engineering and electronics
companies in China. He currently holds senior management positions in two
technology and engineering companies in China.

ZHIGANG RONG
Mr.  Rong  served  as  a Director of the Company since June 2003 until April 11,
2005, and he is the Secretary of the Company since December 2003. Mr. Rong holds
a  Bachelors  Degree  of  Computer  Science  and a Masters Degree of Information
System  Engineering  from National University of Defense Technology in China. He
is  a qualified lecturer and senior engineer. Mr. Rong is experienced in R&D and
corporate  management.  Since 1993, Mr. Rong has served as Manager, Vice General
Manger  and  General  Manager  of  several  technical  companies.  Mr. Rong is a
Director  of  FDI  and  Hyvision  Digital  Film  Inc.

JUN ZHAO
Mr.  Zhao  was  appointed as a  Director and a member of the Audit Committee and
Compensation  Committee of the company in August 2004. Mr. Zhao holds a Bachelor
Degree  in  Economics  from Xinjiang Institute of Finance and Economics. He is a
qualified accountant and CPA. Since 1989, Mr. Zhao has experience in finance and
accounting  gained  from  various  PRC  professional  bodies  and  commercial
corporations.  He  is  currently  a  CFO  and Audit Supervision Manager of a PRC
corporation  in  Shenzhen.

XIAOJUN XIE
Mr.  Xie  was  appointed  as a  Director and a member of the Audit Committee and
Compensation  Committee  of  the  company in August 2004. Mr. Xie graduated from
Xiangtan  University  specializing  in  law.  In  1992,  he  was  granted  the
professional  Lawyer's  Certificate  for  practice. Mr. Xie has been a lawyer of
Hunan  Tianfu  Law  Office  and Guangdong Renren Law Office. He is currently the
vice-director  of  Guangdong  Shenglong  Law  Office.

CARL YUEN
Mr. Carl Yuen has served as our Chief Financial Officer since November 2003. Mr.
Yuen  has  extensive  experience in finance and accounting both in Hong Kong and
the United States. He started his career in Houston, Texas. He joined Greensmart
Corp., a U.S. listed company in 2000 and served as Chief Financial Officer since
2001. Mr. Yuen received BBA and MBA degrees from University of Houston, Texas in
1997  and  1998,  respectively.

(a)  Family Relationships
There  are  no family relationships between or among the directors and executive
officers.

(b)  Involvement in Legal Proceedings
To  the  best  knowledge of the Company, during the past five years, none of the
following  occurred  with  respect  to a present or former director or executive
officer  of  the  Company:  (1)  any bankruptcy petition filed by or against any
business  of which such person was a general partner or executive officer either
at  the  time  of the bankruptcy or within two years prior to that time; (2) any
conviction  in  a  criminal  proceeding  or  being subject to a pending criminal
proceeding  (excluding  traffic  violations and other minor offenses); (3) being
subject  to  any order, judgment or decree, not subsequently reversed, suspended
or  vacated,  of  any  court  of  any  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in  any  type  of  business,  securities  or  banking  activities; and (4) being


                                       26
<PAGE>
found  by  a court of competent jurisdiction (in a civil action), the SEC or the
Commodities  Futures  Trading  Commission  to  have  violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or  vacated.

(c)  Section 16(a) Beneficial Ownership Compliance
Section  16(a)  of the Securities Exchange Act of 1934, as amended, requires our
executive  officers  and  directors  and  persons  who  own  more  than 10% of a
registered  class  of  our  equity  securities  to  file with the Securities and
Exchange  Commission  initial  statements  of  beneficial  ownership, reports of
changes  in  ownership  and  annual reports concerning their ownership of common
stock  and  other  of  our  equity securities, on Forms 3, 4 and 5 respectively.
Executive  officers, directors and greater than 10% shareholders are required by
Commission  regulations  to furnish the Company with copies of all Section 16(a)
reports  they  file.  To  the best knowledge of the Company (based solely upon a
review  of  the  Form  3, 4 and 5 filed), no officer, director or 10% beneficial
shareholder  failed  to  file  on a timely basis any reports required by Section
16(a)  of  the  Securities  Exchange  Act  of  1934,  as  amended.

BOARD OF DIRECTORS
During the year ended December 31, 2004, four meetings of the Board of Directors
were  held.  Additionally,  certain  corporate  actions  were  also conducted by
unanimous  written  consent of the Board of Directors. Directors were reimbursed
for  any  out-of-pocket  expenses  incurred  in  attending  board  meetings.

The  Board of Directors maintains an Audit Committee and Compensation Committee.
As  of December 31, 2004, Xiaojun Xie, Jun Zhao and Xinan Hu were the members of
the Compensation Committee and Audit Committee. Subsequent to the resignation of
Xinan  Hu  on  April  11,  2005,  the Audit Committee and Compensation Committee
members  are  Xiaojun Xie and Jun Zhao, whereas Mr. Zhao is the financial expert
in  the  Audit  Committee.

CODE OF ETHICS AND BUSINESS CONDUCT
On  December 8, 2004, the Company's Board of Directors adopted a Code of Conduct
and  Ethics  that  sets forth the ethical standards of conduct for directors and
executive  officers  of  the  Company,  including  its  subsidiaries.

AUDIT COMMITTEE MATTERS
The  Company's  management  is  responsible for the preparation of the Company's
financial  statements  and  for  maintaining  an  adequate  system of disclosure
controls  and  procedures and internal control over financial reporting for that
purpose.  The  Company's  independent auditors are responsible for conducting an
independent  audit  of  the  Company's annual financial statements in accordance
with  generally  accepted  accounting  principles  and  issuing  a report on the
results  of  the  audit.  The  Audit  Committee  is  responsible  for  providing
independent,  objective  oversight  of  these  processes.

The  Audit Committee has reviewed the Company's audited financial statements for
the  year  ended  December 31, 2004 and has discussed these financial statements
with  the  Company's  management and communicated with the Company's independent
auditor.

The Audit Committee has adopted policies and procedures relating to the approval
of  all  audit  and non-audit services that are to be performed by the Company's
independent  auditors  or other professional and advisory bodies. These policies
generally  require  that the Company will not engage its independent auditors or
other  professional  bodies  to  render  audit  or non-audit services unless the
service  is  specifically  approved  in  advance  by  the  Audit  Committee.

ITEM 10.  EXECUTIVE COMPENSATION

No  compensation  was  paid  to  the  Chairman  and  Chief Executive Officer for
remuneration during fiscal years ended December 31, 2004 and 2003. The following
table  sets  forth  the compensation paid by the Company to its three other most
highly compensated executive officers during the last two fiscal years.  None of
the  executive  officers  received  annual  compensation  in excess of $100,000.


                                       27
<PAGE>
<TABLE>
<CAPTION>
Name and                                                                      Other
Principal                                                                     Annual
Position                        Year         Salary          Bonus         Compensation
-------------------------   ------------  -------------  -------------  ------------------
<S>                         <C>           <C>            <C>            <C>
Ming Li                             2004  $      29,458  $         nil  $              nil
Chief Operating Officer             2003         25,180            nil                 nil
and Director

Zhigang Rong (1)                    2004  $      28,735            nil                 nil
Secretary and Director              2003          9,217            nil                 nil

Carl Yuen                           2004  $      48,000            nil                 nil
Chief Financial Officer             2003          7,200            nil                 nil
</TABLE>

---------------------------------
(1)  Mr.  Rong  also  holds  senior  management  position  in  the Company's PRC
subsidiaries.  He  resigned as the Director of the Company on April 11, 2005 but
remains  the  Secretary  of  the  Company.


Stock  Option

On  January  6,  2004,  the  Board  of Directors of the Company approved and has
granted  4,000,000  shares  of  stock  option  to  the  officers and certain key
employees. The granted stock option has a strike price of $0.50, which was above
the market price of $0.40 of the Company's stock on the date of grant. The stock
option  has  a vest period and can be exercised in 50% from January 7, 2007, 80%
from January 7, 2008 and in whole from January 7, 2009 until their expiration on
January  6,  2014.  Subsequent  to the 2 to 1 reverse share split effective from
June 30, 2004, the total number of stock options was reduced to 2,000,000 shares
and  the  strike  price  was  automatically  adjusted  to  $1.0  per  share.

Shares  of  stock option were granted to the directors and executives are listed
as below:

<TABLE>
<CAPTION>
                                         Shares of
Name/Title                           Stock Option (*)
--------------                       -----------------
<S>                                  <C>
Jinqiang Zhang, Chairman                       150,000
Guangwei Liang, Vice Chairman & CEO            150,000
Ming Li, Director and COO                      100,000
Zhigang Rong, Secretary                        100,000
Carl Yuen, CFO                                       -
------------------------------------------------------
</TABLE>

------------
(*)  adjusted for the 2 to 1 reverse share split

As  the earliest exercisable date of all options is on or after January 7, 2007,
no  option  activity  was  recorded  during  the  year  ended December 31, 2004.

The  stock  option  issued  to  the Directors, officers and key employees of the
Company  were  accounted  for  pursuant  to the provisions of SFAS No. 123 which
allows  the  Company  to either record an expense in the financial statements to
reflect  the  estimated fair value of stock options to employees, or to continue
to  follow  the  intrinsic value method set forth in Accounting Principles Board
Opinion  No.  25,  "Accounting for Stock Issued to Employees". The fair value of
the  options  granted  during  2004 was estimated on the date of grant using the
Black-Scholes  option  pricing  model.


                                       28
<PAGE>
The  Company  has  elected  to  continue  to  follow APB No. 25 and accounts for
stock-based  compensation  plans  utilizing  the  intrinsic  value  method.
Accordingly,  the  Company  has  not  recognized  any  stock option compensation
expense  in  2004.

COMPENSATION AGREEMENTS
There  is currently no long-term employment or consulting agreements between the
Company  and  its  executive  officers  or  directors.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth the number of common shares as owned by record,
or  to  the  knowledge of the Company, beneficially, by each of the officers and
directors  and  by  each  person  owning five percent or more of the outstanding
shares,  as  of  April  8,  2005.  The  percentage is based on 30,096,117 shares
outstanding  on  April  8,  2005.

Each  person  listed  below  has  personal  and sole beneficial ownership of the
shares  of  common  stock  listed  with  their  name:

<TABLE>
<CAPTION>
                                              Number       Percentage
Name/Title                                  of Shares      Ownership
-------------                             ------------  --------------
<S>                                       <C>           <C>
Vinsway Holding Limited (1)                  6,222,963          20.68%
Ming Li, Director and COO                       26,613           0.09%
Zhigang Rong, Secretary                         26,613           0.09%
Xiaojun Xie, Director                           17,342           0.06%
Hui Zhao                                         8,871           0.03%
Carl Yuen, CFO                                       -              -
                                          ------------  -------------
All directors and executive officers (1)
(8 persons)                                     79,439           0.27%
</TABLE>

-----------------------------------------------------------------------
(1)  Vinsway  Holding  Limited  ("Vinsway") was a company formerly controlled by
the  following  persons

     Jinqiang Zhang    Director and Chairman              41.84%
     GuangWei Liang    Director, Vice Chairman and CEO    22.39%
     Xinan Hu          Former Director                    14.90%
     Liechong Li       Former Director                    20.87%

     On  April  4,  2005,  the  above  listed  persons  had  transferred  all of
     their  shares  in Vinsway to Shenzhen Huaqiang Technology Co., Ltd. ("SHT")
     pursuant  to  a  Share  Swap arrangement in exchange for an aggregated 2.5%
     control in SHT.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Agreement with associated company

On  June  1, 2004, SDCL and FDI entered into an Agreement that SDCL engaged FDI,
its  controlled  associated  company,  as  its sales agent for the marketing and
distribution  of its amusement and simulation equipment as well as 3D/4D theatre
in China. With its stronger shareholder background and relatively greater amount
of  registered capital, FDI is well received by different potential customers in
China  in  the  aforesaid  businesses.


