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


                                   FORM 10-QSB


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

                For the quarterly period ended September 30, 2006


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

               For the transition period from _______ to ________

                         Commission file number: 0-24374


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

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


   Suite 1801A, Tower 1, China Hong Kong City, Tsimshatsui, Kowloon, Hong Kong
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (852) 2302 1636
                 ---------------------------------------------
                           (Issuer's telephone number)


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


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

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

As  of October 31, 2006 the Company had 30,096,117 shares of common stock issued
and  outstanding.

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


<PAGE>
<TABLE>
<CAPTION>
                               FANTATECH, INC. AND SUBSIDIARIES

                                          FORM 10-QSB

                                             Index

Part  I - Financial  Information                                                           Page

<S>         <C>                                                                             <C>
Item 1.     Financial Statements
            Condensed Consolidated Balance Sheets - September 30, 2006 (Unaudited) and
                December 31, 2005                                                            3
            Condensed Consolidated Statements of Operations (Unaudited) -Three Months
                and Nine Months Ended September 30, 2006 and 2005                            4
            Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) -
                Three Months and Nine Months Ended September 30, 2006 and 2005               6
            Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months
                Ended September 30, 2006 and 2005                                            7
            Notes to Condensed Consolidated Financial Statements (Unaudited) -
              Three Months and Nine Months Ended September 30, 2006 and 2005                 8

Item 2.     Management's Discussion and Analysis or Plan of Operation                       21

Item 3.     Controls and Procedures                                                         33

Part II - Other Information

Item 1.     Legal Proceedings                                                               34

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds                     34

Item 3.     Defaults Upon Senior Securities                                                 34

Item 4.     Submission of Matters to a Vote of Security Holders                             34

Item 5.     Other Information                                                               34

Item 6.     Exhibits                                                                        34

Signatures                                                                                  35
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                         PART I - FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
-------------------------------------------------------------------------------------------------------------------

                                          FANTATECH, INC. AND SUBSIDIARIES
                                       CONDENSED CONSOLIDATED BALANCE SHEETS

                                                                           September 30, 2006    December 31, 2005
                                                                          --------------------  -------------------
                                  ASSETS                                      (Unaudited)            (Audited)
<S>                                                                       <C>                   <C>
Current assets
  Cash and cash equivalents                                               $            812,176  $         2,365,921
  Deposit at an affiliate's financial clearing center                                      161              321,728
  Guaranteed trust fund deposit                                                          9,550                9,330
  Trade receivables, net of allowance for doubtful accounts                            810,691            1,939,434
  Related party receivables                                                            393,787              193,721
  Inventories                                                                        4,677,049            3,037,087
  Costs and estimated earnings in excess of
    billings on uncompleted contracts                                                  924,830              722,526
  Deposits and prepayments                                                           1,273,441            1,607,725
  Other receivables                                                                    381,404              243,176
                                                                          --------------------  -------------------

Total current assets                                                                 9,283,089           10,440,648

Interest in an associated company, accounted for using the equity method                     -               18,587
Property, plant and equipment, net                                                  14,148,971            6,661,869
Construction in progress                                                               121,367            2,576,520
                                                                          --------------------  -------------------

Total assets                                                              $         23,553,427  $        19,697,624
                                                                          ====================  ===================

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Short-term bank loan                                                               2,508,466  $         2,478,315
  Accounts payable                                                                     861,133            1,585,030
  Accrued liabilities and other payables                                             2,286,936            1,155,197
  Related party payables                                                             2,393,770              778,349
  Billings in excess of cost and estimated earnings
    on uncompleted contracts                                                           284,619              608,104
  Deposits received                                                                  4,000,095            1,811,743
                                                                          --------------------  -------------------

Total current liabilities                                                           12,335,019            8,416,738

Minority interests                                                                   4,146,903            4,289,988
                                                                          --------------------  -------------------

Total liabilities                                                                   16,481,922           12,706,726
                                                                          --------------------  -------------------

Commitments and contingencies

Stockholders' equity

  Preferred stock; $0.001 par value; 10,000,000 shares
    authorized; shares issued and outstanding - none                                         -                    -
  Common stock; $0.001 par value; 100,000,000 shares
    authorized, 30,096,117 shares issued and outstanding                                30,096               30,096
  Additional paid-in capital                                                         4,587,190            4,587,190
  Retained earnings                                                                  1,763,088            1,915,800
  Reserve funds                                                                        407,891              145,347
  Accumulated other comprehensive income                                               283,240              312,465
                                                                          --------------------  -------------------

Stockholders' equity                                                                 7,071,505            6,990,898
                                                                          --------------------  -------------------

Total liabilities and stockholders' equity                                $         23,553,427  $        19,697,624
                                                                          ====================  ===================
</TABLE>

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


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                FANTATECH, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                       Three Months Ended    Three Months Ended
                                                       September 30, 2006    September 30, 2005
                                                      --------------------  --------------------
<S>                                                   <C>                   <C>
REVENUE :
  Contracted sales                                    $           989,304   $         1,836,988
  Revenue sharing operations                                    1,372,343               220,996
                                                      --------------------  --------------------
TOTAL REVENUE                                                   2,361,647             2,057,984
                                                      --------------------  --------------------

COST OF REVENUE:
  Cost of sales                                                   696,536             1,398,305
  Cost of revenue sharing operations                              818,598               177,346
                                                      --------------------  --------------------
TOTAL COST OF REVENUE                                           1,515,134             1,575,651
                                                      --------------------  --------------------

GROSS PROFIT                                                      846,513               482,333
                                                      --------------------  --------------------

OPERATING EXPENSES:
  Selling and marketing                                           482,897               244,145
  General and administrative                                      385,527               349,377
  Loss on disposal of property, plant and equipment                   734                 2,662
                                                      --------------------  --------------------
TOTAL OPERATING EXPENSES                                          869,158               596,184
                                                      --------------------  --------------------

LOSS FROM OPERATIONS                                              (22,645)             (113,851)

OTHER INCOME (EXPENSES)
  Interest expense                                                (36,333)              (47,711)
  Other income                                                     18,058                19,076
  Interest income                                                   3,620                 7,835
  Foreign exchange loss                                            (1,541)               (5,205)
                                                      --------------------  --------------------

LOSS BEFORE INCOME TAX, MINORITY INTERESTS
  AND EQUITY IN LOSS OF AN ASSOCIATED COMPANY                     (38,841)             (139,856)

MINORITY INTERESTS                                                111,360               (51,930)

INCOME TAX                                                         22,314                   830
                                                      --------------------  --------------------

INCOME (LOSS) BEFORE EQUITY IN LOSS OF AN
  ASSOCIATED COMPANY                                               50,205              (192,616)

EQUITY IN LOSS OF AN ASSOCIATED COMPANY                                 -                     -
                                                      --------------------  --------------------

NET INCOME (LOSS)                                     $            50,205   $          (192,616)
                                                      ====================  ====================

WEIGHTED AVERAGE SHARES OUTSTANDING
  BASIC AND DILUTED                                            30,096,117            30,096,117
                                                      ====================  ====================

INCOME (LOSS) PER COMMON SHARE
  - BASIC AND DILUTED                                 $              0.00   $             (0.01)
                                                      ====================  ====================
</TABLE>

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


                                        4
<PAGE>
<TABLE>
<CAPTION>
                                FANTATECH, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                       Nine Months Ended     Nine Months Ended
                                                       September 30, 2006    September 30, 2005
                                                      --------------------  --------------------
<S>                                                   <C>                   <C>
REVENUE :
  Contracted sales                                    $         2,976,711   $         4,560,207
  Revenue sharing operations                                    2,863,391               679,938
                                                      --------------------  --------------------
TOTAL REVENUE                                                   5,840,102             5,240,145
                                                      --------------------  --------------------

COST OF REVENUE:
  Cost of sales                                                 2,101,719             3,364,977
  Cost of revenue sharing operations                            1,870,917               572,374
                                                      --------------------  --------------------
TOTAL COST OF REVENUE                                           3,972,636             3,937,351
                                                      --------------------  --------------------

GROSS PROFIT                                                    1,867,466             1,302,794
                                                      --------------------  --------------------

OPERATING EXPENSES:
  Selling and marketing                                         1,044,953               645,558
  General and administrative                                    1,038,470             1,232,793
  Impairment of trademarks                                              -               170,950
  Loss on disposal of property, plant and equipment                 2,878                 2,662
                                                      --------------------  --------------------
TOTAL OPERATING EXPENSES                                        2,086,301             2,051,963
                                                      --------------------  --------------------

LOSS FROM OPERATIONS                                             (218,835)             (749,169)

OTHER INCOME (EXPENSES)
  Interest expense                                               (106,175)             (113,044)
  Other income                                                    186,517                48,991
  Interest income                                                   8,230                11,106
  Foreign exchange loss                                            (3,396)               (5,205)
                                                      --------------------  --------------------

LOSS BEFORE INCOME TAX, MINORITY INTERESTS
  AND EQUITY IN LOSS OF AN ASSOCIATED COMPANY                    (133,659)             (807,321)

MINORITY INTERESTS                                                318,037                16,337

INCOME TAX                                                         55,891                   863
                                                      --------------------  --------------------

INCOME (LOSS) BEFORE EQUITY IN LOSS OF AN
  ASSOCIATED COMPANY                                              128,487              (791,847)

EQUITY IN LOSS OF AN ASSOCIATED COMPANY                           (18,657)                    -
                                                      --------------------  --------------------

NET INCOME (LOSS)                                     $           109,830   $          (791,847)
                                                      ====================  ====================

WEIGHTED AVERAGE SHARES OUTSTANDING
  BASIC AND DILUTED                                            30,096,117            30,096,117
                                                      ====================  ====================

INCOME (LOSS) PER COMMON SHARE
  - BASIC AND DILUTED                                 $              0.00   $             (0.03)
                                                      ====================  ====================
</TABLE>

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


                                        5
<PAGE>
<TABLE>
<CAPTION>
                                       FANTATECH, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

                                             Three Months Ended September 30,    Nine Months Ended September 30,
                                                 2006              2005              2006              2005
                                            ---------------  ----------------  ----------------  ----------------
<S>                                         <C>              <C>               <C>               <C>
Net income (loss)                           $        50,205  $      (192,616)  $       109,830   $      (791,847)

Other comprehensive income:
  foreign currency translation gain (loss)           24,612          243,602           (29,225)          243,602
                                            ---------------  ----------------  ----------------  ----------------

Comprehensive income (loss)                 $        74,817  $        50,986   $        80,605   $      (548,245)
                                            ===============  ================  ================  ================
</TABLE>

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


                                        6
<PAGE>
<TABLE>
<CAPTION>
                                        FANTATECH, INC. AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

                                                                                Nine Months Ended September 30,
                                                                                      2006             2005
                                                                                -----------------  ------------
<S>                                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                                               $        109,830   $  (791,847)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
  Depreciation expense                                                                 1,315,096       752,366
  Impairment of trademarks                                                                     -       170,950
  Allowance for doubtful accounts                                                         50,352        67,680
  Loss on disposal of property, plant and equipment                                        2,878         2,662
  Foreign exchange loss                                                                    3,396         5,205
  Minority interests                                                                    (318,037)      (16,337)
  Equity in loss of an associated company                                                 18,657             -
Change in operating assets and liabilities:
  (Increase) decrease in --
  Guaranteed trust fund deposit                                                             (220)       (9,410)
  Trade receivables                                                                    1,078,391       112,024
  Bills receivable                                                                             -       554,217
  Related party receivables                                                             (200,066)      374,822
  Inventories                                                                         (1,639,962)       60,354
  Costs and estimated earnings in excess of billings on uncompleted contracts           (202,304)     (476,940)
  Deposits and prepayments                                                               334,284      (693,391)
  Other receivables                                                                     (138,228)     (220,144)
  (Decrease) increase in --
  Accounts payable, accrued liabilities and other payables                               407,842       520,329
  Related party payables                                                               1,615,421       (27,256)
  Billings in excess of costs and estimated earnings on uncompleted contracts           (323,485)     (722,579)
  Deposits received                                                                    2,188,352       368,329
                                                                                -----------------  ------------
Net cash provided by operating activities                                              4,302,197        31,034
                                                                                -----------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property, plant and equipment                                           (6,268,985)   (3,487,102)
  Deposit at an affiliate's financial clearing center                                    321,567     1,785,648
                                                                                -----------------  ------------
Net cash used in investing activities                                                 (5,947,418)   (1,701,454)
                                                                                -----------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from short-term bank loan                                                           -     4,078,102
  Proceeds from related party short term loan                                                  -    (2,433,735)
                                                                                -----------------  ------------
Net cash provided by financing activities                                                      -     1,644,367
                                                                                -----------------  ------------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                                   91,476       139,825
                                                                                -----------------  ------------

NET (DECREASE) INCREASE IN CASH                                                       (1,553,745)      113,772

Cash and cash equivalents, at beginning of period                                      2,365,921        65,794
                                                                                -----------------  ------------
Cash and cash equivalents, at end of period                                     $        812,176   $   179,566
                                                                                =================  ============

Supplementary disclosures of cash flow information:
  Interest paid                                                                 $        106,175   $   113,044
                                                                                =================  ============

  Tax paid                                                                      $        202,467   $    62,631
                                                                                =================  ============

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
  Nil
</TABLE>

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


                                        7
<PAGE>
                        FANTATECH, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
         THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

Fantatech,  Inc., formerly Lucas Educational Systems, Inc. (hereinafter referred
to as the "Company", which term shall include, when the context so requires, its
subsidiaries  and affiliates) was incorporated in the State of Delaware in 1996.
During  November  2002,  the  Company acquired all of the issued and outstanding
shares  of Intsys Share Limited ("Intsys") in a reverse acquisition. The Company
is  engaged  in  the  design,  manufacturing,  sale  and  operation  of  hi-tech
entertainment and amusement attractions for group audiences including simulation
attractions  and  equipment,  3D/4D  theatres,  indoor  entertainment  centers
("FunPlex") and outdoor theme parks. The Company's operations are located in the
People's  Republic  of  China (the "PRC" or "China"). The Company's wholly owned
subsidiaries  include  Intsys,  Shenzhen  Digitainment  Co.,  Ltd. ("SDCL"), and
Megabase  Investment  Limited  ("Megabase"). In addition, the Company's majority
controlled  companies  include  Hytechnology  Inc.  ("Hytech  US"),  Chongqing
FantaWild FunPlex Tour Co. Ltd. ("Chongqing FTC") and Fantatech Development Inc.
("FDI").