                                       29
<PAGE>
Commencing  January 1, 2005 and thereafter, FDI will be entitled to a commission
ranging  from 10% to 20% of the contract price, depending on the gross margin of
the specific contract and the size of the related project under the contract. In
addition, a 5% advertising and promotional incentive will be provided to FDI for
each  contract  solicited by FDI. The aforesaid commission and incentive will be
transferred  to  FDI  through  its  purchase from SDCL the related equipment and
products. The Agreement can be terminated at any time with 60 days notice to the
other  party.

FDI  will  be  responsible for its own operating costs including staff salaries,
marketing  and  promotional  expenses, general office administrative expenses as
well  as  the  associated  sales  taxes  and  income  tax.

In  addition,  the  Agreement  also  provided  that FDI may include in its sales
contract  a  cooperation  regarding  the  operation  of hi-tech amusement centre
"FunPlex"  or  theme  park  "FantaWild"  when  the  proposed  operating venue is
suitable  for the business. However, FDI will only act as the agent in such part
of  the contract on behalf of SDCL. FDI will have no direct or indirect economic
or  legal interest in those revenue sharing operations, which will be solely the
business  of  SDCL who will be responsible to contribute the equipment and fixed
assets  required  for  the  cooperation.  All  the revenues generating from such
cooperated  businesses will be received by SDCL, and all the related expenses as
stipulated  in  such  cooperation  contracts  will  be  borne  by  SDCL.

In  order to give FDI the necessary motivation and platform to better market and
promote  SDCL's  products,  SDCL  agreed that for the year of 2004 an aggregated
commission  of  20%  plus an advertising and promotional incentive of 15% on the
total  amount of contract (direct sale of equipment) canvassed during the period
starting  from the date of the agreement and up to December 31, 2004 was granted
to  FDI.

Related parties transactions

During  the year ended December 31, 2004 and 2003, the Company purchased certain
digital  films  and  programs  for  its products from Hyvision Digital Film Inc.
("Film  Inc.").  The  SDCL's  former  minority  shareholder, ShenzhenYongfengguo
Investment  and  Development  Ltd  has a 35% interest in Film Inc while Shenzhen
Huaqiang  Technology  Co.,  Ltd.  ("SHT")  has  20%  interest in Film Inc. Total
purchases  from  Film  Inc.  were  $ $1,271,084 and $486,145 for the years ended
December 31, 2004 and 2003, respectively. In addition, the Company sold products
and  equipment  to Film Inc. of $nil and $41,190 during the years ended December
31,  2004  and  2003,  respectively. The accounts receivable from Film Inc. were
$nil  and  $96,386 for the years ended December 31, 2004 and 2003, respectively.
Mr.  Guangwei  Liang,  Mr. Ming Li, Mr. Xinan Hu and Mr. Zhigang Rong are common
directors  of  Film  Inc.  and  the  Company.

During the year ended December 31, 2004 and 2003, the Company sold its amusement
equipment  and  4D  theater  to  Hytech  HK  totaling  $750,000  and  $698,138,
respectively. As at December 31, 2004 and 2003, the accounts receivable due from
Hytech  HK  were  $400,862  and  $1,994,  respectively.

As  at  December  31,  2004  and  2003,  the amounts payable and receivable from
related  parties  are  summarized  as  follows:


                                       30
<PAGE>
<TABLE>
<CAPTION>
                                                2004           2003
                                           --------------  -------------
Amounts due from:
-----------------
<S>                                        <C>             <C>
Hytech HK (1)                              $     400,862   $          -
Shenzhen Huaqiang Industrial
     and Trading Co. Ltd. (3)                     17,470              -
Chunren Xie (4)                                    1,500          1,500
Directors (5)                                      1,922         18,392
Film Inc. (6)                                          -         96,386
Shenzhen Huaqiang Technology Co., Ltd (7)         55,947         14,705
                                             -----------     ----------
                                           $     477,701   $    130,983
                                           =============   =============

Amounts due to:
---------------
Hytech HK (1)                              $    (350,588)  $          -
Top Link Development Limited (2)                (280,000)      (280,000)
Dehou FANG (2)                                   (20,000)       (20,000)
                                            ------------    -----------
                                           $    (650,588)  $   (300,000)
                                           =============   =============
</TABLE>

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

(1)  The  amounts  due  from  Hytech  HK  represent the account receivable arose
     during  the  normal course of business, while the amounts payable to Hytech
     HK  represent  the  amount  paid on behalf of the Company in respect of its
     administrative  expenses  incurred  outside PRC. The amount receivable from
     and  payable  to Hytech HK in the year of 2003 totaling $1,994 and $36,395,
     respectively,  were  not  classified  as related party transactions in 2003
     since  Hytech  HK  was a then subsidiary of the Company, which amounts were
     eliminated on consolidation. On May 12, 2004, the Company disposed and sold
     Hytech  HK  to  Top  Link  Hi-Tech  Development  (H.K.)  Limited ("Top Link
     Hi-Tech"),  a  Hong Kong company ultimately owned by SHQ. These amounts are
     unsecured, non-interest bearing and have no definite term of repayment.

(2)  The  amounts  due  from  Top  Link  Development  Limited  ("TLD")  and  Mr.
     Dehou  Fang  were  classified  as short term unsecured loans in 2003, which
     represent  the  amounts  loaned  to  Intsys  Share  Limited in 2002 for its
     payment  for the acquisition of Hytech US and other administrative expenses
     of  the  Company.  TLD is the immediate holding company of Top Link Hi-Tech
     and  Mr.  Dehou  Fang  is a director of Intsys Share Limited. These related
     party  loans  in the amount of $300,000 are unsecured, non-interest bearing
     and have no definite term of repayment.

(3)  Shenzhen  Huaqiang  Industrial  and  Trading  Co.,  Ltd.  ("HIT")  is  an
     affiliate  of  SHQ.  The amount was loaned to HIT in relation to one of the
     revenue  sharing  operations  which  has been terminated and moved to other
     location.  The loan is unsecured, non-interest bearing and have no definite
     term of repayment.

(4)  Chunren Xie is the 30% minority shareholder of Hytech US.

(5)  Amount  due  from  directors  represented  the  cash  advance  for business
     trip and trade fairs.

(6)  The  amount  due  from  Film  Inc.  represented  an advance deposit made to
     Film Inc. for the purchase of digital film by SDCL in 2003.

(7)  The  receivable  due  from  Shenzhen  Huaqiang  Technology Co. Ltd. ("SHT")
     were  the  interest  receivable  on  cash  deposit placed with the clearing
     center  organized  and  managed  by SHT. The clearing center offered market
     interest  rate for the Company's cash fixed deposit and allowed flexibility
     of  changing deposit terms. SHT is a PRC company which holds 20.7% interest
     in  the Company through a Share Swap arrangement effected on April 4, 2005.
     SHT is also a 20% shareholder of Film Inc.


ITEM 13.  EXHIBITS

The  exhibits  required to be filed as part of this Annual Report on Form 10-KSB
is  set forth in the Index to Exhibits, which immediately precedes such exhibits
and  is  incorporated  herein  by  reference.


                                       31
<PAGE>
ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Weinberg  and  Company,  PA ("Weinberg") has served as the Company's independent
auditors  since  February  2004.  Services  provide  to  the  Company  and  its
subsidiaries by Weinberg during the period ended December 31, 2004 included that
audit  of  the  Company's  consolidated financial statements, limited reviews of
quarterly  reports,  and  services  with  respect  to  various  tax matters. The
following  is a summary of the related professional fees invoiced to the Company
by  Weinberg  and Thomas Leger & Co. L.L.P. ("TLC"), the predecessor independent
auditor  of  the  Company,  for professional services rendered during the fiscal
years  ended  December  31,  2004  and  2003:

<TABLE>
<CAPTION>
                               Fiscal 2004               Fiscal 2003
                    --------------------------------  ----------------
Fee Category           Weinberg            TLC              TLC
------------------  ---------------  ---------------  ----------------
<S>                 <C>              <C>              <C>
Audit Fees          $        86,571               --  $         72,890
Audit-Related Fees               --               --                --
Tax Services Fees             9,566               --             5,199
All Other Fees                   --           11,600                --
                     --------------   --------------   ---------------
Total Fees          $        96,137  $        11,600  $         78,089
                     ==============   ===============  ===============
</TABLE>

Audit fees were the aggregated fees billed for professional services rendered by
the  principal  accountant  for  the  audit  of  the  Company's annual financial
statements  and  review  of  financial  statements  included  in  the  Company's
Form 10-QSB  filings, and services that are normally provided in connection with
statutory  and  regulatory  filings  or  engagements.

Audit-related  fees  were  the  aggregated fees billed for assurance and related
services  by  the  principal  accountant  that  are  reasonably  related  to the
performance  of the audit or review of the Company's financial statements. There
were  no  such  fees  incurred  in  2004  and  2003.

Tax  services  fee  were  billed  for professional services performed by TLC and
Weinberg  for  tax  compliance,  tax  advice  and  tax  planning.  This includes
preparation  of  federal  and  state  income tax returns for the Company and its
consolidated  subsidiary.

All  other  fees  were  fees  for  product  and services other than the services
reported  above.  The  fees  incurred  in 2004 was attributable to the change of
independent  auditor  arising  from  the  requirement  of  obtaining consent and
re-issuance  of  opinion  as  well  as  other  related  works.


                                       32
<PAGE>
                                   SIGNATURES

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

                                                     FANTATECH INC.
                                                   ----------------------------
                                                     (Registrant)


Dated: April 28, 2005                         By:  /s/ GUANGWEI LIANG
                                                   ----------------------------
                                                   Guangwei Liang
                                                   Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed below by the following persons on behalf of the Registrant and
in  the  capacities  and  on  the  dates  indicated.


Dated: April 28, 2005                         By:  /s/ JINQIANG ZHANG
                                                   ----------------------------
                                                   Jinqiang Zhang
                                                   Chairman and Director


Dated: April 28, 2005                         By:  /s/ GUANGWEI LIANG
                                                   ----------------------------
                                                   Guangwei Liang
                                                   Chief Executive Officer,
                                                     Vice Chairman and Director


Dated: April 28, 2005                         By:  /s/ MING LI
                                                   ----------------------------
                                                   Ming Li
                                                   Chief Operating Officer
                                                     and Director


Dated: April 28, 2005                         By:  /s/ CARL YUEN
                                                   ----------------------------
                                                   Carl Yuen
                                                   Chief Financial Officer


Dated: April 28, 2005                         By:  /s/ ZHIGANG RONG
                                                   ----------------------------
                                                   Zhigang Rong
                                                   Secretary


                                       33
<PAGE>
Dated: April 28, 2005                         By:  /s/ AIGUO DENG
                                                   ----------------------------
                                                   Aiguo Deng
                                                   Director


Dated: April 28, 2005                         By:  /s/ HUI ZHAO
                                                   ----------------------------
                                                   Hui Zhao
                                                   Director


Dated: April 28, 2005                         By:  /s/ XIAOJUN XIE
                                                   ----------------------------
                                                   Xiaojun Xie
                                                   Director


Dated: April 28, 2005                         By:  /s/ JUN ZHAO
                                                   ----------------------------
                                                   Jun Zhao
                                                   Director


                                       34
<PAGE>
<TABLE>
<CAPTION>
                                      INDEX TO EXHIBITS

Exhibit
Number      Description of Document
---------   -----------------------------
<S>         <C>

3.1 (P)     Certificate of Incorporation (1)

3.2         Certificate of Amendment to the Certificate of Incorporation (2)

4.1         Registration Rights Agreement, dated November 5, 2002 (3)

10.1        Stock Purchase Agreement dated November 4, 2002 (3)

10.2        Stock Purchase Agreement dated October 16, 2002 (3)

10.3        Share Exchange Agreement dated November 6, 2002 (3)

10.4        Bought and Sold Notes between Intsys Share Limited and Top Link Hi-Tech Development
            (H.K.) Limited dated May 12, 2004 (4)

10.5        Share Exchange Agreement among the Company, Intsys Share Limited and Topforce Asia
            Limited dated October 18, 2004 (5)

10.6        Agreement between Shenzhen Digitainment Company Limited and Fantatech Development
            Inc. dated June 1, 2004 (6)

14.1        Code of Ethics and Business Conduct (6)

21.1        Subsidiaries of the Company (6)

31.1        Certification by Chief Executive Officer (6)

31.2        Certification by Chief Financial Officer (6)

32.1        Certification by Chief Executive Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section
            1350 (6)

32.2        Certification by Chief Executive Officer Pursuant to Rule 13a-14(b) and 18 U.S.C. Section
            1350 (6)

1.1         Fairness Opinion issued by Palisades Capital Group, LLC dated September 10, 2004 (5)
</TABLE>

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

(1)  Filed  as  an  Exhibit  to  the  Company's  report  on Form S-1 on November
     17, 1996, and incorporated herein by reference.

(2)  Filed  as  Exhibit  to  the  Company's  report  on Schedule 14C on December
     30, 2002, and incorporated herein by reference.

(3)  Filed  as  Exhibit  to  the  Company's  Current  Report  on  Form  8-K  on
     November 11, 2002, and incorporated herein by reference.

(4)  Filed  as  Exhibit  to  the  Company's  Current  Report  on Form 8-K on May
     12, 2004, and incorporated herein by reference.


                                       35
<PAGE>
                          INDEX TO EXHIBITS (CONTINUED)


(5)  Filed  as  Exhibit  to  the  Company's  Current  Report  on  Form  8-K  on
     October 18, 2004, and incorporated herein by reference.

(6)  Filed  herein.


(P)  Indicates  that  the  document was originally filed with the Securities and
Exchange  Commission  in  paper  form  and  that  there  have been no changes or
amendments  to  the  document  which  would  require  filing  of  the  document
electronically  with  this  Annual  Report  on  Form  10-KSB.


                                       36
<PAGE>
<TABLE>
<CAPTION>
                         FANTATECH INC. AND SUBSIDIARIES
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                              Pages
                                                              -------
<S>                                                           <C>
Index                                                         F-1

Report of Independent Registered Public Accounting Firm       F-2

Consolidated Balance Sheets as of December 31, 2004 and 2003  F-3

Consolidated Statements of Operations for the Years
Ended December 31, 2004 and 2003                              F-4

Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 2004 and 2003         F-5

Consolidated Statements of Cash Flows for the Years
Ended December 31, 2004 and 2003                              F-6

Notes to Consolidated Financial Statements for the Years
Ended December 31, 2004 and 2003                              F-7 to F-23
</TABLE>


                                      F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
Fantatech, Inc. and Subsidiaries:


We  have audited the accompanying consolidated balance sheets of Fantatech, Inc.
and  Subsidiaries  (the  "Company"),  as  of December 31, 2004 and 2003, and the
related  consolidated  statements of operations, changes in stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are  the  responsibility  of  the Company's management. Our responsibility is to
express  an  opinion  on  these  consolidated  financial statements based on our
audit.

We  conducted  our  audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial  statements  are free of material misstatement. An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  consolidated  financial statements. An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as  well as evaluating the overall consolidated financial statement
presentation.  We  believe  that  our  audit provides a reasonable basis for our
opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly  in  all material respects, the financial position of Fantatech, Inc. and
Subsidiaries  as  of  December  31,  2004  and  2003,  and  the results of their
operations  and  their  cash  flows for the years then ended, in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.



WEINBERG & COMPANY, P.A.


Boca Raton, Florida
April 11, 2005


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                               FANTATECH INC. AND SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS
                                DECEMBER 31, 2004 AND  2003

                                                                 2004          2003
                                                              -------------------------
<S>                                                           <C>          <C>
                               ASSETS
Current assets
  Cash                                                        $ 4,078,891  $ 5,240,816
  Short term bills receivable                                     554,217            -
  Trade receivables, net of allowance for doubtful debts          470,858      512,019
  Related party receivable                                        477,701      130,983
  Inventories                                                   1,792,452    1,458,317
  Cost and estimated earnings in excess of
    billings on uncompleted contracts                           2,414,118      917,639
  Deposit and prepayments                                       1,428,410      697,728
  Other receivables                                               156,333       41,518
                                                              -------------------------
Total current assets                                           11,372,980    8,999,020

Property, plant and equipment, net                              3,743,796      666,171
Construction in progress                                        2,255,997    1,660,740
Trademarks                                                        170,950      170,950
                                                              -------------------------
Total assets                                                  $17,543,723  $11,496,881
                                                              =========================
          LIABILITIES AND STOCKHOLDERS' EQUITY / (DEFICIT)
Current liabilities
  Short-term bank loans                                       $ 2,433,735            -
  Accounts payable                                                320,227      792,396
  Accrued liabilities and other payables                        1,059,114    1,319,652
  Related party payables                                          650,588      300,000
  Billings in excess of cost and estimated earnings
    of uncompleted contracts                                    1,629,408            -
  Deposits received                                             1,874,335      630,000
                                                              -------------------------
Total current liabilities                                       7,967,407    3,042,048

Minority interests                                              4,122,426    5,789,180
                                                              -------------------------
Total liabilities                                              12,089,833    8,831,228
                                                              -------------------------
Commitments and contingencies                                           -            -

Stockholders' equity
  Preferred stock; $0.001 par value; 10,000,000 shares
    authorized; no shares issued and outstanding                        -            -
  Common stock; $0.001 par value; 100,000,000 shares
    authorized, 30,096,117 and 20,096,117 shares issued and
    outstanding in 2004 and 2003, respectively.                    30,096       20,096
  Additional paid-in capital                                    4,587,190    2,885,374
  Retained earnings /(deficit)                                    691,257     (385,164)
  Reserve funds                                                   145,347      145,347
                                                              -------------------------
Stockholders' equity                                            5,453,890    2,665,653
                                                              -------------------------
Total liabilities and stockholders' equity                    $17,543,723  $11,496,881
                                                              =========================
</TABLE>

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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                        FANTATECH INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                     2004          2003
                                                 ------------  ------------
<S>                                              <C>           <C>
NET REVENUE :                                    $             $
  Contracted sales                                 8,088,290     4,608,728
  Revenue sharing operations ("RSO")                 307,096        70,634
                                                 ------------  ------------
TOTAL NET REVENUE                                  8,395,386     4,679,362
                                                 ------------  ------------

COST OF REVENUE:
  Direct cost of sales                             4,858,118     2,960,719
  Other cost of revenue - RSO                        311,840        21,716
                                                 ------------  ------------
TOTAL COST OF REVENUE                              5,169,958     2,982,435
                                                 ------------  ------------

GROSS PROFIT                                       3,225,428     1,696,927
                                                 ------------  ------------
OPERATING EXPENSES:
  Selling and marketing                              650,411       300,075
  General and administrative                       1,525,227       873,635
                                                 ------------  ------------
TOTAL OPERATING EXPENSES                           2,175,638     1,173,710
                                                 ------------  ------------

INCOME FROM OPERATIONS                             1,049,790       523,217

OTHER INCOME (EXPENSES)
  Interest expense                                   (30,257)      (88,036)
  Other income (expense)                             163,289        (3,053)
  Loss on disposal of fixed assets                   (41,481)            -
  Interest income                                     67,916        56,409
  Non-operating income                                     -           (28)
                                                 ------------  ------------
INCOME FROM CONTINUING OPERATIONS
  BEFORE TAX PROVISION                             1,209,257       488,509

MINORITY INTERESTS' SHARE OF INCOME                   45,062       124,998

INCOME TAX EXPENSE                                    88,767        38,060
                                                 ------------  ------------
INCOME FROM CONTINUING OPERATIONS                  1,075,428       325,451

DISCONTINUED OPERATIONS
  Loss from discontinued operations (Hytech HK)         (284)      (56,304)
  Gain on disposal of a subsidiary (Hytech HK)         1,277             -
                                                 ------------  ------------
NET INCOME                                       $ 1,076,421   $   269,147
                                                 ============  ============
WEIGHTED AVERAGE SHARES OUTSTANDING
  BASIC AND DILUTED                               22,123,514    20,096,117
                                                 ============  ============
BASIC AND DILUTED NET INCOME PER SHARE           $      0.05   $      0.01
                                                 ============  ============
</TABLE>


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


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                                            FANTATECH INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                      FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                    Additional        Retained                          Total
                                             Common Stock             Paid-In         Earnings         Reserve       Stockholders'
                                       Shares          Amount         Capital         (Deficit)         Funds           Equity
                                    ----------------------------------------------------------------------------------------------
<S>                                 <C>            <C>             <C>             <C>              <C>             <C>

Balance, December 31, 2002             20,096,117  $       20,096  $    2,885,374  $     (654,311)  $      145,347  $    2,396,506

  Net Income                                    -               -               -         269,147                -         269,147

                                    ----------------------------------------------------------------------------------------------
Balance, December 31, 2003             20,096,117  $       20,096  $    2,885,374  $     (385,164)  $      145,347  $    2,665,653

  Issuance of common stock for
    acquisition of 34.59% interest
    in SDCL                            10,000,000          10,000       1,701,816               -                -       1,711,816

  Net Income                                    -               -               -       1,092,487                -       1,092,487

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

Balance, December 31, 2004             30,096,117  $       30,096  $    4,587,190  $      707,323   $      145,347  $    5,469,956
                                    ==============================================================================================
</TABLE>