In  August  2003, SDCL, Shenzhen Huaqiang Industry Company Limited ("SHICL") and
Shenzhen  Huaqiang  Venture Capital Company Limited ("SHVCCL") incorporated FDI.
Each  of SDCL and SHICL hold a 40% equity interest in FDI with the remaining 20%
equity  interest  held by SHVCCL.   FDI is engaged in the sales and marketing of
the products of SDCL in China and assists SDCL with soliciting contracts for the
development  of  hi-tech  entertainment  and  amusement centers and theme parks.
Subsequent  to  its formation, SHVCCL assigned all of its management and control
rights  in  FDI  to  SDCL.  SHICL and SHVCCL are affiliates of Shenzhen Huaqiang
Holdings  Limited  ("SHQ").  The  Chairman  and  President  of  SHQ are also the
Chairman and Chief Executive Officer ("CEO") of the Company.

In  June  2005,  the  Company resolved to set up two management companies in the
cities  of  Chongqing and Tianjin in China, in order to manage the operations of
the  theme park in Chongqing and the large-size attraction "Dino-Rampage" in the
Tianjin  FunPlex,  respectively.  These  management  companies  are  intended to
facilitate the operations of the aforesaid large-size revenue sharing operations
and  will  be  budgeted  to  operate at a break-even level. In late August 2005,
Chongqing FTC, with registered capital of approximately $620,000, which is owned
90%  by  SDCL and 10% by FDI, formally commenced its operations of assisting and
coordinating  the  establishment  of  the Chongqing Theme Park. In late November
2005,  Tianjin  Longqiao  FantaWild  Kepu  Ltd. ("Tianjin LFK"), with registered
capital  of  approximately $37,000, which is owned 50% by FDI and 50% by Tianjin
Longqiao  Property  Development  Co.  Ltd. ("Longqiao PDL"), a third party local
partner, formally commenced its operations. There are seven members of the Board
of  Directors  of  Tianjin  LFK,  to  which  FDI  has  appointed  two directors.


2.   BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS  OF  PRESENTATION  AND  CONSOLIDATION  -  The  interim unaudited condensed
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. The
Company's  investment in Tianjin LFK is accounted for using the equity method of
accounting  as  the  Company does not have effective control over its Board. All
material  intercompany balances and transactions, including intercompany profits
and unrealized profits and losses are eliminated on consolidation.

The  interim  unaudited  condensed  consolidated  financial  statements  as  of
September  30, 2006 and for the three months and nine months ended September 30,
2006  and  2005,  in  the  opinion of the management of the Company, reflect all
adjustments  of  normal  and  recurring  nature,  which  are


                                        8
<PAGE>
necessary  for  a fair presentation of the Company's financial position, results
of  operations  and  cash  flows  for  the  interim  periods  presented. Certain
information  and  footnote disclosures normally included in financial statements
have  been  condensed  or  omitted  pursuant  to  rules  and  regulations of the
Securities  and Exchange Commission, although management of the Company believes
that  the  disclosures are adequate to make the information presented herein not
misleading.  Accordingly, these unaudited interim financial statements should be
read  in  conjunction with the audited consolidated financial statements and the
notes  thereto  included  in  the Company's Annual Report on Form 10-KSB for the
year  ended December 31, 2005. The results of operations for the interim periods
presented  are not necessarily comparable to or indicative of the results of any
other  interim  period or to be expected for the entire year ending December 31,
2006.

GOING  CONCERN  -  The  accompanying unaudited consolidated financial statements
have  been  prepared assuming that the Company will continue as a going concern,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and liabilities
presented in the accompanying unaudited consolidated financial statements do not
purport to represent the realizable or settlement values. During the nine months
ended  September 30, 2006, the Company has been concentrating its efforts in the
two  projects  regarding the sales of equipments to the theme park in the cities
of  Wuhu  and  Shantou,  respectively.  Although the two projects are progressed
within  the  anticipated  schedule,  the  related  progress revenue has not been
recognized  until  the  delivery  of  equipments  to  the  respective  sites.
Accordingly,  the  progress  payments  from the customers totaling approximately
$5,000,000  are  recorded as current liabilities. As a result, the Company has a
net  working  capital deficiency of approximately $3,000,000 as of September 30,
2006.  The  Company expects that the net working capital deficiency is temporary
and will gradually return to positive level once the Company starts to recognize
the  progress  revenue upon delivery of the equipments. On November 6, 2006, the
Company  received another progress payment of approximately $1,890,000 from Wuhu
Huaqiang.

The Company anticipates that, based on current 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, its financial
resources  are  sufficient to support the Company's working capital requirements
for  its  planned  operations  for the next twelve months, although there may be
temporarily  lower  levels of working capital at certain times during the course
of  its  business.

Based  on  management's evaluation of the Company's short-term cash requirements
and  liquidity  resources,  management  anticipates  that  the  pressure  on the
Company's  cash  flows  will  not  be substantial for the next twelve months. In
addition, the projected progress payment related to the sale of equipment to the
theme parks in Wuhu and Shantou, respectively, should provide a stable source of
working  capital  for the Company during the remainder of 2006 and through 2007.

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

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to  make certain estimates and assumptions that affect the
reported  amounts  of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the respective reporting period.  Actual results
could  differ  from  those  estimates.  Significant estimates made by management
are,  among  others,  those related to costs and estimated earnings in excess of
billings  on  uncompleted  contracts,  billings in excess of costs and estimated
earnings  on  uncompleted  contracts,  and  the allowance for doubtful accounts.
Actual  results  could  differ  from  those  estimates.


                                        9
<PAGE>
FOREIGN  CURRENCY  TRANSLATION - All of the Company's production and most of its
business  operations are located in China and are conducted in Renminbi ("RMB"),
which  is  the  official  currency  of China. The Company's Chinese subsidiaries
maintain  their financial records and the statutory financial statements in RMB.
Revenue and expenditures denominated in currencies other than RMB are translated
into RMB at the prevailing exchange rate when recognized and recorded in the PRC
financial  records.  Monetary  assets  and  liabilities  denominated  in  other
currencies  are  also  translated  into and recorded in RMB at the balance sheet
date.  Any transaction gain or loss is charged to the statement of operations of
the  PRC  subsidiaries in the period in which such gain or loss occurs.  The PRC
accounts  denominated  in  RMB  are  then  translated  into United States Dollar
("USD"),  the  reporting  currency  of  the  Company,  using  the  exchange rate
prevailing at the balance sheet date for consolidation and presentation.

On  July  21,  2005,  the  People's Bank of China ("PBC") announced that the RMB
would  no  longer  be tied directly to the USD but against a 'basket' of foreign
currencies  under  a managed floating exchange rate regime, and the new official
parity  exchange rate of USD to RMB was set at USD 1.00 to RMB 8.11 (previously,
USD1.00  to  RMB  8.3),  to  be  allowed to float within a band of +-0.3 percent
around  the  central  parity  rate  as  published  by the PBC daily. The Company
recorded  and  adjusted  its  exchange  rate  applicable  to  the translation of
financial  information  in  accordance  with  the  announced  change  as  of the
effective  date.  Accordingly,  as  of September 30, 2006, the Chinese financial
statements  were translated from RMB to USD at the new prevailing exchange rate.
For  assets  and  liabilities  (other than equity and reserves) translation, the
published  closing  exchange rate of USD 1.00 to RMB 7.97 was applied, while for
revenues,  expenses,  gains and losses, the weighted average rate of USD 1.00 to
RMB  8.00  was  used  for translation. The resulting translation gains or losses
were  recorded  as  a  separate  component  of  stockholders'  equity.

This  quotation  of the exchange rates does not imply free convertibility of RMB
to USD. All foreign exchange transactions in China 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 PBC. Approval of foreign currency
payments  by  the  Foreign  Exchange  Management  Bureau  or  other institutions
requires  submitting  a  payment  application  together  with invoices, shipping
documents,  signed  contracts  and  other  relevant  documentation.

The Company's other subsidiaries in the United States of America and the British
Virgin  Islands  ("BVI") adopted USD as their functional currency.  Transactions
denominated  in  currencies  other  than  the  functional  currency  of  these
subsidiaries  are  converted  into  their  functional currency at the prevailing
exchange  rates  at  the  date  of  transaction  or  settlement.

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  (see  Note  9).

CHANGE  IN METHOD OF ACCOUNTING FOR INVENTORY VALUATION FOR LOW VALUE ITEMS - On
January  1,  2006,  the  Company elected to change its accounting method for low
value  inventory/stock  (i.e.  small parts, bolt and nut and consumables) to the
weighted  average  method.  In  all  prior years, inventory was valued using the
first-in, first-out ("FIFO") method.  The new method of accounting for low value
inventory/stock  was  adopted  to  enhance  operating  efficiency  and  resource
utilization.  The numerous categories of low value items only constitute a small
portion  of  the  overall product costs. Management believes that maintenance of
such  low  value  inventory  with  the  FIFO  method reduced warehouse operating
efficiency  as  well  as  resource utilization in relation to inventory control.


                                       10
<PAGE>
In  addition, based on the fast inventory turnover and stable unit price of such
low  value  inventory,  the  difference  between  the  two  methods would not be
material. Therefore, the new accounting method of weighted average is preferable
to  the  FIFO  method  in  relation  to  low  value  inventory.

Based  on  the estimated average price change within different categories of low
value stock, the adoption of the accounting principle would have reduced the net
income for the year ended December 31, 2005 by $4,293 or 0.35%, while increasing
the  net loss by $569 or 0.30% and $1,464 or 0.18% for the three months and nine
months  ended  September 30, 2005, respectively.  The effect of adopting the new
accounting  principle  would have reduced the inventory and retained earnings as
of December 31, 2005 by $4,293.  Statement of Financial Accounting Standards No.
154, Accounting Changes and Error Corrections - A Replacement of APB Opinion No.
20 and FASB Statement No. 3 ("SFAS No. 154") demands a retrospective application
of  changes  in accounting principles. However, because the impact of the change
in  accounting  principle on the financial statements is immaterial as described
above,  the  Company  has  not  taken  this  action.

The  new  accounting  principle,  affecting only low value stock, was adopted by
management  and  approved  by  the  Audit  Committee.


RECENT  ACCOUNTING  PRONOUNCEMENTS
----------------------------------

In  September  2006,  the  Securities  and  Exchange  Commission  issued  Staff
Accounting  Bulletin  No. 108 ("SAB No. 108"), "Considering the Effects of Prior
Year  Misstatements  when  Quantifying  Current Year Misstatements". SAB No. 108
requires  analysis  of  misstatements  using both an income statement (rollover)
approach  and  a  balance sheet (iron curtain) approach in assessing materiality
and provides for a one-time cumulative effect transition adjustment. SAB No. 108
is  effective  for  the  fiscal year beginning November 15, 2006. The Company is
reviewing  SAB  No. 108 to determine what effect, if any, its adoption will have
on  the  Company's  financial  statement  presentation  and  disclosures.

In  September  2006,  the  Financial  Accounting Standards Board ("FASB") issued
Statement  of  Financial  Accounting Standards No. 157 ("SFAS 157"), "Fair Value
Measurements",  which is effective for fiscal years beginning after November 15,
2007  and  for  interim periods within those years. SFAS 157 defines fair value,
establishes  a  framework  for  measuring  fair  value  in  generally  accepted
accounting  principles  (GAAP),  and  expands  disclosures  about  fair  value
measurements. The Company is reviewing SFAS No. 157 to determine what effect, if
any,  its  adoption  will have on the Company's financial statement presentation
and  disclosures.