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                      FANTATECH INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                        2004          2003
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                          $ 1,076,421   $   269,147
Less: income (loss) from discontinued operations                            993       (56,304)
                                                                    ------------  ------------
  Income from continuing operations                                   1,075,428       325,451
Adjustments to reconcile net income from continuing operations to
 net cash provided by operating activities:
  Depreciation expense                                                  569,150       309,766
  Loss on disposal of fixed assets                                       41,481             -
  Minority interests' share of income                                    45,062       124,998
  Provision for doubtful accounts                                        18,385             -
Change in operating assets and liabilities:
  Decrease in trade receivables                                          22,776       253,557
  (Increase) decrease  in inventories                                  (334,135)      121,227
  (Increase)in costs and estimated earnings
    in excess of billings on uncompleted contracts                   (1,496,479)     (322,848)
  (Increase)in deposits and prepayments                                (730,682)     (289,330)
  (Increase)in other receivables                                       (114,815)      (24,008)
  (Increase)in short term bills receivable                             (554,217)            -
  (Increase)decrease in related party receivable                       (346,718)       21,179
  Increase in billings in excess of costs and estimated earnings
    on uncompleted contracts                                          1,629,408             -
  Increase in deposits received                                       1,244,335       630,000
  (Decrease)increase in accounts payable, accrued liabilities and
    other payables                                                     (732,707)      786,922
  Increase in related party payables                                    350,588             -
                                                                    ------------  ------------
Net cash provided by operating activities                               686,860     1,936,914
                                                                    ------------  ------------

                                                                    ------------  ------------
Net cash provided by (used in) discontinued operations                      993       (56,304)
                                                                    ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from disposal of fixed assets                                  8,795             -
  Purchase of property, plant and equipment                          (3,697,051)     (437,978)
  Construction in progress                                             (595,257)   (1,660,740)
                                                                    ------------  ------------
Net cash used in investing activities                                (4,283,513)   (2,098,718)
                                                                    ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from short term loan                                       2,433,735     2,891,566
  Principal repayments on short term loan                                     -    (5,060,241)
  Minority interests' contribution in subsidiary                              -     4,337,350
                                                                    ------------  ------------
Net cash provided by financing activities                             2,433,735     2,168,675
                                                                    ------------  ------------

NET(DECREASE)INCREASE IN CASH                                        (1,161,925)    1,950,567

Cash and cash equivalents, at beginning of year                       5,240,816     3,290,249
                                                                    ------------  ------------
Cash and cash equivalents, at end of year                           $ 4,078,891   $ 5,240,816
                                                                    ============  ============

Supplementary disclosures of cash flow information:
  Interest paid                                                     $    30,257   $    86,809
                                                                    ============  ============
  Tax paid                                                          $    83,196   $    54,886
                                                                    ============  ============

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

  Acquisition of minority interest in a subsidiary by the issuance of 10,000,000 shares of common stock.
</TABLE>

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


                                      F-6
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

1.   DESCRIPTION OF BUSINESS AND BUSINESS COMBINATION

Fantatech,  Inc.,  formerly Lucas Educational Systems, Inc., (the "Company") was
incorporated  in  the  State  of  Delaware.  During  November  2002, the Company
acquired  all  of  the  issued  and  outstanding  shares of Intsys Share Limited
("Intsys")  in  a  reverse  acquisition.  Intsys was incorporated in the British
Virgin  Islands  on  April  29,  2002.

The  Company,  through  its  subsidiaries,  constructs hi-tech entertainment and
amusement  centers  and theme parks in different major cities located throughout
China.

During  May  2002,  Intsys  acquired  a 65.41% interest in Shenzhen Digitainment
Company Limited ("SDCL" or "Digitainment"), a joint venture company incorporated
in  the  People's Republic of China ("PRC" or "China") trading under the name of
Shenzhen  Hytechnology  Inc.  and  the  former  owners of the 65.41% interest in
Digitainment  became all of the shareholders of Intsys. The business combination
was  deemed to be a reverse merger and the acquisition of the 65.41% interest in
SDCL  has  been  accounted  for  at  historical cost. SDCL is engaged in design,
development  and  production  of  hi-tech  entertainment and amusement products,
including  4D theatre, simulation games, indoor entertainment center, large size
indoor  attraction  and  theme  parks  (See  Note  4).

In  August  2002, Intsys established Hytechnology Limited, ("Hytech HK"), a Hong
Kong  company  in which Intsys owns 99%. Hytech HK has been engaged in the sales
and  marketing  of  the  products  of  Digitainment outside the United States of
America (excluding China). On May 12, 2004, the Company disposed and sold Hytech
HK  to  Top  Link  Hi-Tech  Development  (H.K.) Limited, a Hong Kong Corporation
ultimately  owned  by  Shenzhen  Huaqiang  Holdings  Ltd.  ("SHQ"), in which the
Chairman  and  President  are  also  the  Chairman  and  CEO  of  the  Company.

During  September  2002,  Intsys acquired a 70% equity interest of Hytechnology,
Inc.  ("Hytech  US"),  a  Delaware Corporation, from a third party for $172,000.
Hytech  US is engaged in the sales and marketing of the products of Digitainment
in  the  United  States  of  America  (See  Note  4).

In  August  2003, SDCL, Shenzhen Huaqiang Industry Company Limited ("SHICL") and
Shenzhen  Huaqiang  Venture  Capital Company Limited ("SHVCCL") formed Fantatech
Development, Inc. ("FDI") in PRC. FDI is owned 40% by SDCL, 40% by SHICL and 20%
by  SHVCCL, and is intended to engage in the sales and marketing of the products
of  Digitainment  in  China  and  to  assist SDCL to solicit the cooperation for
hi-tech  entertainment  and amusement centers and theme parks. Subsequent to the
formation  of  FDI,  SHVCCL (the 20% shareholder) assigned all of its management
and  control  rights  to  SDCL.  SHICL  and  SHVCCL  are  associates  of  SHQ.

In  October  2004,  the  Company  entered  into  an  agreement  ("Share Exchange
Agreement")  between  and among Intsys and Topforce Asia Limited ("Topforce"), a
British  Virgin Islands ("BVI") corporation. Under the Share Exchange Agreement,
the  Company  acquired  the  remaining  34.59%  of SDCL (the "Acquisition"). The
Company  previously purchased 65.41% of SDCL on May 2002. Under the terms of the
Share  Exchange  Agreement,  the  Company issued to Topforce and/or its designee
10,000,000  shares of its common stock and Topforce transferred to Intsys all of
the  equity  interest  of  Megabase  Investment  Limited  ("Megabase"),  a  BVI
corporation,  established  to  hold  34.59%  equity  interest in SDCL. Palisades
Capital  Group,  LLC  valued  the  Acquisition  and  issued  a  Fairness Opinion
expressing  that  the number of shares issued under the Share Exchange Agreement
relative  to  the  value  of the 34.59% interest in SDCL was within the fairness
range  of  value.

During  the  year  ended  December 31, 2004, the Company has launched a total of
eight  "FunPlex"  indoor entertainment centers located in different major cities
in  China.  With  the  completion  of  the currently outstanding contracts as at
December  31,  2004,  the  number  of  "FunPlex" amusement center will exceed 18
throughout  major  cities  in  China.


                                      F-7
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

2.   BASIS OF PRESENTATION AND CONSOLIDATION

The  consolidated  financial  statements include the financial statements of the
Company,  its  subsidiaries  in  which  the Company has an effective controlling
interest  including  its  effectively  controlled  associated  company, FDI. All
material  intercompany balances and transactions, including intercompany profits
and  unrealized  profits  and  losses  are  eliminated  on  consolidation.


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and cash equivalents
-------------------------

Cash  and  cash  equivalents include cash on hand, demand and time deposits with
banks  and liquid investments with an original maturity of three months or less.

Inventories
-----------

Inventories consist of raw materials, work-in-process, and finished goods, which
are  held  for  resale,  used  in  the production of entertainment and amusement
equipment that the Company sells and rents, or moved to construction in progress
as  the  components  of  the  amusement  centers  or parks are constructed. (See
revenue and cost recognition). Inventories are stated at the lower of cost, on a
first-in,  first-out  basis,  or  net  realizable  value. Costs of raw materials
include  purchases  and related costs incurred in bringing the products to their
present  location  and  condition.

Allowance for doubtful accounts:
--------------------------------

The  Company  uses  the  allowance  method to account for uncollectible accounts
receivable.  The  Company  periodically  adjusts  the  allowance  for  doubtful
accounts  based  on  management's continuing review of accounts receivable. This
analysis  by  management  is  based  on  prior  years' experience, as well as an
analysis  of  current  economic  and  business  trends.

The  Company  records  a  full  allowance for accounts receivable that have been
determined  legally  to be uncollectible. For accounts receivable that have been
outstanding  for  over 180 days, the Company determines an appropriate allowance
based  on  individual  circumstances.

During  the  year ended December 2004 and 2003, the Company provided $18,385 and
$nil  as  general  allowance  for doubtful and long overdue accounts. Management
expects  to  continue to update the allowance for doubtful accounts during 2005.

Property, plant and equipment
-----------------------------

Property,  plant  and  equipment  are  recorded  at  cost  less  accumulated
depreciation.  Gains or losses on disposals are reflected in current operations.
Major  expenditures  for  betterments and renewals are capitalized. All ordinary
repair  and maintenance costs are expensed as incurred. Depreciation is provided
using  the  straight-line  method over the estimated useful lives of the assets,
generally  three  to  five  years, and in case of assets used in revenue sharing
operations,  over  the  term  of  the  cooperation.  Leasehold  improvements are
amortized  on  a  straight-line basis over the shorter of the useful life of the
improvement  or  the  term  of  the  lease.


                                      F-8
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Construction in progress
------------------------

Construction  in progress is recorded at cost (net of impairment) in relation to
the construction of the hi-tech amusement centers and theme parks, usually under
revenue  sharing operations. Upon the official opening of the amusements centers
and  parks,  the  cost  of  the construction in progress will be transferred and
recorded  as  property,  plant  and  equipment.

Trademarks
----------

The  identifiable  intangible assets of the Company are trademarks acquired in a
business  combination.  The  Company  adopted  the  provisions  of  Statement of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets",  at  the  beginning  of  2002.  Under  the  provisions of SFAS No. 142,
identifiable  intangibles  with  finite  lives  are  amortized  and  those  with
indefinite  lives are not amortized. The trademarks have been determined to have
an  indefinite  life  and  are therefore not being amortized. As at December 31,
2004  and 2003, management's impairment review of the trademark did not indicate
that  an  impairment  was  warranted.

Impairment of long-lived assets
-------------------------------

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting  for  Impairment  of  Long-Lived  Assets",  the  Company reviews its
long-lived  assets  for  impairment  whenever events or changes in circumstances
indicate  that the carrying amount of an asset may not be recoverable based upon
undiscounted  cash  flows  expected  to  be  generated by such assets over their
expected  useful  lives.  If  such  assets  are  considered  to be impaired, the
impairment  to  be  recognized  is  measured by the amount by which the carrying
amount  of  the  assets  exceeds  the fair value of the assets. During the years
ended  December  31,  2004 and 2003, the Company recorded no impairment charges,
respectively.

Revenue sharing operations
--------------------------

A  revenue  sharing  operation  is  a  set  up in which the Company combines its
operations,  resources and expertise in order to construct, market and operate a
particular  project  under  a  contractual  arrangement, whereas no corporation,
partnership  or other entity has been established or created. Different parts of
the  construction  process  are  carried  out  and  responsible  by  each of the
venturers  independently. Each venturer bears its own costs and takes a share of
the  revenue  from  the  project,  which  is  determined  in accordance with the
contractual  arrangement.

In  respect  of  its  interests  in  revenue  sharing  operations,  the  Company
recognizes  in  the  consolidated  financial  statements:

1.)  the  assets  that  it  provided  and controls, and the liabilities, if any,
     that  it  incurs  are included in the Company's consolidated balance sheet;
     and
2.)  the  expenses  that  it  incurs  and its share of the admission income that
     it  earns  from the provision or sale of goods or services by the assets it
     provided  are  included  in  the  Company's  consolidated  statements  of
     operations.

Income  and  expenses  in  relation  to the revenue sharing operations have been
recorded  and  presented  using  segment accounting as required by SFAS No. 131,
"Disclosures  about  segments  of  an enterprise and related information", which
requires  that  a  public  business  enterprise report financial and descriptive
information  about  its  reportable  operating  segments.

Revenue and cost recognition
----------------------------


                                      F-9
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Revenue is recognized when the following four criteria are met:
     1)   persuasive evidence of an arrangement exists,
     2)   delivery has occurred or services have been rendered,
     3)   the price is fixed, and
     4)   collectability is reasonably assured.

The Company principally derives its revenue from (1-a) the sale of entertainment
and  amusement  products,  and  (1-b)  the  services  in  respect of the design,
development  and  construction  of  4-D  screen  system,  simulation  amusement
equipment  and  similar  computer  controlled  and  integrated  projects and (2)
admission  fees  generated  from  revenue  sharing  operations.

(1-a)  Long-term construction contract revenue and costs

Long-term  construction contract revenue and costs are recognized as revenue and
expenses  in the statement of operations by reference to the stage of completion
of  a  contract  (i.e.  the percentage of completion method) when the outcome of
that  contract  can be estimated reliably. The stage of completion of a contract
is  determined  based on the proportion that costs incurred to the balance sheet
date  bear  to  total estimated costs.  A loss on a contract is recognized as an
expense  immediately  when  it is probable that total contract costs will exceed
total  the  contract  revenue.

Costs  attributable  to  un-priced  change  orders  would be treated as costs of
contract  performance in the period in which the costs are incurred if it is not
probable  that  the  costs  will  be  recovered through a change in the contract
price.  If  it  is probable that the costs will be recovered through a change in
the  contract  price,  those  costs  would  be  treated  as  costs  of  contract
performance in the period in which they are incurred, and contract revenue would
be  recognized  to  the extent of the costs incurred. If it is probable that the
contract price will be adjusted by an amount that exceeds the costs attributable
to  the change order and the amount of the excess can be reliably estimated, the
original  contract  price  would also be adjusted for that amount when the costs
are  recognized as costs of contract performance if its realization is probable.

(1-b)  Sale of entertainment and amusement products

Revenue from the sale of entertainment and amusement products is recognized when
the  products  are  delivered  to  the  customers.  Revenue  is adjusted for the
deduction  of  any  sales  returns and discounts. The Company did not record any
sales  returns  and  discounts  for  the years ended December 31, 2004 and 2003.

(2)   Revenue  generated  from  revenue  sharing  operations

Income  is  recognized  when  the  agreed percentage of revenue from the revenue
sharing  operations become due and receivable. The Company recorded $307,096 and
$70,634  as  revenues  from  its  revenue sharing operations for the years ended
December  31,  2004  and  2003.

Income taxes
------------

The  Company  accounts  for  income tax using Statements of Financial Accounting
Standards  ("SFAS") No. 109 "Accounting for Income Taxes". SFAS No. 109 requires
an  asset  and  liability  approach  for  financial accounting and reporting for
income taxes and allows recognition and measurement of deferred tax assets based
upon  the  likelihood  of realization of tax benefits in future years. Under the
asset  and  liability  approach,  deferred  taxes  are  provided for the net tax
effects  of  temporary  differences  between  the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes.  A  valuation  allowance  is provided for deferred tax assets if it is
more  likely  than not that these items will either expire before the Company is
able  to  realize  their  benefits,  or  that future deductibility is uncertain.


                                      F-10
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Stock based compensation
------------------------

The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123,  which  defines  a  fair-value-based  method  of accounting for stock based
employee  compensation  and  transactions  in  which an entity issues its equity
instruments to acquire goods and services from non-employees. Stock compensation
for  stock  granted to non-employees has been determined in accordance with SFAS
No.  123  and  the  Emerging  Issues  Task  Force  consensus in Issue No. 96-18,
"Accounting  for  Equity Instruments that are issued to Other than Employees for
Acquiring,  or in Conjunction with Selling Goods or Services" ("EITF 96-18"), as
the  fair  value  of  the  consideration  received  or  the fair value of equity
instruments  issued,  whichever  is  more  reliably  measured.

The  Company continues to follow Accounting Principles Board ("APB") Opinion No.
25,  "Accounting for Stock Issued to Employees", in accounting for stock options
issued  to  employees  (see  Note  11) and non-employee directors, and pro forma
disclosures  of  the effect on net income (loss) and net income (loss) per share
as  if  the  Company  had  accounted for such stock options under the fair value
method  prescribed  by  SFAS  No.  123  are  as  follows:

<TABLE>
<CAPTION>
                                                     2004          2003
                                                 -------------  -----------
<S>                                              <C>            <C>
Net income for the year, as reported including
  total stock-based employee compensation
  cost, net of related tax effects, of $nil
  for 2004 and 2003                              $  1,076,421   $   269,147
Deduct: Total stock-based employee
  compensation expense determined under
  fair value based method for all awards, net
  of related tax effects                            ( 276,186)            -
                                                 -------------  -----------
Pro forma net income                             $    800,235   $   269,147
                                                 ============   ===========
Net income per share:
  Basic and diluted -- as reported               $       0.05   $      0.01
                                                 ============   ===========
  Basic and diluted - pro forma for stock-based
                      compensation               $       0.04   $      0.01
                                                 ============   ===========
</TABLE>

Earnings per share
------------------

Statement of Financial Accounting Standard No. 128, "Earnings per share", ("SFAS
No.  128")  requires  dual  presentation of basic and diluted earnings per share
("EPS")  with  a  reconciliation  of  the  numerator  and denominator of the EPS
computations. Basic EPS excludes the dilutive effects of stock options, warrants
and  convertible  securities,  if  any,  and  is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares  outstanding  during  the  period.  Diluted  EPS  reflects  the potential
dilution that could occur if securities or other contracts to issue common stock
(such  as  convertible  preferred  stock,  warrants to purchase common stock and
common  stock  options)  were  exercised  or  converted  into  common  stock.

The  common  shares  issuable  upon  exercise  of outstanding stock options were
excluded  from the calculation of diluted EPS since the exercise prices exceeded
the  average  fair  market  value  of  the  common  stock  during 2004 and 2003.
Accordingly,  basic  and  diluted  EPS  were the same for all periods presented.

Research and development
------------------------

Research  and  development  costs are expensed to operations as incurred. During
the  years  ended  December 31, 2004 and 2003, a total of approximately $841,918
and  $502,831,  respectively,  in  labor  and  materials costs were incurred for
research  and  development  purposes  which had been expensed as direct costs of
sales.


                                      F-11
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

Reserve funds
-------------

In  accordance  with  the  PRC  Companies  Law, the Company's PRC subsidiary and
controlled  associated  company  are  required  to  transfer a percentage of its
profit after taxation, as determined in accordance with PRC accounting standards
and  regulations,  to  the surplus reserve funds upon dividend distribution. The
surplus  reserve  funds  are comprised of the statutory surplus reserve fund and
the  welfare  reserve  fund.  Subject to certain restrictions set out in the PRC
Companies  Law,  the  statutory  surplus  reserve  fund  may  be  distributed to
stockholders  in the form of share bonus and/or cash dividends. The welfare fund
is  non-distributable  and must be used for the benefits of all the staff of the
enterprise.  During  the years ended December 31, 2004 and 2003, no dividend had
been  declared  by  SDCL  and  FDI,  and  therefore,  no  reserve  funds  were
transferred.

Foreign currency translation
----------------------------

The Company's major subsidiaries in PRC maintain their financial records and the
statutory financial statements in Renminbi: ("RMB"), the functional currency and
the  currency  of the PRC. In preparing the financial statements, translation of
amounts  from  RMB to United States dollars ("US$") have been made at the single
rate  of exchange of US$1.00:RMB8.30. No representation is made that RMB amounts
could  have been, or could be, converted into United States dollars at that rate
or  at any other rate. There has not been a material change in the exchange rate
during  the  years  ended  December  31,  2004  and  2003.

This  quotation  of the exchange rates does not imply free convertibility of RMB
to  other foreign currencies. All foreign exchange transactions continue to take
place either through the Bank of China or other banks authorized to buy and sell
foreign  currencies  at  the exchange rate quoted by the People's Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions
require  submitting  a payment application form together with invoices, shipping
documents  and  signed  contracts.

Fair values of financial instruments
------------------------------------

The  Company  values  its  financial  instruments  as  required by SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments". The Company's financial
instruments primarily consist of cash and cash equivalents, accounts receivable,
other  receivables, prepayments, accounts payable and accruals, short-term loans
and amount due to and due from related parties. The carrying values of financial
instruments  approximate the fair values because of their short-term maturities.

Use of estimates
----------------

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

Recent accounting pronouncements
--------------------------------

In  January  2003,  (as  revised  in  December  2003)  The  Financial Accounting
Standards  Board  ("FASB")  issued  Interpretation  No.  46,  "Consolidation  of
Variable  Interest  Entities", an interpretation of Accounting Research Bulletin
("ARB")  No.  51,  "Consolidated  Financial  Statements".  Interpretation No. 46
addresses  consolidation  by business enterprises of variable interest entities,
which  have  one  or  both  or  the  following  characteristics:  (i) the equity
investment  at  risk  is  not  sufficient  to  permit  the entity to finance its
activities  without additional subordinated support from other parties, which is
provided  through  other  interest  that will absorb some or all of the expected
losses  of  the  entity;  (ii)  the  equity  investors  lack  one or more of the


                                      F-12
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

following  essential  characteristics  of  a controlling financial interest: the
direct  or  indirect  ability  to  make  decisions about the entities activities
through  voting  rights  or  similar  rights;  or  the  obligation to absorb the
expected  losses  of  the  entity if they occur, which makes it possible for the
entity  to  finance  its  activities; the right to receive the expected residual
returns  of  the entity if they occur, which is the compensation for the risk of
absorbing  the  expected  losses.

Interpretation  No.  46, as revised (46R), also requires expanded disclosures by
the  primary  beneficiary  (as  defined) of a variable interest entity and by an
enterprise  that  holds  a  significant variable interest in a variable interest
entity  but  is  not  the  primary  beneficiary.

Interpretation  No. 46R, applies to small business issuers no later than the end
of  the first reporting period that ends after December 15, 2004. This effective
date  includes  those  entities  to  which Interpretation 46 has previously been
applied.  However,  prior  to  the required application Interpretation No. 46, a
public  entity  that is a small business issuer shall apply Interpretation 46 or
this  Interpretation to those entities that are considered to be special-purpose
entities  no  later  that  as of the end of the first reporting period that ends
after  December  15,  2003.  Interpretation No. 46R may be applied prospectively
with  a cumulative-effect adjustment as of the date on which it is first applied
or  by  restating  previously  issued financial statements for one or more years
with  a  cumulative-effect  adjustment  as  of  the  beginning of the first year
restated. The implementation of the provisions of Interpretation No. 46R did not
have  a  significant  effect  on  the Company's consolidated financial statement
presentation  or  disclosure.