In  September  2006, FASB issued Statement of Financial Accounting Standards No.
158  ("SFAS  158"), "Employers' Accounting for Defined Benefit Pension and Other
Postretirement  Plans  -  an  amendment  of FASB Statements No. 87, 88, 106, and
132(R)",  which is effective for fiscal years beginning after December 15, 2006.
SFAS  158 requires an employer to recognize the overfunded or underfunded status
of a defined benefit postretirement plan (other than a multiemployer plan) as an
asset  or  liability  in  its  statement  of financial position and to recognize
changes  in  that  funded  status in the year in which the changes occur through
comprehensive  income of a business entity or changes in unrestricted net assets
of  a not-for-profit organization. SFAS 158 also requires an employer to measure
the  funded  status  of  a  plan  as  of  the  date of its year-end statement of
financial  position,  with limited exceptions. The Company is reviewing SFAS No.
158  to  determine  what effect, if any, its adoption will have on the Company's
financial  statement  presentation  and  disclosures.


3.   DEPOSIT AT AN AFFILIATE'S FINANCIAL CLEARING CENTER


                                       11
<PAGE>
Cash  on  deposit  at  the  financial  clearing  center  ("FCC")  operated by an
affiliate  as  at  September  30,  2006  and  December 31, 2005 is summarized as
follows:

<TABLE>
<CAPTION>
                                         September 30, 2006    December 31, 2005
                                            (Unaudited)            (Audited)
                                        --------------------  -------------------
<S>                                     <C>                   <C>
Financial clearing center operated by:
  Shenzhen Huaqiang Holdings Limited    $                161  $           321,728
                                        ====================  ===================
</TABLE>

The  Company's  Chinese subsidiaries are members of the FCC operated by Shenzhen
Huaqiang Technology Co., Ltd. ("SHT"), a significant shareholder (35.53%) of the
Company,  and  SHQ.  As  described  below, the role of each of SHT and SHQ is to
primarily  coordinate  the financial arrangement of its members via the FCC. The
Company  has  cash  on  deposit  at  the  FCC.

A FCC resembles an internal bank which accepts deposits from and grants loans to
its  members at the prevailing market rate of interest. A FCC also obtains loans
from  external  commercial  banks  and  then in turn sub-lends to its members in
order  to  meet  their  working  capital  requirements  with  less  complicated
application  procedures and no attendant financial charges. The cash deposits at
the  FCC  can  be  withdrawn  any time without any restrictions, except that the
respective  FCC can collect directly from the Company's account any overdue loan
principal  and  accrued  interest  in  case  the  Company  is  in default in its
repayment  obligations.


4.  INVENTORIES

Inventories  at  September  30,  2006  and  December  31, 2005 are summarized as
follows:

<TABLE>
<CAPTION>
                       September 30, 2006    December 31, 2005
                          (Unaudited)            (Audited)
                      --------------------  -------------------
<S>                   <C>                   <C>
     Raw Materials    $          1,492,695  $         1,766,203
     Work-in-process             3,066,594            1,140,725
     Finished Goods                117,760              130,159
                      --------------------  -------------------
                      $          4,677,049  $         3,037,087
                      ====================  ===================
</TABLE>


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

Costs  and  estimated earnings in excess of billings on uncompleted contracts as
of  September  30,  2006  and  December  31,  2005  are  summarized  as follows:

<TABLE>
<CAPTION>
                                                     September 30, 2006    December 31, 2005
                                                        (Unaudited)            (Audited)
                                                    --------------------  -------------------
<S>                                                 <C>                   <C>
Cumulative costs incurred on uncompleted contracts  $        14,726,750   $       12,127,482

Cumulative estimated earnings to date                         3,601,801            2,808,758
                                                    --------------------  -------------------
                                                             18,328,551           14,936,240

Less: Billings to date                                      (17,688,340)         (14,821,818)
                                                    --------------------  -------------------
                                                    $           640,211   $          114,422
                                                    ====================  ===================
</TABLE>


                                       12
<PAGE>
Included in the accompanying balance sheets under the following captions are the
following:

<TABLE>
<CAPTION>
                                            September 30, 2006    December 31, 2005
                                               (Unaudited)            (Audited)
                                           --------------------  -------------------
<S>                                        <C>                   <C>
Costs and estimated earnings in excess
  of billings on uncompleted contracts     $           924,830   $          722,526
Billings in excess of costs and estimated
  earnings on uncompleted contracts                   (284,619)            (608,104)
                                           --------------------  -------------------
                                           $           640,211   $          114,422
                                           ====================  ===================
</TABLE>


6.   PROPERTY, PLANT AND EQUIPMENT

Property,  plant,  and  equipment as at September 30, 2006 and December 31, 2005
consisted  of  the  following:

<TABLE>
<CAPTION>
                                              September 30, 2006    December 31, 2005
                                                 (Unaudited)            (Audited)
                                             --------------------  -------------------
<S>                                          <C>                   <C>
Leasehold improvements                       $           471,295   $          441,465
Plant and machinery                                      575,561              528,648
Furniture and fixtures                                   113,022              110,829
Equipment for revenue sharing operations              14,912,602            6,330,547
Computers and equipment                                1,105,851            1,059,747
Motor vehicles                                           361,650              285,462
                                             --------------------  -------------------
                                                      17,539,981            8,756,698
Less: Accumulated depreciation and
amortization (net of write off on disposal)           (3,391,010)          (2,094,829)
                                             --------------------  -------------------
                                             $        14,148,971   $        6,661,869
                                             ====================  ===================
</TABLE>

Depreciation  expense  was  $516,676  and  $247,321  for  the three months ended
September  30,  2006 and 2005, respectively, and $1,315,096 and $752,366 for the
nine  months  ended  September  30,  2006  and  2005,  respectively.


7.   INTEREST IN AN ASSOCIATED COMPANY

The  investment  consists  of  the Company's 50% equity interest in Tianjin LFK,
which  is  held  by  FDI  (a  40%  owned but effectively controlled subsidiary).
Tianjin  LFK  was  established  in  November  2005 to manage the Tianjin FunPlex
entertainment  center  which  commenced  its  formal operation in February 2006.
Although  Tianjin  LFK  is  budgeted  to operate at a break-even level annually,
actual profitability, especially on an interim basis and at the initial stage of
operation  in particular, is subject to substantial variability. The Company has
no  contractual  obligation  for  any  losses  incurred  by  Tianjin  LFK.

The  unaudited  condensed  statements of operations of Tianjin LFK for the three
months and nine months ended September 30, 2006 are as follows:

<TABLE>
<CAPTION>
                                                      Three months ended    Nine months ended
                                                      September 30, 2006    September 30, 2006
                                                      -------------------  --------------------
<S>                                                   <C>                  <C>
Net sales                                             $           141,919  $           458,563
                                                      ===================  ====================
Net income (loss)                                     $           238,825  $           (61,654)
                                                      ===================  ====================
The Company's share of net loss                       $                 -  $           (18,657)
                                                      ===================  ====================
Income (loss) in excess of investment (unrecognized)  $           119,413  $           (12,170)
                                                      ===================  ====================
</TABLE>


                                       13
<PAGE>
Reconciliation of the investment in Tianjin LFK is as follow:

<TABLE>
<CAPTION>
                                                 Interest in an
                                               associated company
                                              --------------------
<S>                                           <C>
                                              $            18,587
As at January 1, 2006                                          70
Effect of exchange rate change on investment              (18,657)
                                              --------------------
Equity in loss of an assoicated company       $                 -
                                              ====================
</TABLE>

Based  on  the  agreement  with  Longqiao  PDL, the local venture partner of the
Tianjin  FunPlex, revenue income from the FunPlex will be shared equally between
the  Company  and  Longqiao PDL net of the rental and administrative expenses of
the  FunPlex. For the three months and nine months ended September 30, 2006, the
Company  recorded no income from the Tianjin FunPlex due to the loss incurred by
Tianjin  LFK.


8.   STOCK BASED COMPENSATION

On  January  7,  2004, the Company granted a total of 2,000,000 stock options to
its  key  employees  to  purchase common stock at an exercise price of $1.00 per
share.  Market  price  of the Company's common stock at the grant date was $0.80
per share. The stock options vest and are exercisable as follows:

<TABLE>
<CAPTION>
     Scale   Vested and exercisable
     ------  ----------------------
<S>          <C>
       50%   On or after January 7, 2007
       80%   On or after January 7, 2008
      100%   On or after January 7, 2009
</TABLE>

All  unexercised  options  will  expire on January 6, 2014 and are cancelled one
month  after  termination  of  employment.

Prior  to  October  10, 2005, the Company followed SFAS No. 123, which defined a
fair-value  method  of  accounting  for  stock  based  employee compensation and
transaction  in  which  an entity issued its equity instruments to acquire goods
and services from non-employee. The provisions of SFAS No. 123 allowed 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 income (loss) per common share of the estimated fair market value of
stock  options  issued  to  employees.  Accordingly, compensation cost for stock
options to employees is 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.

In  accordance  with SFAS No. 123, the cost of stock options and warrants issued
to  non-employees  was measured at the grant date based on the fair value of the
award.  The fair value of the stock-based award at the grant date was determined
using  the  Black-Scholes option-pricing model. The resulting amount was charged
to  expense  on  the  straight-line  basis  over the period in which the Company
expected to receive benefit, which was generally the vesting period.

Pro  forma  Disclosure  - The fair value of stock options granted by the Company
has  been  estimated  on


                                       14
<PAGE>
the  grant  date  using  the  Black-Scholes option-pricing model. Had such stock
options been accounted for pursuant to SFAS No. 123, the effect on the Company's
results  of  operations and earnings per common share would have been as follow:

<TABLE>
<CAPTION>
                                       (Unaudited)         (Unaudited)
                                    Three months ended   Nine months ended
                                      September 30         September 30
                                    ------------------  -------------------
                                      2006     2005       2006      2005
                                    ------------------  -------------------
<S>                                 <C>      <C>        <C>       <C>
Net income (loss)
  As reported                       $50,205  (192,616)  $109,830  (791,847)
  Compensation expense for stock
  options based on fair value,
  net of taxes                            -   (69,047)         -  (207,140)
                                    ------------------  -------------------
  Pro forma net income (loss)       $50,205  (261,663)  $109,830  (998,987)
                                    ------------------  -------------------
Net income (loss) per share
  As reported - Basic and diluted   $  0.00     (0.01)  $   0.00     (0.03)
                                    ------------------  -------------------

  Pro forma - Basic and diluted     $  0.00     (0.01)  $   0.00     (0.03)
                                    ------------------  -------------------
</TABLE>

Effective  October  10,  2005, the Board of Directors of the Company resolved to
cancel  all  of  the  issued and outstanding stock options which were previously
granted  to  the  Company's  key  employees.  In October 2005, all of the option
holders  entered  into  Option  Surrender  and  Cancellation Agreements with the
Company  and agreed to surrender unconditionally and irrevocably the options for
cancellation with no additional monetary compensation from the Company.


9.   EARNINGS PER SHARE

On  January  7,  2004,  the  Company granted stock options to purchase 2,000,000
shares  common  stock to certain officers and key employees of the Company at an
exercise  price  of $1.00 per share. Effective from October 10, 2005, all of the
Company's outstanding options were cancelled. As at September 30, 2006 and 2005,
there  were  0 and 2,000,000 stock options issued and outstanding, respectively.

These  stock  options were not considered to be potentially dilutive securities,
and  were not included in the calculation of loss per share for the three months
and  nine  months  ended  September 30, 2005 because the Company incurred losses
during  the  period  and  thus their effect would have been anti-dilutive. As no
option  is  outstanding  as  of September 30, 2006, basic and diluted EPS is the
same  for  all  periods  presented.


10.  IMPAIRMENT OF INTANGIBLE ASSETS

During  the  nine  months  ended  September  30,  2005,  in  view of the reduced
business  activities  of  Hytech US, including the fact that there were no sales
contracts secured in 2004 and 2005, the Company conducted a re-evaluation of the
intangible assets associated with the trademarks registered by Hytech US and the
related  expected future cash flows. As a result of this evaluation, the Company
recorded  a  full provision for impairment of $170,950 for the nine months ended
September  30,  2005.  In  2006,  no  impairment  of  intangible assets has been
recorded.


11.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

(a)  Agreement with associated company
     ---------------------------------

On  June  1, 2004, SDCL and FDI entered into an Agreement pursuant to which SDCL
engaged  FDI,  its


                                       15
<PAGE>
controlled  associated  company,  as  its  sales  agent  for  the  marketing and
distribution  of  its  amusement  and simulation equipment and 3D/4D theatres 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 commissions and incentives will be
reflected in the ex-factory price (reduced selling price) and transferred to FDI
through  its  purchase  from  SDCL  of  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  provides  that FDI may include in its sales
contracts  a  provision  for  the cooperative operation of any hi-tech amusement
center  "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 the revenue sharing operations, which will be solely the
business of SDCL and SDCL will be responsible for contributing the equipment and
fixed  assets required for the cooperative operation. All revenues generating by
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 practice, the advertising and promotional incentives and commissions are paid
to  FDI  through  a  price reduction. SDCL reduces the sales price to FDI by the
amount  of the agreed percentage of incentives and commissions, which represents
a reduction in the revenue of SDCL. FDI can capture such portion of revenue from
its  onward  sales  to  the  ultimate  customers.  In  this  regard, the revenue
recognized  by  SDCL  is  in  compliance  with  EITF  No.  01-9, "Accounting for
Consideration  Given  by  a  Vendor  to  a Customer (Including a Reseller of the
Vendor's  Products)".