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting For Certain Financial
Instruments  with  Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments with characteristics of
both  liabilities  and equity that, under previous pronouncements, issuers could
account  for  as  equity.  The new accounting guidance contained in SFAS No. 150
requires  that  those  instruments  be  classified as liabilities in the balance
sheet.

SFAS  No.  150  affects  the issuer's accounting for three types of freestanding
financial  instruments.  One  type  is  mandatorily redeemable shares, which the
issuing company is obligated to buy back in exchange for cash or other assets. A
second  type includes put options and forward purchase contracts, which involves
instruments  that do or may require the issuer to buy back some of its shares in
exchange  for  cash  or  other  assets.  The  third type of instruments that are
liabilities under this Statement is obligations that can be settled with shares,
the monetary value of which is fixed, tied solely or predominantly to a variable
such  as  a  market  index,  or  varies inversely with the value of the issuers'
shares.  SFAS  No.  150  does  not  apply  to  features  embedded in a financial
instrument  that  is  not  a  derivative  in  its  entirety.

Most  of  the  provisions  of  SFAS  No.  150  are  consistent with the existing
definition  of  liabilities  in  FASB  Concepts  Statement  No.  6, "Elements of
Financial Statements". The remaining provisions of this Statement are consistent
with  the  FASB's  proposal  to  revise  that  definition  to  encompass certain
obligations  that  a  reporting  entity  can  or  must settle by issuing its own
shares.  This  Statement  shall  be  effective for financial instruments entered
into  or  modified  after  May  31, 2003 and otherwise shall be effective at the
beginning  of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of a non-public entity, as to which
the effective date is for fiscal periods beginning after December 15, 2004.  The
implementation  of  the  provisions  of  SFAS No. 150 did not have a significant
effect  on  the  Company's  consolidated  financial  statement  presentation  or
disclosure.

In  November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
151,  Inventory  Costs-  an  amendment  of ARB No. 43, Chapter 4. This Statement
amends  the  guidance  in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
the  accounting for abnormal amounts of idle facility expense, freight, handling
costs,  and  wasted  material  (spoilage).  Paragraph  5  of  ARB 43, Chapter 4,
previously  stated  that  "under some circumstances, items such as idle facility
expense,  excessive  spoilage,  double  freight,  and rehandling costs may be so
abnormal  as  to  require  treatment  as  current period charges" This Statement
requires  that those items be recognized as current-period charges regardless of
whether  they  meet  the criterion of "so abnormal." In addition, this Statement
requires  that  allocation  of  fixed  production  overheads  to  the  costs  of
conversion  be  based  on the normal capacity of the production facilities. This
Statement  is  effective  for  inventory  costs


                                      F-13
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

incurred  during fiscal years beginning after June 15, 2005. Management does not
believe  the  adoption of this Statement will have any immediate material impact
on the Company.

On  December  16,  2004,  the  FASB  published Statement of Financial Accounting
Standards  No. 123 (Revised 2004), Share-Based Payment ("SFAS 123R").  SFAS 123R
requires  that  compensation cost related to share-based payment transactions be
recognized in the financial statements.  Share-based payment transactions within
the  scope  of  SFAS  123R  include  stock  options,  restricted  stock  plans,
performance-based awards, stock appreciation rights, and employee share purchase
plans.  The provisions of SFAS 123R are effective as of the first interim period
that  begins  after  June 15, 2005.  Accordingly, the Company will implement the
revised  standard  in  the  third  quarter  of  fiscal year 2005. Currently, the
Company  accounts  for its share-based payment transactions under the provisions
of  APB  25,  which does not necessarily require the recognition of compensation
cost  in  the  financial statements. Management is assessing the implications of
this  revised  standard,  which  may  materially impact the Company's results of
operations  in  the  third  quarter  of  fiscal  year  2005  and  thereafter.

On  December  16,  2004, FASB issued Statement of Financial Accounting Standards
No.  153,  Exchanges  of Nonmonetary Assets, an amendment of APB Opinion No. 29,
Accounting for Nonmonetary Transactions (" SFAS 153"). This statement amends APB
Opinion  29  to  eliminate  the  exception  for nonmonetary exchanges of similar
productive  assets  and  replaces  it  with a general exception for exchanges of
nonmonetary  assets  that do not have commercial substance. Under SFAS 153, if a
nonmonetary  exchange  of similar productive assets meets a commercial-substance
criterion  and fair value is determinable, the transaction must be accounted for
at  fair  value  resulting  in  recognition  of  any  gain  or loss. SFAS 153 is
effective  for  nonmonetary transactions in fiscal periods that begin after June
15,  2005.  The  Company  does  not  anticipate  that the implementation of this
standard  will  have  a  material  impact  on its financial position, results of
operations  or  cash  flows.

Reclassifications  -  Certain  prior  year amounts in the accompanying financial
statements  have  been reclassified to conform to the current year presentation.
These  reclassifications had no effect on the results of operations or financial
position  for  any  year  presented.


4.   BUSINESS ACQUISITIONS

During  May  2002,  Intsys  Share Limited (Intsys) acquired a 65.41% interest in
Shenzhen  Digitainment  Company  Limited  (Digitainment) in a reverse merger for
50,000,000  shares  of  Intsys.  The  former  owners  of  the 65.41% interest in
Digitainment  became  all  the  shareholders  of  Intsys. The acquisition of the
65.41%  interest  in  Digitainment  has  been  accounted for at historical cost.

During  September  2002, Intsys acquired 70% of the issued and outstanding stock
of  Hytechnology,  Inc. for $172,000 cash. The acquisition of Hytechnology, Inc.
has  been  accounted  for  using  the purchase method of accounting for business
acquisitions.  Accordingly,  the results of operations have been included in the
Company's  consolidated  financial statements since the date of acquisition. The
significant  asset  acquired  of  $170,950  is the trademark of "FantaWild". The
trademark  application  for  "FantaWild" was filed with the United States Patent
and Trademark Office during 2001. The trademark was officially registered during
the  year  of  2003.  The  Company believed the useful lives of the trademark is
indefinite  and  performed  its impairment test in accordance with SFAS No. 142.
The  proforma  effects  of the acquisition were not material to the consolidated
financial  statements.

During  November  2002,  the  Company acquired all of the issued and outstanding
shares  of  Intsys in a reverse merger. Under the terms of the merger agreement,
the  Company  issued  40,000,000  shares of common stock to the shareholders and
their  designees.  There  was no proforma difference in revenues, net income, or
earnings  per  share  for  the  year  ended  December  31,  2002.

On  October  18,  2004,  the  Company entered into an agreement ("Share Exchange
Agreement")  between  and among Intsys and Topforce Asia Limited ("Topforce"), a
British  Virgin  Islands  ("BVI")  corporation.  Under


                                      F-14
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

the  Share Exchange Agreement, the Company acquired the remaining 34.59% of SDCL
(the "Acquisition"). The Company previously purchased 65.41% of SDCL on May 2002
(the  "65.41%  Purchase").  Under the terms of the Share Exchange Agreement, the
Company  issued  10,000,000  shares  of common stock and Topforce transferred to
Intsys all of the equity interest of Megabase Investment Limited ("Megabase"), a
BVI  corporation,  established  to  hold  34.59%  equity  interest  in  SDCL.

At  the  request  of  the Company's independent board members, Palisades Capital
Group,  LLC  valued  the  34.59%  of  SDCL  and  issued  a Fairness Opinion (the
"Opinion")  as  to  the  number  of shares of the Company being issued under the
Share  Exchange  Agreement.  (see  Note  17)


5.   SHORT TERM BILLS RECEIVABLE

During  the  year ended December 31, 2004, the Company received payment from its
customer  totaling  $554,217  in  the  form  of  bills  receivable, which were a
banker's  postdated  cashier  order.  The  bills were maturing in April and June
2005,  respectively,  and the customer had compensated the Company $6,024 as the
relevant  interest  costs which was equivalent to the market bank saving rate of
2.17%  per  annum.  There  were  no  such  bills  receivable  in  2003.


6.   INVENTORIES

     Inventories are summarized as follows at December 31, 2004 and 2003:

                   2004       2003
                 ---------  ---------
Raw materials    1,437,481  1,127,361
Work-in-process    195,525    306,817
Finished goods     159,446     24,139
                 ---------  ---------
                 1,792,452  1,458,317
                 =========  =========

7.   COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS

A summary of the costs and estimated earnings in excess of billings on
uncompleted contracts as of December 31, 2004 and 2003 are as follow:

                                             2004          2003
                                         ------------  ------------
Costs incurred on uncompleted contracts   13,472,578     9,829,748
Estimated earnings to date                 3,665,374     1,551,846
                                         ------------  ------------
                                          17,137,952    11,381,594
Less: Billings to date                   (16,353,242)  (10,463,955)
                                         ------------  ------------
                                             784,710       917,639
                                         ============  ============

Included in the accompanying balance sheet under the following captions:

                                              2004         2003
                                          -----------  ------------
Costs and estimated earnings in excess
  of billings on uncompleted contracts      2,414,118       917,639
Billings in excess of costs and estimated
  earnings on uncompleted contracts        (1,629,408)            -
                                          -----------  ------------
                                              784,710       917,639
                                          ===========  ============


                                      F-15
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

8.   PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment consisted of the followings as at December 31,
2004 and 2003:

<TABLE>
<CAPTION>
                                                       2004         2003
                                                   ------------  -----------
<S>                                                <C>           <C>
Leasehold improvements                                 412,964      410,168
Plant and machinery                                    455,927       68,219
Equipment invested in revenue sharing operations     3,017,555           --
Furniture and fixtures                                 105,353       98,963
Computers and equipment                              1,009,350    1,640,727
Motor vehicles                                         295,633      241,127
                                                   ------------  -----------
                                                     5,296,782    2,459,204
Less: Accumulated depreciation and                  (1,552,986)  (1,793,033)
     Amortization (net of write off on disposal)
                                                   ------------  -----------
                                                     3,743,796      666,171
                                                   ============  ===========
</TABLE>

Depreciation  expense was $569,150 and $309,766 for the years ended December 31,
2004  and  2003, respectively. For the year ended December 31, 2004, accumulated
depreciation  was  reduced  by  $240,048,  which  was  comprised  of  current
depreciation  and  amortization expenses of $569,150 and a write off of $809,198
arising  from  the  disposal  of  fixed  assets,  as compared to the increase in
accumulated depreciation and amortization from depreciation expenses of $309,766
in  2003.


9.   SHORT-TERM BANK LOANS

In  September  2004,  the Company obtained a short term bank loan of $2,433,735.
The  interest  rate  on  the  bank loan is 5.31% per annum with interest payable
monthly  and  the  principal  is  due  for  repayment  in one year. The loan was
guaranteed  by Shenzhen Huaqiang Holdings Limited ("SHQ"), in which the Chairman
and  President  are  also  the  Chairman  and  CEO  of  the  Company.


10.  INCOME TAXES

Companies  within  the  Group  are subject to income taxes on an entity basis on
income  arising  or  derived  from  the tax jurisdiction in which each entity is
domiciled.  Fantatech  Inc. and Hytechnology Inc. are both Delaware corporations
and  are  subject to the corporation income taxes of the United State of America
at a maximum rate of 34%. For the year ended December 31, 2004 and 2003, both US
corporations  incurred  losses  totaling  $539,255  that are available for carry
forward  to  future  years  through  2023.

The Company's British Virgin Island ("BVI") subsidiaries are taxed in BVI. Under
the current BVI laws, income derived outside of BVI, dividends and capital gains
arising from investment by BVI subsidiaries are not subject to income taxes, and
no  withholding  tax is imposed on payments of dividends by the BVI subsidiaries
to  the  Company.

The  Company's  PRC subsidiaries and associates are subject to Enterprise Income
Tax  in the PRC at a rate of 15% on net profits. However, based on the local tax
rules,  SDCL  is  entitled  to  a  tax  holiday  for  the first two years of its
operations  (years  1999  to 2000) and a 50% reduction of the rate for the third
through  eighth  years  (years  2001  to  2006)  of  operations  due to its high
technology content of businesses. The provision for taxes on earnings of the PRC
subsidiaries,  calculated  based  on the prevailing accounting standards in PRC,
for  the  years  ended  December  31,  2004  and  2003 were $88,767 and $38,060,
respectively.  No  other  significant


                                      F-16
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

deferred  tax  assets  or  liabilities existed at December 31, 2004 and 2003. At
December  31,  2004,  the  tax losses available for carryforward in the PRC were
$152,346,  which  was  attributable  to  the  losses  incurred by FDI and can be
carried  forward  for  five  years.


11.  STOCK BASED COMPENSATION

On  January  6,  2004,  the Company granted a total of 4,000,000 shares of stock
options  to  its  key  employees  at the strike price of $0.50 per share. Market
price  of the share at the grant date was $0.40 per share. The stock options are
vested  and  exercisable  as  follows:

Scale    Vested and exercisable
------   ----------------------
50%      On or after January 7, 2007
80%      On or after January 7, 2008
100%     On or after January 7, 2009

All  options  unexercised  expire  on  January  6,  2014 and any options will be
cancelled  one  month  after termination of employment. Subsequent to the 2 to 1
reverse  share  split  effective  from  June 30, 2004, the total number of stock
options  was  reduced to 2,000,000 shares and the strike price was automatically
adjusted  to  $1.0 per share. As the earliest exercisable date of all options is
on  or  after  January  7, 2007, no option activity was recorded during the year
ended  December  31,  2004.

Additional  information  on  options  outstanding  at  December  31, 2004 was as
follows:

<TABLE>
<CAPTION>
                                                            Options
                                                        exercisable as
                          Options outstanding           of December 31
                        as of December 31, 2004              2004
                        -----------------------         --------------
                                      Weighted average
                                          remaining
                       Number            contractual
Exercise prices     outstanding         life (years)
----------------  -----------------  -----------------
<S>               <C>                <C>                <C>

$            1.0          2,000,000                9.0             NIL
                  =================  =================  ==============
</TABLE>

The  provisions  of  SFAS No. 123 allow companies to either record an expense in
the financial statements to reflect the estimated fair value of stock options to
employees,  or  to  continue  to  follow the intrinsic value method set forth in
Accounting  Principles  Board  Opinion  No.  25, "Accounting for Stock Issued to
Employees",  but  to  disclose  on  an  annual basis the pro forma effect on net
income  (loss)  and  net income (loss) per share had the fair value of the stock
options  been  recorded  in the financial statements. SFAS No.123 was amended by
SFAS  No.  148,  which  now  requires companies to disclose in interim financial
statements  the  pro forma effect on net income (loss) and net income (loss) per
common  share  of  the  estimated  fair  market value of stock options issued to
employees. The Company has elected to continue to follow APB No. 25 and accounts
for  stock-based  compensation  plans  utilizing  the  intrinsic  value  method.

Accordingly,  compensation  cost for stock options to employees will be measured
as the excess, if any, of the fair market price of the Company's common stock at
the  date  of  grant above the amount an employee must pay to acquire the common
stock.

The  fair  value of the options granted during 2004 was estimated on the date of
grant  using  the  Black-Scholes  option  pricing  model  with  the  following
assumptions:  risk  free interest rate of 2.25%, 2.75% and 3.25% for the portion
of  options exercisable from 2007, 2008 and 2009, respectively; expected life of
3  to  5  years;


                                      F-17
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

expected volatility of 100%; forfeiture rate of 2% and no dividends. The company
did not recognize any compensation expense for stock options in the consolidated
statements of operations for the years ended December 31, 2004.


12.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

(a)  Agreement with associated company

     On  June  1,  2004,  SDCL  and  FDI  entered  into  an  Agreement that SDCL
     engaged  FDI, its controlled associated company, as its sales agent for the
     marketing  and  distribution  of  its amusement and simulation equipment as
     well as 3D/4D theatre in China.

     Commencing  January  1,  2005  and  thereafter,  FDI  will be entitled to a
     commission  ranging from 10% to 20% of the contract price, depending on the
     gross  margin  of the specific contract and the size of the related project
     under the contract. In addition, a 5% advertising and promotional incentive
     will  be  provided to FDI for each contract solicited by FDI. The aforesaid
     commission  and  incentive  will be transferred to FDI through its purchase
     from  SDCL  the  related  equipment  and  products.  The  Agreement  can be
     terminated at any time with 60 days notice to the other party.

     FDI  will  be  responsible  for  its  own  operating  costs including staff
     salaries, marketing and promotional expenses, general office administrative
     expenses as well as the associated sales taxes and income tax.

     In  addition,  the  Agreement  also  provided  that  FDI may include in its
     sales  contract  a cooperation regarding the operation of hi-tech amusement
     centre  "FunPlex"  or  theme  park  "Fantawild" when the proposed operating
     venue is suitable for the business. However, FDI will only act as the agent
     in  such part of the contract on behalf of SDCL. FDI will have no direct or
     indirect  economic  or  legal interest in those revenue sharing operations,
     which  will  be  solely  the  business  of  SDCL who will be responsible to
     contribute the equipment and fixed assets required for the cooperation. All
     the revenues generating from such cooperated businesses will be received by
     SDCL,  and  all  the  related  expenses  as  stipulated in such cooperation
     contracts will be borne by SDCL.

     In  order  to  give  FDI  the  necessary  motivation and platform to better
     market  and  promote SDCL's products, SDCL agreed that for the year of 2004
     an  aggregated  commission  of  20%  plus  an  advertising  and promotional
     incentive of 15% on the total amount of contract (direct sale of equipment)
     canvassed  during the period starting from the date of the agreement and up
     to December 31, 2004 was granted to FDI.

(b)  Purchases of digital films and related components

     During  the  year  ended  December  31,  2004  and  2003,  the  Company
     purchased  certain  components  for its products from Hyvision Digital Film
     Inc.  ("Film  Inc."),  an  affiliate of SHQ. Total purchases from Film Inc.
     were $1,271,084 and $486,145, respectively.

     The  accounts  receivable  from  Film  Inc.  were $ nil and $96,386 for the
     years  ended  December 31, 2004 and 2003, respectively. Mr. Guangwei Liang,
     Mr. Ming Li, Mr. Xinan Hu and Mr. Zhigang Rong are common directors of Film
     Inc. and the Company.

(c)  Sales to related parties

     During  the  year  ended  December  31, 2004 and 2003, the Company sold its
     amusement  equipment  and  4D  theater  to  Hytech HK totaling $750,000 and
     $698,138,  respectively.  As  at  December  31, 2004 and 2003, the accounts
     receivable due from Hytech HK were $400,862 and $1,994, respectively.


                                      F-18
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

     In  addition,  the  Company  also  sold products and equipment to Film Inc.
     of  $nil  and  $41,190  during  the years ended December 31, 2004 and 2003,
     respectively.

(d)  Related  party  receivables  and  payables

     As  at  December  31,  2004  and  2003,  the amounts payable and receivable
     from related parties are summarized as follows:

<TABLE>
<CAPTION>
                                                2004           2003
                                           --------------  -------------
Amounts due from:
-----------------
<S>                                        <C>             <C>
Hytech HK (1)                              $     400,862   $          -
Shenzhen Huaqiang Industrial
  and Trading Co. Ltd. (3)                        17,470              -
Chunren Xie (4)                                    1,500          1,500
Directors (5)                                      1,922         18,392
Film Inc. (6)                                          -         96,386
Shenzhen Huaqiang Technology Co., Ltd (7)         55,947         14,705
                                           -------------   -------------
                                           $     477,701   $    130,983
                                           =============   =============

Amounts due to:
---------------
Hytech HK (1)                              $    (350,588)  $          -
Top Link Development Limited (2)                (280,000)      (280,000)
Dehou FANG (2)                                   (20,000)       (20,000)
                                           -------------    ------------
                                           $    (650,588)  $   (300,000)
                                           =============   =============
</TABLE>

     (1)  The  amounts due from Hytech HK represent the account receivable arose
          during  the  normal  course  of business, while the amounts payable to
          Hytech  HK  represent  the  amount  paid  on  behalf of the Company in
          respect  of  its  administrative  expenses  incurred  outside PRC. The
          amount  receivable  from  and payable to Hytech HK in the year of 2003
          totaling  $1,994  and  $36,395,  respectively,  were not classified as
          related  party  transactions  in  2003  since  Hytech  HK  was  a then
          subsidiary  of  the  Company,  which  amounts  were  eliminated  on
          consolidation.  On  May 12, 2004, the Company disposed and sold Hytech
          HK  to  Top  Link  Hi-Tech  Development  (H.K.)  Limited  ("Top  Link
          Hi-Tech"),  a Hong Kong company ultimately owned by SHQ. These amounts
          are  unsecured,  non-interest  bearing  and  have  no definite term of
          repayment.

     (2)  The  amounts  due  from  Top  Link Development Limited ("TLD") and Mr.
          Dehou  Fang  were  classified  as  short term unsecured loans in 2003,
          which represent the amounts loaned to Intsys Share Limited in 2002 for
          its  payment for the acquisition of Hytech US and other administrative
          expenses  of  the Company. TLD is the immediate holding company of Top
          Link Hi-Tech and Mr. Dehou Fang is a director of Intsys Share Limited.
          These  related  party  loans  in the amount of $300,000 are unsecured,
          non-interest  bearing  and  have  no  definite  term  of  repayment.

     (3)  Shenzhen  Huaqiang  Industrial  and  Trading  Co.,  Ltd. ("HIT") is an
          affiliate  of  SHQ. The amount was loaned to HIT in relation to one of
          the  revenue sharing operations which has been terminated and moved to
          other  location.  The loan is unsecured, non-interest bearing and have
          no  definite  term  of  repayment.


                                      F-19
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                         NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

     (4)  Chunren  Xie  is  the  30%  minority  shareholder  of  Hytech  US.

     (5)  Amount  due  from  directors represented the cash advance for business
          trip  and  trade  fairs.

     (6)  The  amount  due from Film Inc. represented an advance deposit made to
          Film  Inc.  for  the  purchase  of  digital  film  by  SDCL  in  2003.