When FDI receives the commissions and incentives, which are reflected as reduced
costs  of  sales  for  FDI,  the income is included in FDI's gross profit, which
supports  FDI's  selling,  administrative  and  other  operating  functions.  No
further  incentives  are  passed  on  to  the  ultimate  customers  from  FDI.

The  revenue recognized by SDCL and the reduced costs of sales for FDI, however,
are  eliminated  in  preparing  the  consolidated  financial  statements  of the
Company.  Accordingly, the commission and incentive received by FDI are included
in  the  consolidated  gross  profit  only.

During  the  three months and nine months ended September 30, 2006, SDCL did not
record  any  sale of its products to FDI for resale to end customers. During the
three  months  and nine months ended September 30, 2005, total sales to FDI were
$1,263,469 and $1,559,520, respectively. During the three months and nine months
ended  September  30,  2006,  FDI  collected  for  SDCL  a  total of $44,039 and
$159,933,  respectively,  of  the  net  revenue  shared from the revenue sharing
centers  operated  for  SDCL.  During  the  three  months  and nine months ended
September  30,  2005,  FDI  collected  for SDCL a total of $52,179 and $201,507,
respectively.

(b)  Contracts with related party
     ----------------------------

On  January  24,  2006,  SDCL entered into an Equipment Sale Contract (the "Sale
Contract")  and an Equipment Installation Contract (the "Installation Contract")
with  Wuhu Huaqiang Tour City Development Co., Ltd. ("Wuhu Huaqiang").  Pursuant
to the Sale Contract, Wuhu Huaqiang will purchase from SDCL 22 sets of amusement
attractions/equipment  (the  "Equipment") for use in a specific theme park to be
built  in  the  City  of Wuhu, Anhui Province, China.  The consideration for the
Equipment  is  RMB  126,730,000  (approximately $15,650,000) (the "Sale Price"),
plus a right to receive 8% of the theme park's Distributable Income for a period
of  15 years from commencement of theme park operations.  "Distributable Income"
means  the  theme  park's  Gross  Revenue,  less  certain  limited


                                       16
<PAGE>
expenses  (including  sales  tax  and the purchase cost of souvenirs, beverages,
foods  and other commodities sold in the theme park).  Wuhu Huaqiang has made an
initial  deposit  of approximately 6% of the Sale Price (approximately $938,000)
within one month of the effective date of the Sale Contract.  The balance of the
Sale  Price  is payable in five separate installments to be made through May 30,
2007.  Under the Sale Contract, Wuhu Huaqiang has guaranteed that the 8% revenue
share  from  the theme park's aggregate Distributable Income during such 15-year
period  shall in no case be less than RMB 50,000,000 (approximately $6,170,000).

The  Installation Contract provides for the installation of the Equipment at the
theme  park  by  SDCL.  Total  consideration for the installation service is RMB
10,000,000  (approximately  $1,230,000)  payable  in  five  equal  installments
beginning one month after the signing of the Installation Contract and ending 10
days  after  completion  of the installation services. The installation services
are  scheduled  to  be  completed  by  July  18,  2007.

Management  believes  that  these  arrangements  with  Wuhu  Huaqiang  will  be
advantageous  to  the Company and that its participation in the large-size theme
park  business  will  enhance  its  reputation  in  the  industry with a minimum
investment.  Both the Sale and Installation Contracts were reviewed and approved
by  the  Company's  Audit  Committee  and  Board  of  Directors.

Wuhu  Huaqiang  is  a joint venture company incorporated in the City of Wuhu and
controlled  75%  by  SHQ,  a  related  party  of  the  Company. The Chairman and
President  of  SHQ  are  also the Chairman and CEO of the Company, respectively.
The  Chairman  and  CEO  did  not  participated  in  the discussion regarding or
eventual  Board approval of the Sale and Installation Contracts. The CEO and the
Chief  Operating  Officer  ("COO")  of  the  Company  are also directors of Wuhu
Huaqiang.

(c)  Purchases of digital films and related components
     -------------------------------------------------

During  the  three  months and nine months ended September 30, 2006, the Company
purchased  certain  components  for its products from Hyvision Digital Film Inc.
("Hyvision"),  an  affiliate  of  SHQ,  having  a  total  value  of $872,408 and
$1,559,829,  respectively.  During  the  three  months  and  nine  months  ended
September  30,  2005,  total purchases from Hyvision were $360,269 and $769,807,
respectively. The CEO and the COO of the Company are also directors of Hyvision.
SHT,  a  significant  shareholder  of  the Company, has a 20% equity interest in
Hyvision.

(d)  Sales  to  related  parties
     ---------------------------

During  the  three  months and nine months ended September 30, 2006, the Company
sold  equipment  to Hytechnology Limited ("Hytech HK") for an aggregate price of
$655,000  and $663,750, respectively, and $770 and $100,770 for the three months
and  nine  months  ended  September  30,  2005,  respectively.  Hytech  HK  is
beneficially owned by Top Link Development Limited ("TLD"), a company controlled
by  SHQ.

(e)  Related  party  receivables  and  payables
     ------------------------------------------


                                       17
<PAGE>
As  at  September  30,  2006  and  December  31,  2005,  the amounts payable and
receivable  from  related  parties  are  summarized  as  follows:

<TABLE>
<CAPTION>
                                  September 30, 2006    December 31, 2005
                                     (Unaudited)            (Audited)
                                 --------------------  -------------------
<S>                              <C>                   <C>
Amounts due from:
-----------------
Hytech HK (1)                    $           348,997   $          159,988
Shenzhen Huaqiang Industrial
  and Trading Co. Ltd. (2)                     7,886                7,791
Chunren Xie (3)                                1,500                1,500
Director (4)                                  23,007               24,442
SHQ (5)                                          251                    -
Wuhu Huaqiang (6)                             12,146                    -
                                 --------------------  -------------------
                                 $           393,787   $          193,721
                                 ====================  ===================

Amounts due to:
---------------
Hytech HK (1)                    $          (156,981)  $         (141,506)
TLD (7)                                      (50,000)            (280,000)
Dehou Fang (7)                               (20,000)             (20,000)
Bilibest Industries Limited (8)             (435,947)             336,843
Wuhu Huaqiang (6)                         (1,204,064)                   -
Hyvision (9)                                (526,778)                   -
                                 --------------------  -------------------
                                 $        (2,393,770)  $         (778,349)
                                 ====================  ===================
</TABLE>

(1)  The amount  due  to  Hytech HK represents the payment made on behalf of the
     Company in respect of its administrative expenses incurred outside the PRC.
     These amounts are unsecured, non-interest bearing and have no definite term
     of repayment. The amount due from Hytech HK represents the trade receivable
     arising  from  the  sales  of  the  Company's  products.

(2)  Shenzhen  Huaqiang Industrial and Trading Co., Ltd. ("HIT") is an affiliate
     of  SHQ.  This amount represents a payment made by the Company on behalf of
     HIT  in connection with one of the revenue sharing operations that has been
     closed.  The  amount is unsecured, non-interest bearing and has no definite
     term  of  repayment.

(3)  Chunren Xie is a 30% minority shareholder of Hytech US.

(4)  Amount  due  from  director represent cash advances made for business trips
     and  trade  fairs.

(5)  The amount  due  from  SHQ represents the prepayment made by the Company in
     respect  of  the  maintenance  fees  for  computer  networks.

(6)  The amount  due  to  Wuhu  Huaqiang was the deposits paid to the Company in
     respect  of  the  Sale  Contract and Installation Contract as stated in (b)
     above.  The amount due from Wuhu Huaqiang represents the balance of advance
     payment  made  by  the  Company  related  to  a  study  tour on theme parks
     organized  for  the  senior  management  of  Wuhu  Huaqiang, as well as the
     payment made by the Company on behalf of Wuhu Huaqiang related to the IAAPA
     exhibition  in  Shanghai.

(7)  The amounts  due  to TLD and Mr. Dehou Fang represent the amounts loaned to
     Intsys  in  2002  for the acquisition of Hytech US and other administrative
     expenses  of  the Company. TLD is controlled by SHQ and Mr. Dehou Fang is a
     director  of  Intsys. During the three months ended September 30, 2006, the
     Company  repaid  $230,000  to  TLD.  The  remaining  related  party  loans
     aggregating  $70,000  are  unsecured,  non-interest  bearing  and  have  no
     definite  term  of  repayment.

(8)  The  amount  due  to  Bilibest  Industries  Limited,  an  affiliate of SHQ,
     represents  payments  made  on  behalf  of  the  Company  for  certain
     administrative  expenses  incurred  outside  China.  These  amounts  are
     unsecured,  non-interest  bearing  and  have no definite term of repayment.


                                       18
<PAGE>
(9)  The amount  due  to Hyvision represents the amount payable for the purchase
     of  digital  film  products  and  other  components  from  Hyvision.

(f)  Deposit at financial clearing center operated by an affiliate - See Note 3.
     -------------------------------------------------------------


12.   SEGMENT  REPORTING

The  following segment information is presented 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 segment information is based on
the  management  approach  adopted  in  the Company's internal reporting and the
reported  revenue  and  operating  income for the measured segments are based on
information  provided  to  the  chief  operating  decision maker for performance
review  and  resources  allocation.

Management  of  the  Company monitors the performance of the operations in three
segments  with  respect to the nature of revenue generated from the sales of its
products  and  services,  which  are  divided  into  three main categories:  (1)
contract  sales  of equipment or facilities used in hi-tech amusement centers or
theme  parks, 3D/4D theaters and the related products; (2) contracts in relation
to  the  design of 4D theater, amusement center, large-size attraction and theme
park  -  newly  developed  business in 2005; and (3) revenue sharing operations.
During the three months and nine months ended September 30, 2006 and 2005, there
was  no  revenue  recorded  from  segment  in  relation  to the design services.

Each  segment involves different marketing strategies and business techniques as
well  as  different resource allocation.  The Company's chief operating decision
maker  evaluates  performance  based  on EBIT (earnings or loss before interest,
taxes,  impairment  losses,  and  minority  interests).  The segments related to
contracted  sales,  design  and revenue sharing operations are assessed based on
the  net income after deducting the relevant direct costs of sales, depreciation
expenses,  selling,  administrative  and  management  costs.  Other  corporate
expenses  consist  of  general  administrative  expenses  that  are not directly
related  to  the  operations  of  this  segment  are  classified  as  corporate
administrative  and  other  expenses.


                                       19
<PAGE>
The following tables summarize revenues and EBIT by segment for the three months
and  nine  months  ended  September  30,  2006  and  2005.

<TABLE>
<CAPTION>
                                            Three months ended September 30, 2006 (Unaudited)
                                           ---------------------------------------------------
                                                                        Revenue
                                            Contracted     Design       Sharing
                                              Sales       Services    Operations      Total
                                           ------------  -----------  -----------  -----------
<S>                                        <C>           <C>          <C>          <C>
REVENUE                                    $   989,304   $         -  $ 1,372,343  $ 2,361,647
                                           ------------  -----------  -----------  -----------

Direct costs of production                     682,042             -      282,657      964,699
Salaries, wages and
  related personnel expenses                    82,423             -      130,862      213,285
Selling and marketing expenses                 111,601             -      263,297      374,898
Depreciation expenses                            2,997             -      442,152      445,149
                                           ------------  -----------  -----------  -----------
  Total Operating Expenses                     879,063             -    1,118,968    1,998,031
                                           ------------  -----------  -----------  -----------

INCOME FROM OPERATIONS                         110,241             -      253,375      363,616

Corporate administrative
  and other expenses                                 -             -            -      369,744
                                           ------------  -----------  -----------  -----------

EBIT                                                                                   (6,128)

Reconciliation of EBIT to net income:
  Minority interests                                                                 (111,360)
  Interest expenses, net                                                               32,713
  Income tax expenses                                                                  22,314
  Equity in loss of an associated company                                                   -
                                                                                  ------------

NET INCOME                                                                        $    50,205
                                                                                  ============
</TABLE>

<TABLE>
<CAPTION>
                                             Nine months ended September 30, 2006 (Unaudited)
                                           ---------------------------------------------------
                                                                        Revenue
                                            Contracted     Design       Sharing
                                              Sales       Services    Operations      Total
                                           ------------  -----------  -----------  -----------
<S>                                        <C>           <C>          <C>          <C>
REVENUE                                      2,976,711   $         -  $ 2,863,391  $ 5,840,102
                                           ------------  -----------  -----------  -----------

Direct costs of production                   2,033,427             -      497,867    2,531,294
Salaries, wages and
  related personnel expenses                   286,466             -      295,348      581,814
Selling and marketing expenses                 318,697             -      456,406      775,103
Depreciation expenses                           11,350             -    1,118,028    1,129,378
                                           ------------  -----------  -----------  -----------
  Total Operating Expenses                   2,649,940             -    2,367,649    5,017,589
                                           ------------  -----------  -----------  -----------

INCOME FROM OPERATIONS                         326,771             -      495,742      822,513

Corporate administrative
  and other expenses                                 -             -            -      858,227
                                           ------------  -----------  -----------  -----------

EBIT                                                                                  (35,714)

Reconciliation of EBIT to net income:
  Minority interests                                                                 (318,037)
  Interest expenses, net                                                               97,945
  Income tax expenses                                                                  55,891
  Equity in loss of an associated company                                              18,657
                                                                                  ------------

NET INCOME                                                                        $   109,830
                                                                                  ============
</TABLE>

<TABLE>
<CAPTION>
                                      Three months ended September 30, 2005 (Unaudited)
                                     ---------------------------------------------------
                                                                  Revenue
                                      Contracted     Design       Sharing
                                        Sales       Services    Operations      Total
                                     ------------  -----------  -----------  -----------
<S>                                  <C>           <C>          <C>          <C>
REVENUE                              $ 1,836,988   $         -  $   220,996  $ 2,057,984
                                     ------------  -----------  -----------  -----------

Direct costs of production               837,796             -            -      837,796
Salaries, wages and                      481,885             -       19,017      500,902
  related personnel expenses
Selling and marketing expenses           223,912             -       19,621      243,533
Depreciation expenses                     74,031             -      163,534      237,565
                                     ------------  -----------  -----------  -----------
  Total Operating Expenses             1,617,624             -      202,172    1,819,796
                                     ------------  -----------  -----------  -----------

INCOME FROM OPERATIONS                   219,364             -       18,824      238,188

Corporate administrative
  and other expenses                           -             -            -      338,168
                                     ------------  -----------  -----------  -----------

EBIT                                                                            (99,980)

Reconciliation of EBIT to net loss:
  Minority interests                                                             51,930
  Interest expenses, net                                                         39,876
  Income tax expenses                                                               830
  Impairment on trademarks                                                            -
                                                                            ------------

NET LOSS                                                                    $  (192,616)
                                                                            ============
</TABLE>

<TABLE>
<CAPTION>
                                       Nine months ended September 30, 2005 (Unaudited)
                                     ---------------------------------------------------
                                                                  Revenue
                                      Contracted     Design       Sharing
                                        Sales       Services    Operations      Total
                                     ------------  -----------  -----------  -----------
<S>                                  <C>           <C>          <C>          <C>
REVENUE                                4,560,207   $         -  $   679,938  $ 5,240,145
                                     ------------  -----------  -----------  -----------

Direct costs of production             1,804,364             -            -    1,804,364
Salaries, wages and                    1,458,801             -       54,800    1,513,601
  related personnel expenses
Selling and marketing expenses           469,275             -       64,547      533,822
Depreciation expenses                    206,497             -      524,625      731,122
                                     ------------  -----------  -----------  -----------
  Total Operating Expenses             3,938,937             -      643,972    4,582,909
                                     ------------  -----------  -----------  -----------

INCOME FROM OPERATIONS                   621,270             -       35,966      657,236

Corporate administrative
  and other expenses                           -             -            -    1,191,669
                                     ------------  -----------  -----------  -----------

EBIT                                                                           (534,433)

Reconciliation of EBIT to net loss:
  Minority interests                                                           (16,337)
  Interest expenses, net                                                       101,938
  Income tax expenses                                                              863
  Impairment on trademarks                                                     170,950
                                                                           ------------

NET LOSS                                                                   $  (791,847)
                                                                           ============
</TABLE>


                                       20
<PAGE>
The  following  table reconciles each reporting segment's assets to total assets
reported  on  the Company's consolidated balance sheets as of September 30, 2006
and  December  31,  2005,  respectively.

<TABLE>
<CAPTION>
                             September 30, 2006    December 31, 2005
                                (Unaudited)            (Audited)
                            --------------------  -------------------
<S>                         <C>                   <C>
Contracted sales            $          3,669,319  $         3,299,046
Revenue sharing operations            13,176,926            5,631,597
Shared assets *                        6,707,182           10,766,981
                            --------------------  -------------------
Total Assets                $         23,553,427  $        19,697,624
                            ====================  ===================
</TABLE>

* Shared assets represent assets that provide benefit to all of the Company's
  operating  segments.

  Shared assets are not allocated to operating segments for internal reporting
  or decision-making purposes.

There  were  no  intersegment  revenues  generated for the three months and nine
months  ended  September  30,  2006  and  2005,  respectively.

Over  90%  of  the Company's revenues are derived from its operations in the PRC
and  over  90%  of  the  Company's  assets  are  located  in  the  PRC.


13.  MINORITY INTERESTS

As  of  September  30,  2006,  the  Company's  minority  interest  balance  was
$4,146,903.  It  was  comprised of the minority shares of effectively controlled
subsidiaries,  including  FDI,  Chongqing  FTC and Hytech US. As of December 31,
2005,  the  minority interest balance was $4,289,988, which was comprised of the
minority  shares  of FDI, Chongqing FTC and Hytech US, which the Company did not
own.  As of September 30, 2006, the Company owned a 70% interest in Hytech US, a
94% interest in Chongqing FTC and a 40% interest in FDI.

For  the  three  months  and  nine  months ended September 30, 2006, the Company
recorded  the  minority  interests  share  of  loss  of  $111,360  and $318,037,
respectively,  as  compared to the minority interests share of income of $51,930
and  loss  of  $16,337  for the three months and nine months ended September 30,
2005,  respectively.


14.  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 operating leases in effect as of
September  30,  2006:

<TABLE>
<CAPTION>
                                            Total
                                         ----------
<S>                                      <C>
     September 30, 2007                  $  313,869
     September 30, 2008                     222,034
     September 30, 2009                     217,854
     September 30, 2010                     185,848
     September 30, 2011                     176,508
     Thereafter till September 30, 2018   1,191,430
                                         ----------
     Minimum lease payment               $2,307,543
                                         ==========
</TABLE>

Capital  expenditures

At  September  30,  2006  and  December  31, 2005, the Company's commitments for
capital expenditures were approximately $1,756,000 and $6,200,000, respectively.
This  commitment  relates  to costs to acquire machinery and equipment which are
used  in  the  Company's  revenue  sharing  operations.


                                       21
<PAGE>
Legal  proceedings

The  Company  is  periodically  subject  to various pending and threatened legal
actions  which arise in the normal course of business.  The Company's management
believes that the impact of any such current litigation will not have a material
adverse  impact  on  the  Company's financial position or results of operations.


                                       22
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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

This  Quarterly  Report  on Form 10-QSB for the quarterly period ended September
30, 2006 contains "forward-looking" statements within the meaning of Section 27A
of  the  Securities  Act  of 1933, as amended, and Section 21E of the Securities
Exchange  Act  of  1934, as amended, including statements that include the words
"believes",  "expects",  "anticipates",  "intends",  "plans",  "may",  "will" or
similar  expressions  that  are intended to identify forward-looking statements.
In  addition,  any  statements  that refer to expectations, projections or other
characterizations  of  future  events or circumstances, including any underlying
assumptions,  are  forward-looking statements.  These forward-looking statements
may  include,  among  others,  statements  concerning the Company's expectations
regarding  its  business,  growth  prospects, sales trends, gross margin trends,
operating  costs,  the availability of funds to finance capital expenditures and
operations,  facility  expansion plans, competition, operating results 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 Quarterly Report on
Form  10-QSB for the quarterly period ended September 30, 2006 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.

Each  forward-looking  statement  should  be  read  in context with, and with an
understanding  of,  the  various  disclosures  of concerning the Company and its
business  made  elsewhere  in  this  Quarterly  Report  on  Form  10-QSB for the
quarterly period ended September 30, 2006, as well as other public reports filed
with the United States Securities and Exchange Commission.  Investors should not
place  undue reliance on any forward-looking statement as a prediction of actual
results  or  developments.  Except  as required by applicable law or regulation,
the  Company  undertakes  no  obligation to update or revise any forward-looking
statement  contained  in  this Quarterly Report on Form 10-QSB for the quarterly
period  ended September 30, 2006, whether as a result of new information, future
events  or  otherwise.

OVERVIEW

Fantatech,  Inc.,  (the  "Company"), through its subsidiaries and affiliates, is
engaged  in  the  design,  development,  manufacturing,  and  sale  of  hi-tech
entertainment  and amusement products and their related operations, including 4D
theaters,  indoor  entertainment  centers  ("FunPlexes"),  large  size  outdoor
attractions and theme parks, each which are designed and manufactured to provide
virtual  reality  and  simulation entertainment. The Company's technical team is
experienced  in  the  design  and  manufacturing  of  comprehensive, integrated,
computerized  entertainment  products.

The Company's wholly owned subsidiaries include Intsys Share Limited ("Intsys"),
Shenzhen  Digitainment  Co.,  Ltd.  ("SDCL"),  and  Megabase  Investment Limited
("Megabase").  In  addition, the Company's majority controlled companies include
Hytechnology  Inc.  ("Hytech  US"),  Chongqing  FantaWild FunPlex Tour Co., Ltd.
("Chongqing  FTC")  and  Fantatech  Development  Inc.  ("FDI").

The  Company  both  manufactures  and  sells hi-tech amusement equipment for its
proprietary  FantaWild  FunPlexes, FantaWild 4D Theaters, large-size attractions
and FantaWild Theme Parks. The Company also participates in the success of these
attractions  through  revenue-sharing  operating  arrangements.  The  Company is
becoming  increasingly  involved in the development of theme parks since, in the
opinion  of  management,  there  are  attractive  growth  opportunities for such
ventures  in  the Chinese market. The Company provides its products to customers
both directly and through local partners in revenue-sharing operations.


                                       23
<PAGE>
Most  of  the  Company's  customers  are  located  in  China,  and sales to such
customers  are  generally  on  an open account basis with a deposit collected in
advance. The Company purchases raw materials and certain components from various
suppliers  located  in  China.  The  Company has not encountered any significant
difficulties  in  obtaining  the  required raw materials and it does not rely on
suppliers  that  cannot  be  easily  replaced.

As  for  revenue-sharing operations, the Company supplies the equipment for each
of  its  4D  theaters,  FunPlex indoor entertainment centers, large size outdoor
attractions  and  theme  parks  (each,  a  "Revenue-Sharing  Center")  through
cooperation  agreements with local venture partners in different Chinese cities.
The  Company  selects  appropriate  partners  and  sells  them  a portion of the
amusement  equipment  and  machines required to set up a Revenue-Sharing Center.
The  Company  generally  provides the balance of the amusement and entertainment
equipment  required for the Revenue-Sharing Center to its local venture partners
in  exchange  for approximately 30% to 50% share of such Center's gross revenue.
The  local  partners  are  responsible  for  operating, promoting, and providing
suitable  venues  for  the  Revenue-Sharing  Centers.  In general, the amount of
equipment required to be purchased by a local venture partner is calculated such
that  the  Company's gross margin on the purchased equipment covers its internal
cost  for  the balance of the required equipment. The Company also considers the
credibility  of  the  local  partner and the costs associated with the operating
venues.  The  Revenue-Sharing  Centers  therefore  require  only  a minimal cash
investment  on  the  part  of the Company, related primarily to the provision of
maintenance  services  after  commencement  of  the  Revenue-Sharing  Center
operations.  With  respect to 4D theaters, the Company generally contributes all
of  the  equipment  necessary  for the theaters while the local partners provide
suitable  venues.  The Company retains all title to the equipment it provides to
the  Revenue-Sharing  Centers  (except  for  equipment  purchased by the venture
partner)  and  may  repossess  and  relocate such equipment if its local venture
partners  cannot fulfill their obligations under the cooperation agreements. The
Revenue-Sharing  Center  arrangements generally have terms of five to ten years,
which  are  approximately  equal  to  the estimated useful life of the equipment
provided  by  the  Company.

During  the  nine  months  ended  September  30,  2006,  two  FunPlex  indoor
entertainment  centers  in  the cities of Tianjin and Urumchi, respectively, and
four  4D  theatres  in  the  cities  of  Changchun, Beijing, Kunming and Beihai,
respectively,  commenced  operations.  In  late April 2006, the first theme park
built  by  the  Company which features ten large-size attractions, commenced its
operations  in the city of Chongqing. The Company has a revenue-sharing interest
in  this  facility.  As  at September 30, 2006, there were a total of twenty-six
Revenue-Sharing  Centers  (fourteen FunPlex centers, eleven 4D theaters, and one
theme park) operating in different Chinese cities (including, in addition to the
cities  as  mentioned  above,  the cities of Langfang, Taiyuan, Nanning, Yantai,
Chifeng, Shenyang, Zhongshan, Nanjing, Huaian, Zhuhai, Changzhi, Dalian, Datong,
Wuhan,  Hangzhou,  Dongguan  and  Guangzhou).  The  first  4D  Ride Dino-Rampage
attraction  built  by the Company commenced its operation in the Beijing FunPlex
amusement center in November 2004. The large-size Dino-Rampage attraction in the
Tianjin  FunPlex  was completed in December 2005, and commenced its operation in
February  2006.  Two  Floating Sphere 4D theatres named "Sky Trailer" in Beijing
and  Chongqing  were  put  into  operation  in  late  April  2006.