     (7)  The  receivable due from Shenzhen Huaqiang Technology Co. Ltd. ("SHT")
          were  the interest receivable on cash deposit placed with the clearing
          center  organized  and  managed  by  SHT.  The clearing center offered
          market  interest rate for the Company's cash fixed deposit and allowed
          flexibility  of  changing  deposit  terms.  SHT is a PRC company which
          holds  20.7%  interest in the Company through a Share Swap arrangement
          effected  on April 4, 2005. SHT is also a 20% shareholder of Film Inc.


13.  DISPOSAL OF HYTECHNOLOGY LIMITED - DISCONTINUED OPERATIONS

On  May  12, 2004, the Company sold all of its interest in Hytech HK to Top Link
Hi-Tech  Development  (H.K.)  Limited  ("Top  Link")  for $1,277 pursuant to the
Bought  and  Sold  Note. Top Link is a Hong Kong Corporation ultimately owned by
Shenzhen Huaqiang Holdings Ltd. ("SHQ"), in which the Chairman and President are
also the Chairman and CEO of the Company. Hytech HK was engaged in the sales and
marketing  of  entertainment  products,  including  the  products  of  SDCL.

During  the  fiscal year ended December 31, 2003, Hytech HK generated revenue of
$860,925  or  15.8%  of the Company's 2003 total revenue. Hytech HK had a profit
margin  of  3.7%  as  compared  to  the Company's profit margin of 30.1% and had
losses  from  operations  of  $284  in  2004  and $56,304 in 2003, respectively.
Management  believed  that the disposal of Hytech HK will have minimal impact to
the  Company's  net  profit  for  the fiscal year ended 2004 as the Company will
continue  to  sell  and  market  the  products  through  its  other subsidiaries
subsequent  to  the  disposal.


14.  SEGMENT REPORTING

The  Company  discloses  segment  information  in  accordance with SFAS No. 131,
"Disclosure  About  Segments  of  an  Enterprise and Related Information," which
requires  companies to report selected segment information and to report certain
entity-wide  disclosures  about  products and services, major customers, and the
material  countries  in  which the entity holds assets and reports revenue which
were  assessed  by  the  management  separately.

The factors for determining reportable segments of the Company were based on the
nature  of  revenue  generated  from  its  products  and  services.  The revenue
generated  from  the  operations  of  the  Company  can be divided into two main
categories:  (1)  contracts  sales  of  equipment  or facilities used in hi-tech
amusement  centre  or  theme  park, 3D/4D theatre, and the related services; (2)
revenue sharing operations. Each segment involves different marketing strategies
and business techniques. The accounting policies of the segments are the same as
those  described  in the summary of significant accounting policies. The Company
evaluates  performance  based  on EBIT (earnings or loss before interest, taxes,
impairment  losses,  and  minority interest). The following table summarizes the
revenue  and  EBIT  by  segment  for  the year ended December 31, 2004 and 2003.
Corporate  expenses  consist of general operating expenses that are not directly
related  to  the  operations  of  the  segments.


                                      F-20
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                            2004         2003
                                        ------------  -----------
<S>                                     <C>           <C>
NET REVENUE:
  Contracted sales                      $ 8,088,290   $4,608,728
  Revenue sharing operations                307,096       70,634
                                        ------------  -----------
                                          8,395,386    4,679,362
                                        ============  ===========
EBIT (Unaudited)
  Contracted sales                        2,579,761    1,347,934
  Revenue sharing operations                 (4,744)      48,918
                                        ------------  -----------
                                          2,575,017    1,396,852
  Corporate                              (1,360,945)    (933,020)
                                        ------------  -----------
                                          1,214,072      463,832
                                        ============  ===========
Reconciliation of EBIT to net income:
  EBIT per segments                       1,214,072      463,832
  Minority interest                          28,996      124,998
  Interest (income)expenses, net            (37,659)      31,627
  Income tax expenses                        88,767       38,060
  Loss on disposal of fixed assets           41,481            -
                                        ------------  -----------
NET INCOME                              $ 1,092,487   $  269,147
                                        ============  ===========
</TABLE>

During  the  year  of  2004  and 2003, approximately 9% and 21% of the Company's
contracted  sales,  respectively,  were from outside of PRC, which included USA,
Canada,  Italy,  Israel,  Ukraine,  Kuwait  and  Philippine.

Three  customers accounted for approximately 18.4%, 17.8% and 14.2% of the total
net  sales  for  the  year  ended December 31, 2004 as compared to approximately
26.1%,  12.3%  and  10.4% in 2003. However, the Company does not believe that it
has a material reliance on any one customer as most of the contracted sales will
be  completed  within  one to two years, and the Company will continue to target
the  development  of  the  revenue sharing operations of "FantaWild FunPlex" and
large  size  theme  park  attractions.


15.  MINORITY INTEREST

As of December 31, 2004, minority interest balance of $4,122,426 is comprised of
the  minority  interest  of  its  subsidiaries including FDI, SDCL (prior to the
acquisition  of  the minority interest on October 18, 2004) and Hytech US. As of
December  31, 2003, the minority interest balance is $5,789,180. It is comprised
of  the  minority  shares  of  its  subsidiaries, namely SDCL, Hytechnology Inc,
Hytechnology  Ltd.  and  FDI,  which the Company did not own. As of December 31,
2004,  the  Company  owned  70%  interest  in Hytech US and 40% interest in FDI.
During  the  year  ended  December  31,  2004,  the  Company recorded a minority
interest  income  of  $45,062,  as  compared  to  $124,998  in  2003.


16.  REVERSE STOCK SPLIT

On  June 10, 2004, the Board of Directors of the Company approved that every two
shares  of  the  Company's  common  stock  with  par  value  $0.001  per  share
("Pre-Reverse-Split  Common  Stock")  was  reclassified into one share of common
stock,  par value $0.001 per share ("Post-Reverse-Split Common Stock") effective
on  June  30, 2004. Each fractional share of Post-Reverse-Split common stock was
rounded  up  to  the  next  whole number of share. The reverse split reduced the
Company's  issued  and  outstanding  shares from 40,192,063 shares to 20,096,117
shares.  The  par  value  of  the  Company's  common  stock  was  not  affected.
Retroactive  effect  has  been  given  to  share  and  per  share amounts in the
financial  statements  resulting from the reverse stock split. Subsequent to the
reverse  stock  split,  the  Company's  new  trading symbol was changed to FNTN.


                                      F-21
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

17.  ACQUISITION OF ASSETS AND ISSUANCE OF NEW SHARES

On  October  18,  2004,  the  Company entered into an agreement ("Share Exchange
Agreement")  between  and  among  the  Company, Intsys and Topforce Asia Limited
("Topforce"),  a  British  Virgin  Islands  ("BVI") corporation. Under the Share
Exchange  Agreement,  the  Company  acquired  the  remaining 34.59% of SDCL (the
"Acquisition").  Pursuant  to  the  terms  of  the Share Exchange Agreement, the
Company  issued  10,000,000  shares  of  its  common  stock  and  Topforce  had
transferred  to Intsys all of the equity interest of Megabase Investment Limited
("Megabase"),  a  BVI corporation, established to hold 34.59% equity interest of
SDCL.

Palisades  Capital  Group,  LLC  (an independent company that was engaged by the
Board  of Directors) valued the 34.59% of SDCL and has issued a Fairness Opinion
(the  "Opinion")  that  the  number  of  shares  issued under the Share Exchange
Agreement  reflected  fairly  the  value  of  the  assets  acquired.

Subsequent  to  the  issuance of 10,000,000 new shares, the Company's issued and
outstanding  common  stock  totaled  30,096,117  shares.


18.  COMMITMENTS AND CONTINGENCIES

Operating leases

The  following  are  the approximate minimum lease payments that will have to be
made  in the years as indicated below based on the operating leases in effect as
of  December  31,  2004:

                            Total
                          ----------
2005                      $  268,135
2006 - 2009 (4 years)        734,660
2010 - 2018 (7.25 years)   1,441,205
                          ----------
Minimum lease payments    $2,444,000
                          ==========

The total rental expense incurred for the years ended December 31, 2004 and 2003
were  $330,379  and  $251,194,  respectively.

Litigation

The  Company  is not a party to any pending or any threatened legal proceedings.
None  of  the Company's directors, officers or affiliates, or owner of record of
more than five percent (5%) of the Company's securities, or any associate of any
such  director,  officer or security holder is a party adverse to the Company or
has  a  material  interest  adverse  to  the  Company  in  reference  to pending
litigation.


19.  MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

Three  customers accounted for approximately 18.4%, 17.8% and 14.2% of sales for
the  year  ended December 31, 2004 as compared to approximately 26.1%, 12.3% and
10.4%  for  the  year  ended  December  31,  2003.  As  of  December  31,  2004,
approximately   80%  (2003:  85%)  of   accounts   receivable  were  from  trade
transactions  with  four  customers,  of  which   one   customer  accounted  for
approximately  33%  (2003:  44%)  of  the  accounts  receivable  balance.

The  Company's financial instruments that are exposed to concentration of credit
risk  consist  primarily  of  cash and cash equivalents, and accounts receivable
from customers. Cash and cash equivalents are mainly maintained with major banks
in  the PRC. The Company periodically performs credit analysis and monitors that
financial  condition of its customers at the subsidiary level in order to ensure
collections  and  minimize  credit  risk.


                                      F-22
<PAGE>
                        FANTATECH INC. AND SUBSIDIARIES
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

20.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The  Company's  primary  operations  are  conducted in the PRC. Accordingly, the
Company's  business,  financial  condition  and  results  of  operations  may be
influenced  by the political, economic and legal environments in the PRC, and by
the  general  state  of  the  PRC's  economy.

The  Company's  operations  in the PRC are subject to special considerations and
significant  risks  not typically associated with companies in North America and
Western  Europe.  These  include  risks  associated  with,  among  others,  the
political,  economic  and  legal environments and foreign currency exchange. The
Company's  results  may  be  adversely  affected by changes in the political and
social  conditions  in  the  PRC,  and  by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency conversion
and  remittance  abroad,  and rates and methods of taxation, among other things.

The  Company's operating assets and primary sources of income and cash flows are
its interest in subsidiaries and associated company in the PRC.  The PRC economy
has, for many years, been a centrally-planned economy, operating on the basis of
annual,  five-year  and ten-year state plans adopted by central PRC governmental
authorities, which set out national production and development targets.  The PRC
government  has  been  pursuing  economic  reforms  since  it  first adopted its
"open-door"  policy in 1978.  There is no assurance that the PRC government will
continue  to  pursue  economic reforms or that there will not be any significant
change  in  its  economic  or  other  policies, particularly in the event of any
change  in  the  political  leadership  of, or the political, economic or social
conditions in, the PRC.  There is also no assurance that the Company will not be
adversely  affected  by  any  such  change  in  governmental  policies  or  any
unfavorable  change in the political, economic or social conditions, the laws or
regulations,  or  the  rate  or  method  of  taxation  in  the  PRC.

As  many of the economic reforms which have been or are being implemented by the
PRC  government  are  unprecedented  or  experimental,  they  may  be subject to
adjustment  or  refinement,  which  may  have  adverse  effects  on the Company.
Further,  through state plans and other economic and fiscal measures, it remains
possible  for  the  PRC  government  to  exert  significant influence on the PRC
economy.


                                      F-23