During  the  nine  months  ended  September  30, 2006, the Company commenced the
construction  of  two  large-sized theme parks located in the cities of Wuhu and
Shantou, respectively. The Company expects to complete the theme park located in
the  city of Shantou by early 2007, while the Wuhu Theme Park is scheduled to be
completed  by  the  end  of  2007.

The unaudited condensed consolidated financial statements of the Company include
the accounts of the Company and its wholly-owned and majority-owned subsidiaries
as  well  as  the  controlled  associated  entities.  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  of America and are reported and
presented in U.S. Dollars ("$" or "USD").


                                       24
<PAGE>
All  of the Company's production and most of its business operations are located
in  China and are conducted in Renminbi ("RMB"), which is the currency of China.
Prior  to  July  21,  2005,  the  exchange rate remained stable at approximately
US$1.00  to  RMB  8.30.  On  July  21,  2005, the People's Bank of China ("PBC")
announced  that  RMB  would no longer be valued with respect to the U.S. Dollar,
but  against  a 'basket' of foreign currencies under a managed floating exchange
rate  regime, and the new official parity exchange rate of USD to RMB was set at
US$1.00  to  RMB  8.11,  to  be  allowed to float within a band of +-0.3 percent
around  the  central  parity  rate  as  published  by  the  PBC  daily.

For  the  nine  months  ended September 30, 2006 and 2005, the Chinese financial
statements  were  translated  from  RMB  to  USD  at  the new prevailing closing
exchange  rates:  -  for  the  translation of assets and liabilities (other than
equity and reserves), the published closing exchange rate of US 1.00 to RMB 7.97
and  US  1.00  to  RMB  8.09 were applied, respectively; for revenues, expenses,
gains  and  losses, the weighted average rate of US 1.00 to RMB 8.00 and US 1.00
to  RMB  8.25  for  the  respective periods were used. The resulting translation
gains  or  losses were recorded as a separate component of stockholders' equity.
As  of  December 31, 2005, the Chinese financial statements were translated from
RMB to USD at the closing exchange rate of US 1.00 to RMB 8.07.


CRITICAL  ACCOUNTING  POLICIES

The  discussion and analysis of the Company's financial condition and results of
operations  is  based  upon  the  Company's  unaudited  condensed  consolidated
financial  statements,  which  have  been prepared 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 unaudited condensed
consolidated  financial  statements.

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

The  Company  principally derives its revenue from (1) the sale of entertainment
and  amusement  products,  (2)  long-term  contracts  related  to  designing and
manufacturing  and  assembling  of  4-D  screen  system,  simulation  amusement
equipment,  large-size  attractions,  and  theme  parks  and  (3) admission fees
generated  from  revenue  sharing  operations.

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)   collectibility is reasonably assured.

(1)  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, installed and tested.  Revenue is
adjusted  for  any reduction in sales due to change in product specifications or
sales  discounts  offered  to  the  customers.


                                       25
<PAGE>
(2)  Long-term construction contract revenue and costs

Long-term  contract revenues 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 the
contract  can  be  estimated  reliably. The stage of completion of a contract is
determined  based  on the proportion of costs incurred at the balance sheet date
compared  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  contract  revenue.

Costs  attributable  to  unpriced change orders are 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.

During  the  process  of  recognizing  the  revenue  generated from the sales of
products  as  described  in  (1)  and  (2)  above, the Company has evaluated the
criteria  for  multiple  deliverables  in  using separate unit of accounting for
identifiable  delivered  items  in  accordance  with  EITF  No.  00-21  "Revenue
Arrangements  with  Multiple Deliverables", and concluded that the amusement and
entertainment  products  designed,  manufactured and installed by the Company do
not  meet the stand-alone test since no part of the products will be or are sold
in  the market by the Company or by other similar vendors.  There is no reliable
evidence of fair value of the undelivered items and the contracts for sales have
no general right of return relative to the delivered items.

In  addition,  the Company has evaluated the scope and applicability of SOP 97-2
"Software  Revenue  Recognition"  and  determined that the revenue earned on the
Company's  amusement  products containing software is incidental to the products
as  a whole.  The Company does not engage in businesses of licensing, selling or
leasing,  or  otherwise  marketing  computer  software.  The  software  does not
require  significant  production,  modification and customization and is not the
focus of the marketing efforts, nor is it what the customer perceives to obtain.
The post-contract services associated with the Company's products do not involve
multiple  element  arrangements  and the estimated cost for the one year product
warranty  is  insignificant,  and  there are no upgrades/enhancements offered to
customers currently or historically.  Accordingly, the Company believes that its
revenue  requires  no  software  revenue  recognition.

The  Company considers that profits on contracts are derived from its efforts in
all  phases  of  operations, including areas such as procurement and management.
Costs  incurred  closely  relate  to  contract  performance  and  are  therefore
considered  the  best  measure  to  determine  recognition  of  contracted sales
revenue.  The  Company  periodically  reviews  its  calculation  methodology  to
evaluate  the  accuracy  of  the  results  of  the  input  measures.

(3)  Revenue generated from revenue sharing operations

Income  is recognized based on the agreed percentage of revenue when the revenue
from  Revenue-Sharing  Centers becomes due and receivable.  The Company recorded
$1,372,343  and  $2,863,391  in revenue from its Revenue-Sharing Centers for the
three  months  and  nine  months  ended  September  30,  2006, respectively, and
$220,996  and  $679,938 for the three months and nine months ended September 30,
2005,  respectively.

Asset  Impairment:
------------------

The  Company  reviews its long-lived assets, including its production facilities
and  the  amusement  and


                                       26
<PAGE>
entertainment  equipment  used  in  the  Revenue-Sharing  Centers,  as  well  as
identifiable  intangibles  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
nine  months  ended  September  30,  2005, in view of the fact that the business
activities  of Hytech US reduced substantially and there were no sales contracts
secured in 2005, the Company recorded a provision for impairment of $170,950 for
the nine months ended September 30, 2005. During the nine months ended September
30,  2006,  no  impairment  charge  was  recorded.

Change in Method of Accounting for Inventory Valuation for Low Value Items:
---------------------------------------------------------------------------

On  January 1, 2006, the Company elected to change its accounting method for low
value  inventory/stock  (i.e.  small parts, bolt and nut and consumables) to the
weighted  average  method.  In  all  prior years, inventory was valued using the
first-in, first-out ("FIFO") method. Management believes that the new accounting
method  is preferable to the FIFO method in relation to accounting for low value
inventory,  since  the  adoption  of  the  new accounting principle will enhance
operating  efficiency  and  resource  utilization.

Based  on  the estimated average price change within different categories of low
value stock, the adoption of the accounting principle would have reduced the net
income for the year ended December 31, 2005 by $4,293 or 0.35%, while increasing
the  net loss by $569 or 0.30% and $1,464 or 0.18% for the three months and nine
months  ended  September  30, 2005, respectively. The effect of adopting the new
accounting  principle  would have reduced the inventory and retained earnings as
of December 31, 2005 by $4,293.  Statement of Financial Accounting Standards No.
154,  Accounting  Changes  and  Error  Corrections  -  SFAS  No.  154  demands a
retrospective application of changes in accounting principles in the comparative
prior  period financial statements. However, because the impact of the change in
accounting  principle  on  the  financial  statements is immaterial as described
above, the Company chose not to apply such retrospective presentation.


CONSOLIDATED RESULTS OF OPERATIONS

The  unaudited  condensed  consolidated  statements  of operations for the three
months  and  nine months ended September 30, 2005 have been adjusted in order to
provide  comparisons  for  segment performance. This adjustment had no effect on
the  operating  results  for  the  period  presented.

Three months ended September 30, 2006 and 2005:

REVENUE

For  the  three  months  ended  September 30, 2006, net sales were $2,361,647 as
compared  to  net  sales  of $2,057,984 for the three months ended September 30,
2005.  Approximately  58.1%  and  10.7% of the net sales during the three months
ended  September  30,  2006  and  2005,  respectively,  were  from  the revenues
generated  from  the  revenue  sharing  operations.

During the three months ended September 30, 2006, net contracted sales decreased
by $847,684 or 46.1% to $989,304, as compared to $1,836,988 for the three months
ended  September  30,  2005. This was primarily due to the normal fluctuation of
the business since the recognition of revenue from contracted sales was based on
actual  costs  incurred  in  relation  to  the  stages of completion. During the
period,  the  Company  was mainly involved in the construction stages of the two
large-size  theme  park projects in Wuhu and Shantou, respectively. As a result,
no  significant revenue was recorded in relation to these two projects.  In view
of  the  Company's  current sales contracts, especially in relation to the theme
parks in Wuhu and Shantou, the Company expects that the revenue to be recognized
as  net  contracted sales will increase through 2007 when construction stages in
progress  are  completed.


                                       27
<PAGE>
During  the three months ended September 30, 2006, the Company recorded revenues
from its Revenue-Sharing Centers totaling $1,372,343 as compared to $220,996 for
the  three  months  ended  September  30,  2005,  representing  an  increase  of
$1,151,347  or  521.0%.  The  increase  was mainly attributable to the increased
numbers  of  FunPlex  amusement  centers (from nine to fourteen) and 4D theaters
(from  five  to  eleven)  as at September 30, 2006, as compared to the number of
Revenue-Sharing  Centers  as  at  September  30, 2005. In addition, the official
opening of the theme park in Chongqing in late April 2006 contributed ($904,968)
to  the  increase  in  revenues from Revenue-Sharing Centers. With the scheduled
opening of the theme park in Shantou by early 2007, the Company anticipates that
revenue  from  Revenue-Sharing  Centers  will  continue  to  increase.

GROSS  PROFIT

For  the  three months ended September 30, 2006, total gross profit was $846,513
or  35.8%  of  total net sales, as compared to total gross profit of $482,333 or
23.4%  of  total net sales for the three months ended September 30, 2005. Net of
the  revenue  from the Revenue-Sharing Centers, gross profit margin increased by
5.7% due to an increase in contract profitability. It is anticipated that due to
the  contracted  lower profit margin from the Equipment Sale Contract related to
the  Wuhu  Theme Park, gross profit may decline during the relevant construction
period  when revenue is recognized. The Company, however, has obtained the right
to  receive 8% of the theme park's Distributable Income for a period of 15 years
from  commencement  of  theme  park operation. (See Note 11 (b) to the Condensed
Consolidated  Financial  Statements)

Cost  of  revenue  in relation to contracted sales during the three months ended
September  30,  2006  consisted  of  raw  materials,  electronic  parts, factory
consumables,  sub-contracting  charges  and  related  supplies  purchased  for
fabrication  and  assembling  of  the amusement equipment, factory rent, workers
wages  and  salaries,  and  the  depreciation of production facilities. Costs to
revenue-sharing operations included cost of souvenirs sold, equipment and venues
rental,  depreciation  for  the fixed assets used in the operations, maintenance
costs,  salaries  for  staffs  and  engineers,  administrative expenses, and the
associated  traveling  and  lodging  expenses.

During  the  three  months  ended  September  30,  2006, total gross profit from
Revenue-Sharing  Centers was $553,745 or 40.4% of the total segment revenues, as
compared to total gross profit of $43,650 or 19.8% of the total segment revenues
for  the  three  months  ended September 30, 2005. The increase in segment gross
profit  margin  was  attributable to the higher profit contribution from certain
newly launched Revenue-Sharing Centers, such as the Chongqing Theme Park and the
4D theatre located in the Beijing Amusement Park, which were partially offset by
some  other  less  profitable  Revenue-Sharing  Centers.  As  most  of  the
Revenue-Sharing Centers are relatively new and have been operating for less than
two  years  (about  half  of the Revenue-Sharing Centers have been operating for
less  than  one  year),  these  centers  are still subject to fluctuation in the
numbers  of  patron  visits  and  thus  admission  revenue, especially for those
Revenue-Sharing  Centers located in newly developed business districts which are
subject to a temporarily low flow of shoppers and patrons. The local partners of
the  Revenue-Sharing  Centers  are  adjusting and continuously fine-tuning their
promotional  and  marketing  strategies  in  order to stimulate and maintain the
local  demand  for  their  respective  amusement  Revenue-Sharing  Centers.

In  addition,  since  November  2005,  the  operation  of  the FunPlex center in
Dongguan  was temporarily suspended due to the local partner's failure to secure
a  valid  license  from the local cultural department.  It is estimated that the
approval  process  may  require approximately nine months.  In the meantime, the
Company  has  taken  possession of certain high value equipment from FunPlex for
immediate  use  in  other sales or cooperation contracts, while the depreciation
for  the  remaining equipment in the FunPlex continued and was charged to costs.
In  case  the  local  partner fails to obtain the required license by the end of
2006,  the  Company  may  consider  to  terminate  the cooperation agreement and
transfer  all  of  the  remaining  assets  to  other  projects.


                                       28
<PAGE>
The  Company anticipates that the gross profit from Revenue-Sharing Centers will
improve  gradually with more efficient management and operations of the existing
FunPlex amusement centers due to economies of scale and increased experience. In
view  of  the  operation  of the Chongqing Theme Park and the gradual opening of
theme  parks  located in Shantou and Wuhu re-scheduled to early 2007 and the end
of  2007, respectively, the Company anticipates that the revenue from theme park
operations  will  eventually  increase  due  to the relatively large size of the
operation.

SELLING  AND  MARKETING  EXPENSES

Selling  and  marketing  expenses increased by $238,752 or 97.8% to $482,897 for
the three months ended September 30, 2006, as compared to $244,145 for the three
months  ended  September  30,  2005.  This  was primarily due to the increase in
marketing,  promotional,  sales  representative  offices  and exhibition related
expenses  in  2006,  as  a  result  of expanded operations. The Company plans to
continue its marketing and promotional efforts in order to increase its business
in  China  and  also  in  overseas  markets.

GENERAL  AND  ADMINISTRATIVE  EXPENSES

General  and  administrative expenses ("G&A Expenses") consist of the management
office  operating  costs  of  SDCL,  FDI, Hytech US, Chongqing FTC and the costs
associated  with the operation of the Company's executive offices, and the legal
and  accounting costs associated with the operation of a public company. For the
three  months  ended  September  30,  2006, G&A Expenses increased by $36,150 or
10.3%  to  $385,527  as  compared  to the G&A Expenses of $349,377 for the three
months  ended  September 30, 2005. Net of the effect of the reduction in general
provision for doubtful accounts in 2005, G&A expenses for the three months ended
September  30,  2006  and  2005  were  substantially  equal.

INCOME  (LOSS)  FROM  OPERATIONS

Loss  from operations for the three months ended September 30, 2006 decreased by
$91,206  to $22,645, as compared to the loss from operations of $113,851 for the
three  months  ended  September  30,  2005.  The  decrease in operating loss was
primarily  attributable to the increase in gross profit, offset partially by the
increase  in  selling  and  marketing  expenses  during  the  three months ended
September  30,  2006.

OTHER  INCOME  (EXPENSE)

For  the  three  months  ended September 30, 2006, the Company recorded interest
income  of $3,620 as compared to $7,835 for the three months ended September 30,
2005.  For  the  three  months  ended  September  30, 2006, interest expense was
$36,333  as  compared  to $47,711 for the three months ended September 30, 2005.

Other  income  was  $18,058  for  the  three  months ended September 30, 2006 as
compared  to  other  income  of $19,076 for the three months ended September 30,
2005.  Other  income is mainly comprised of miscellaneous income earned from the
sub-letting  of  part  of  the  Company's  factory  space temporarily available.

MINORITY  INTERESTS

During  the  three  months  ended  September  30, 2006, the Company recorded the
minority  interests'  share  of  loss  of  $111,360  as compared to the minority
interests'  share  of income of $51,930 for the three months ended September 30,
2005.  As  of September 30, 2006, the minority interests represented effectively
the  60%  shareholding  in  FDI,  30%  in  Hytech  US  and  6% in Chongqing FTC.

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  Hytech  US  are  both  Delaware


                                       29
<PAGE>
corporations  and  are  subject  to  the  corporation income taxes of the United
States  of  America. Intsys and Megabase are not liable for income taxes in BVI.
The  Company's  Chinese  subsidiaries (SDCL) and associates (FDI) located in the
City of Shenzhen are subject to Enterprise Income Tax ("EIT") in China at a rate
of  15%  on  net  income,  while Chongqing FTC is subject to an EIT rate of 33%.
Based on the local tax rules in Shenzhen, SDCL was entitled to a tax holiday for
the  first two years of its operations (years 1999 and 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  Chinese  subsidiaries,  calculated  based  on  the
prevailing  accounting  standards in China, for the three months ended September
30,  2006  and  2005  were  $22,314  and  $830,  respectively.

NET  INCOME  (LOSS)

The  Company  recorded  a  net  income  of  $50,205  for  the three months ended
September  30,  2006  as compared to a net loss of $192,616 for the three months
ended  September 30, 2005. The increase in net income is primarily the result of
the  decrease in the loss from operation and the increase in minority interests'
share of losses, offset partially by the increase in income tax during the three
months  ended  September  30,  2006.


Nine months ended September 30, 2006 and 2005:

REVENUE

For  the  nine  months  ended  September  30, 2006, net sales were $5,840,102 as
compared  to  net  sales  of  $5,240,145 for the nine months ended September 30,
2005.  Approximately  49.0%  and  13.0%  of the net sales during the nine months
ended  September  30,  2006  and  2005,  respectively,  were  from  the revenues
generated  from  the  Revenue-Sharing  Centers.

During  the nine months ended September 30, 2006, net contracted sales decreased
by  $1,583,496  or  34.7%  to $2,976,711, as compared to $4,560,207 for the nine
months  ended  September  30,  2005.  This  was  primarily  due  to  the  normal
fluctuation  of  the  business  since the recognition of revenue from contracted
sales  was  based  on  actual  costs  incurred  in  relation  to  the  stages of
completion.  During  the  period, the Company was mainly involved in the initial
construction  stages  of  the  two  large-size  theme  park projects in Wuhu and
Shantou,  respectively.  As  a  result,  no  significant revenue was recorded in
relation  to  these  two  projects.  In  view  of  the  Company's  current sales
contracts,  especially  in  relation to the theme parks in Wuhu and Shantou, the
Company  expects  that the revenue to be recognized as net contracted sales will
increase  during the remainder of 2006 and through 2007 when construction stages
in  progress  are  completed.

During  the  nine months ended September 30, 2006, the Company recorded revenues
from its Revenue-Sharing Centers totaling $2,863,391 as compared to $679,938 for
the nine months ended September 30, 2005, representing an increase of $2,183,453
or  321.1%.  The  increase  was  mainly attributable to the increased numbers of
FunPlex  amusement centers (from eight to fourteen) and 4D theaters (from two to
eleven)  as  at September 30, 2006, as compared to the number of Revenue-Sharing
Centers as at September 30, 2005. In addition, the official opening of the theme
park in Chongqing in late April 2006 contributed ($1,640,290) to the increase in
revenues  from  Revenue-Sharing Centers. With the scheduled opening of the theme
park  in  Shantou  by  early  2007,  the  Company  anticipates that revenue from
Revenue-Sharing  Centers  will  continue  to  increase.

GROSS  PROFIT

For  the nine months ended September 30, 2006, total gross profit was $1,867,466
or  32.0% of total net sales, as compared to total gross profit of $1,302,794 or
24.9%  of  total  net sales for the nine months ended September 30, 2005. Net of
the  revenue  from the Revenue-Sharing Centers, gross profit margin increased by
3.2% due to an increase in contract profitability. It is anticipated that due to
the  contracted lower profit margins from the Equipment Sale Contract related to
the  Wuhu  Theme  Park,  the  gross


                                       30
<PAGE>
profit  may  suffer  a  decline pressure during the relevant construction period
when  revenue  is  recognized.  The  Company, however, has obtained the right to
receive  8%  of  the  theme park's Distributable Income for a period of 15 years
from  commencement  of  theme  park  operation. (See Note 11(b) to the Condensed
Consolidated  Financial  Statements)

During  the  nine  months  ended  September  30,  2006,  total gross profit from
Revenue-Sharing  Centers was $992,474 or 34.7% of the total segment revenues, as
compared  to  total  gross  profit  of  $107,564  or  15.8% of the total segment
revenues  for  the nine months ended September 30, 2005. The increase in segment
gross  profit  margin  was  attributable  to the higher profit contribution from
certain newly launched Revenue-Sharing Centers, such as the Chongqing Theme Park
and  the  4D  Theatre  located  in the Beijing Amusement Park, but was partially
offset  by  some  other  less  profitable Revenue-Sharing Centers As most of the
Revenue-Sharing Centers are relatively new and have been operating for less than
two  years  (about  half  of the Revenue-Sharing Centers have been operating for
less  than  one  year),  these  centers  are still subject to fluctuation in the
numbers  of  patron  visits  and  thus  admission  revenue, especially for those
Revenue-Sharing Centers located in the newly developed business districts which,
in  turn,  are  subject  to  temporary  lower-than-normal  flow  of shoppers and
patrons.  The  local  partners  of  the  Revenue-Sharing Centers are continually
adjusting  and  continuously  fine-tuning  their  promotional  and  marketing
strategies  in  order  to  stimulate  and  maintain  the  local demand for their
respective  amusement  Revenue-Sharing  Centers.

In  addition,  since  November  2005,  the  operation  of  the FunPlex center in
Dongguan  was temporarily suspended due to the local partner's failure to secure
a  valid  license  from the local cultural department.  It is estimated that the
approval  process  may  require approximately nine months.  If the local partner
fails  to  obtain  the  required license by the end of 2006, the Company has the
options  to  terminate  the cooperation agreement and transfer all the remaining
assets  to  other projects. In the meantime, the Company has taken possession of
certain  high  value  equipment from FunPlex for immediate use in other sales or
cooperation contracts, while the depreciation for the remaining equipment in the
FunPlex  has  continued  and  was  charged  to  costs.

The  Company anticipates that the gross profit from Revenue-Sharing Centers will
improve  gradually with more efficient management and operations of the existing
FunPlex amusement centers due to economies of scale and increased experience. In
view  of  the  operation  of the Chongqing Theme Park and the gradual opening of
theme  parks  located in Shantou and Wuhu re-scheduled to early 2007 and the end
of  2007, respectively, the Company anticipates that the revenue from theme park
operations  will  eventually  increase  due to the relatively large size of such
operation.

SELLING  AND  MARKETING  EXPENSES

Selling  and marketing expenses increased by $399,395 or 61.9% to $1,044,953 for
the  nine  months ended September 30, 2006, as compared to $645,558 for the nine
months  ended  September  30,  2005.  This  was primarily due to the increase in
marketing,  promotional,  sales  representative  offices  and exhibition related
expenses  in  2006,  as  a  result  of expanded operations. The Company plans to
continue its marketing and promotional efforts in order to increase its business
in  China  and  also  in  overseas  markets.

GENERAL  AND  ADMINISTRATIVE  EXPENSES

For the nine months ended September 30, 2006, G&A Expenses decreased by $194,323
or  15.8%  to  $1,038,470  as compared to the G&A Expenses of $1,232,793 for the
nine  months  ended  September  30, 2005. This was primarily attributable to the
decrease  in  various  general  administrative  expenses.

IMPAIRMENT  OF  INTANGIBLE  ASSETS

During  the  nine  months  ended  September 30, 2005, in view of the substantial
reduction  of  business  activities  in  Hytech  US  and  the fact that no sales
contracts  were  secured  by  Hytech US in 2004 or 2005, the Company conducted a
re-evaluation of the intangible assets associated with Hytech US and the related
expected future cash flows. As a result of this evaluation, the Company recorded
a  full  provision


                                       31
<PAGE>
for impairment of $170,950 for the intangible assets. There was no impairment of
intangible  assets  recorded  in  2006.

LOSS  FROM  OPERATIONS

Loss  from  operations for the nine months ended September 30, 2006 decreased by
$530,334  to  $218,835,  as compared to the loss from operations of $749,169 for
the  nine  months  ended  September  30,  2005.  The  reduction  was  primarily
attributable to the increase in gross profit and the decrease in G&A Expenses as
well as the provision for impairment of intangible property, offset partially by
the  increase  in  selling  and  marketing expenses during the nine months ended
September  30,  2006.

OTHER  INCOME  (EXPENSE)

For  the  nine  months  ended  September 30, 2006, the Company recorded interest
income  of $8,230 as compared to $11,106 for the nine months ended September 30,
2005,  due primarily to the decrease in the average bank deposit balance in 2006
as  a  result  of  the  increase  in  resources  allocated  to  projects  under
construction.

For  the  nine months ended September 30, 2006, interest expense was $106,175 as
compared to $113,044 for the nine months ended September 30, 2005.

Other  income  was  $186,517  for  the  nine  months ended September 30, 2006 as
compared  to  other  income  of  $48,991 for the nine months ended September 30,
2005.  Other  income  is  comprised  of  miscellaneous  income  earned  from the
sub-letting of part of the Company's factory space temporarily available and the
receipt  of  discretionary  incentive  subsidies from the local government.  The
increase  in  other  income  was  primarily  attributable  to  the discretionary
incentive  subsidy  of  approximately $133,000 granted to the Company during the
nine  months  ended  September  30,  2006.

As  the  Company successfully developed a set of innovative simulation games, it
received  the  recognition  of  the  Shenzhen Technology Bureau. The Company was
eligible  and  applied  for  an  incentive subsidy under the Bureau's Technology
Subsidy Scheme. The Shenzhen Technical Bureau granted a subsidy of approximately
$77,000 to the Company as an encouragement for enterprises in China to invest in
products  with  high  technology content. In addition, the Company's proprietary
Fantawild  4D  digital  broadcasting system also received high appreciation from
the  Ministry of Finance and was granted a subsidy of approximately $50,000. The
Company  also  entitled  to  an  incentive  income  of approximately $6,000 from
Shenzhen  Trade  and  Industry  Bureau  to  recognize  the  Company's success in
exporting self-developed high-tech products to the overseas market. No incentive
subsidy  income  was  recorded  for  the  nine  months ended September 30, 2005.

MINORITY  INTERESTS

During  the  nine  months  ended  September  30,  2006, the Company recorded the
minority  interests'  share  of  loss  of  $318,037, as compared to the minority
interests'  share  of  loss  of  $16,337 for the nine months ended September 30,
2005.  As  of September 30, 2006, the minority interests represented effectively
the 60% shareholding in FDI, 30% in Hytech US and 6% in Chongqing FTC.

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  Hytech  US  are  both  Delaware  corporations  and are subject to the
corporation  income  taxes  of the United States of America. Intsys and Megabase
are  not  liable  for  income  taxes  in BVI. The Company's Chinese subsidiaries
(SDCL)  and  associates  (FDI)  located  in  the City of Shenzhen are subject to
Enterprise  Income  Tax  ("EIT")  in China at a rate of 15% on net income, while
Chongqing  FTC is subject to an EIT rate of 33%. Based on the local tax rules in
Shenzhen,  SDCL  was  entitled  to  a tax holiday for the first two years of its
operations  (years  1999 and 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


                                       32
<PAGE>
earnings  of  the  Chinese  subsidiaries,  calculated  based  on  the prevailing
accounting  standards in China, for the nine months ended September 30, 2006 and
2005  were  $55,891  and  $863,  respectively.

EQUITY LOSS RELATED TO AN ASSOCIATED COMPANY

For  the  nine  months  ended September 30, 2006, the Company recorded a $18,657
loss  reflecting  the  Company's  share  of the net loss incurred by Tianjin LFK
(limited  to  the  total  amount  of  investment)  during  the nine months ended
September  30,  2006.  (See  Note  7  to  the  Condensed  Consolidated Financial
Statements.)

NET INCOME (LOSS)

The  Company  recorded  a  net  income  of  $109,830  for  the nine months ended
September  30,  2006  as  compared to a net loss of $791,847 for the nine months
ended  September 30, 2005. The increase in net income is primarily the result of
the  increase in the share of losses by minority interest, the reduction in loss
from operation as well as the increase in incentive subsidy, offset partially by
the  increase  in  the  income tax and the equity loss of an associated company.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

General
-------

The Company anticipates that, based on current 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, its financial
resources  are  sufficient to support the Company's working capital requirements
for  its  planned  operations  for the next twelve months, although there may be
temporarily  lower  levels of working capital at certain times during the course
of  its  business.  Depending on the future rate of growth, the Company may seek
additional  capital  in  the  future  to  support  its  expansion in operations.

In view of the continue growth of it's operations, the Company will continue its
efforts  in  arranging additional external short term bank loans for its working
capital  requirements.  The  Company is also monitoring the process of invoicing
its  customers  for  project  progress  payments in order to reduce the carrying
amounts  of  work  in  progress  and the costs incurred in excess of billings on
uncompleted  contracts.  Based  on  management's  evaluation  of  the  Company's
short-term  cash  requirements  and  liquidity resources, management anticipates
that  the  pressure  on the Company's cash flows will not be substantial for the
next  twelve  months. In addition, the projected progress payment related to the
sale  of  equipment to the theme parks in Wuhu and Shantou, respectively, should
provide  a stable source of working capital for the Company during the remainder
of  2006.


Operations
----------

During  the  nine  months  ended  September  30,  2006, the Company's operations
provided  cash  resources of $4,302,197, as compared to the net cash provided by
operating  activities  of  $31,034 for the nine months ended September 30, 2005.
During  the  nine  months  ended  September 30, 2006, the Company's cash balance
decreased  by  $1,553,745  to  $812,176  at  September  30, 2006, as compared to
$2,365,921  at  December  31,  2005.  Taking  into account the cash deposited at
affiliates'  financial  clearing  centers  ("FCCs")  (defined  in  Note 3 to the
Condensed  Consolidated  Financial  Statements) the Company's total cash balance
decreased  by  $1,875,312  to  $812,337  at  September  30, 2006, as compared to
$2,687,649  at  December  31,  2005.  During the nine months ended September 30,
2006,  the  Company's net working capital decreased by $5,075,840 to a shortfall
of  -$3,051,930 at September 30, 2006, as compared to $2,023,910 at December 31,
2005,  and  the  Company had a current ratio of 0.75:1 at September 30, 2006, as
compared  to  1.24:1 at December 31, 2005, representing the total current assets
were


                                       33
<PAGE>
insufficient to cover the total current liabilities during the nine months ended
September  30,  2006.

The  decrease  in  the  Company's  net  working capital was due primarily to the
increase  in  customer  deposits  received by the Company in relation to the two
large-size  theme  park  projects  in Wuhu and Shantou, as well as the Company's
continuing  investment in fixed assets for Revenue Sharing Centers, including 4D
theaters,  FunPlex  centers  and  theme  parks.  During  the  nine  months ended
September  30,  2006,  the  Company  recorded  an  increase  in  fixed assets of
approximately  $8,720,000  for  revenue  sharing  operations, and an increase in
deposits received from customers and related parties of approximately $5,000,000
for construction of the theme parks, which largely accounted for the increase in
total  current  liabilities,  and  in  turn  temporarily affecting the Company's
current  ratio  as  of  September  30,  2006.

The  Company  has  tightened  its criteria with respect to partner selection for
establishment  of additional revenue sharing operations in order to make sure it
has  sufficient  resources to administer its current revenue sharing centers and
to  complete  the contracts on hand, in particular, the contracts related to the
two  theme  parks  in Wuhu and in Shantou. Potential partners without self-owned
commercial  property  at  a  prime  city  location for potential revenue-sharing
operation  will  not  be considered. This is to avoid the possible disputes that
may  arise  between  the  local  partner and the landlord, which may require the
Company to relocate its equipment to other suitable sites. With the operation of
the  theme  park  in  Chongqing and the re-scheduled commencement of the Shantou
theme park by early 2007, together with the revenue generated from the contracts
on  hand  as well as other Revenue-Sharing Centers, the Company expects that its
net  working  capital  will  gradually  improved  through  2006  and thereafter.

Trade  receivables, net of allowance for doubtful debts, decreased by $1,128,743
or  58.2%  to  $810,691  at  September  30,  2006,  as compared to $1,939,434 at
December  31,  2005,  which  was  attributable  to the repayment by customers of
outstanding  amounts  and  the  difference  in timing of invoicing in the normal
course  of business. The Company provided a general allowance for doubtful debts
of  $82,379  and  $32,027  as  at  September  30,  2006  and  December 31, 2005,
respectively.

As  of September 30, 2006, costs and estimated earnings in excess of billings on
uncompleted contracts increased by $202,304 or 28.0% to $924,830, as compared to
$722,526  at  December  31,  2005,  which  was  attributable  to the increase in
resources  utilized  in  projects  under construction. The billings in excess of
costs  and  estimated  earnings  decreased  by  $323,485 or 53.2% to $284,619 at
September  30,  2006,  as  compared  to  $608,104  at  December  31,  2005.

Deposits  and  prepayments made by the Company decreased by $334,284 or 20.8% to
$1,273,441  at  September  30,  2006,  as compared to $1,607,725 at December 31,
2005,  due  to  the  settlement  with  the  suppliers  for  completed  projects.

During  the  nine  months ended September 30, 2006, the total amount of accounts
payable,  accrued  liabilities and other payables increased by $407,842 or 14.9%
to  an  aggregate of $3,148,069, as compared to $2,740,227 at December 31, 2005,
which  was  due  primarily  to  the increase in accrued costs related to certain
completed  projects,  especially  the  theme  park  in  Chongqing.

The  amounts  receivable from related parties increased by $200,066 or 103.3% to
$393,787 at September 30, 2006, as compared to $193,721 at December 31, 2005 due
primarily  to  the  increase  in trade receivable due from Hytech HK. The amount
payable  to  related  parties increased by $1,615,421 or 207.5% to $2,393,770 at
September  30,  2006,  as  compared  to $778,349 at December 31, 2005, which was
mainly  attributable to the deposit received from Wuhu Huaqiang  with respect to
its  purchase of equipment for the theme park in Wuhu (the deposit is to be used
for  the equipment purchased under the Sales Contract as mentioned in Note 11(b)
and  yet to be recognized as sales revenue) as well as the increase in the trade
payable  due  to  Hyvision, partially offset by a repayment of the amount due to
TLD.

Investing
---------

For  the  nine  months  ended  September  30,  2006,  the  Company's  investment
activities  used  cash


                                       34
<PAGE>
resources  of  $5,947,305,  as  compared  to  $1,701,454 cash used by investment
activities  for  the  nine  months  ended  September  30,  2005.

Additions  to  property,  plant  and  equipment  during  the  nine  months ended
September  30, 2006 aggregated $6,268,985, of which approximately $6,100,000 was
for  investment in the Company's Revenue-Sharing Centers. In addition, there was
a  transfer of construction in progress of approximately $2,500,000 to property,
plant  and equipment as the Company has materially completed the construction of
the  equipment  used  in  the  Chongqing  Theme  Park  and other Revenue-Sharing
Centers. At September 30, 2006, the Company had capital expenditure requirements
of  approximately  $1,750,000 in order to complete current contracts through the
end  of  2006.  The  Company  believes that it will be able to fund the expected
capital  expenditures  through  internal  cash  flow  and  external  resources.

As  at  September  30,  2006  and December 31, 2005, the Company maintained cash
deposits of $161 and $321,728 at the FCC operated by SHQ, respectively. The cash
deposits  at  the  FCC  can  be  withdrawn  any  time  without any restrictions.

Financing
---------

During  the nine months ended September 30, 2006, short-term bank loan increased
by  $30,151  to  $2,508,466,  as compared to $2,478,315 as of December 31, 2005,
which  was  purely  due  to  the  effect  of  exchange  rate change. The Loan is
unsecured  and  accrues  interest  at a rate of 5.58% per annum.  The short-term
bank  loan  was  guaranteed  by  SHQ.

The short-term bank loan will mature on November 25, 2006 and will be re-granted
by  the  bank  for  a  term  of  one  year  upon  completion of certain required
documentation.  The  loan  will  still  be  guaranteed  by  SHQ.

As  at  September 30, 2006 and December 31, 2005, the Company had no off-balance
sheet  arrangements.


ITEM  3.  CONTROLS  AND  PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures

Members  of  the  Company's  management,  including  its principal executive and
financial officers, have evaluated the effectiveness of the Company's disclosure
controls  and  procedures,  as  defined  by  paragraph (e) of Exchange Act Rules
13a-15  or  15d-15,  as  of September 30, 2006, the end of the period covered by
this  report.  Based upon that evaluation, the Company's principal executive and
financial  officers  have  concluded  that the Company's disclosure controls and
procedures  are  effective.

(b)  Changes in Internal Controls

There were no changes in the Company's internal control over or in other factors
identified  in  connection  with  the  evaluation  required  by paragraph (d) of
Exchange  Act  Rules  13a-15 or 15d-15 that occurred during the quarterly period
ended September 30, 2006 that have materially affected, or are reasonably likely
to  materially  affect,  our  internal  control  over  financial  reporting.


                                       35
<PAGE>
PART  II  -  OTHER  INFORMATION


ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

A  list of the exhibits required to be filed as part of this report is set forth
in  the  Index  to  Exhibits,  which  immediately precedes such exhibits, and is
incorporated  herein  by  reference.


                                       36
<PAGE>
                                   SIGNATURES


Pursuant  to  the  requirements  of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.



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


Date: November 15, 2006                 By: /s/ GUANGWEI LIANG
                                        ----------------------
                                        Guangwei Liang
                                        Chief Executive Officer


Date: November 15, 2006                 By: /s/ GARY LUI
                                        ----------------
                                        Gary Lui
                                        Chief Financial Officer


                                       37
<PAGE>
<TABLE>
<CAPTION>
                                Index to Exhibits

Exhibit
Number      Description of Document
-------     -----------------------
<S>         <C>
3.1(i)      Certificate of Incorporation, as amended (1)
3.1(ii)     Bylaws of Registrant (2)
31.1        Certification of the Chief Executive Officer pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002
31.2        Certification of the Chief Financial Officer pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002
32.1        Certification by the Chief Executive Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002
32.2        Certification by the Chief Financial Officer pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002
</TABLE>

(1)  Incorporated by Reference from Company's report on Schedule 14C on December
     30,  2002.

(2)  Incorporated  by  Reference  from Company's Annual Report on Form 10KSB for
     the  year  ended  March  31,  1999.


                                       38