**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


____________________





FORM
      10-KSB


____________________








[
      X ]
      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      Fiscal Year Ended December 31, 2006





[
      ]
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
      THE
      SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from _______________ to __________________




Commission
      File Number 000-30058











**China
      Software Technology Group Co., Ltd.**


(Name
      of
      small business issuer in its charter)





Delaware
            04-2621506(State
                or other jurisdiction
                of incorporation or organization)
            (IRS.
                EmployerIdentification
                No.)




Skyworth
                Building, No. 5, Floor 6, Block A,Hi-Tech
                Industrial ParkNanshan
                District, Shenzhen P.R.China
            518057(Address
                of principal executive offices)
            (Zip
                Code)











Issuer’s
      telephone number, including area code +86-755-2674-3553




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





Securities
      registered pursuant to Section 12(g) of the Exchange Act: Common
      Stock, $.0001 par value per share





Check
      whether
      the issuer is not required to file reports pursuant to section 13 or 15(d)
      of
      the Exchange Act.




Yes
      [ ]
      No [X]




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.




Yes
      [X]
      No [  ]





Check
      if
      there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
      S-B contained in this form, and no disclosure will be contained, to the best
      of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-KSB or any amendment
      to
      this Form 10-KSB  [X]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act




Yes [ 
]
      No [X]





State
      issuer’s revenues for its most recent fiscal year: $2,151,435 for the fiscal
      year ended December 31, 2006.





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days.





The
      aggregate
      market value of the voting and non-voting common stock held by non-affiliates
      of
      the registrant, based on the average bid and asked price of the registrant's
      common stock as quoted on the OTC Bulletin Board on March 30, 2007, was
      approximately  $2,092,103.





On
      March
      30, 2007, the issuer had 21,502,568 shares
      of
      common stock outstanding.





Transitional
      Small Business Disclosure Format (check one):





Yes
      [  ] No: [X]

















**China
      Software Technology Group Co. Ltd.** ****


**Form
      10-KSB**




Table
      of Contents





Forward-Looking
      Statements and Associated Risk




PART
                I
              
              PageItem
                  1.
              Description
                  of Business
              3Item
                  2.
              Description
                  of Property
              21Item
                  3.
              Legal
                  Proceedings
              22Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              22PART
                  IIItem
                  5.
              Market
                  for Common Equity, Related Stockholder Matters
              23Item
                  6.
              Management's
                  Discussion and Analysis or Plan of Operation
              25Item
                  7.
              Financial
                  Statements
              35Item
                  8.
              Changes
                  in and Disagreements with  Accountants
                  on Accounting and  Financial
                  Disclosure
              35Item
                  8A.
              Controls
                and
                Procedures
              35Item
                  8B.
              Other
                Information
              36PART
                  IIIItem
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons; Compliancewith
                  Section 16(a) of the Exchange Act
              36Item
                  10.
              Executive
                Compensation
              38Item
                  11.
              Security
                Ownership of Certain BeneficialOwners
                and Management and Related  Stockholder
                Matters
              39Item
                  12.
              Certain
                Relationships and Related  Transactions,
                and Director Independence
              40Item
                  13.
              Exhibits
              41Item
                  14.
              Principal
                Accountant Fees and Services
              42Signatures
              
              44Financial
                  Statements
              F-1




2








**PART
      I**





**ITEM
      1.**  **DESCRIPTION
      OF BUSINESS**





**Forward-Looking
      Statements and Associated Risk and Other Information About This Annual
      Report**





This
      report contains forward-looking statements that involve risks and uncertainties.
      Such forward-looking statements include statements regarding, among other
      things, (a) our projected sales, profitability, and cash flows, (b) our growth
      strategies, (c) anticipated trends in our industries, (d) our future financing
      plans, and (e) our anticipated needs for working capital. They are generally
      identifiable by use of the words “may,” “will,” “should,” “anticipate,”
“estimate,” “plan,” “potential,” “project,” “continuing,” “ongoing,” “expects,”
“management believes,” “we believe,” “we intend,” or the negative of these words
      or other variations on these words or comparable terminology. These statements
      may be found under “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations” and “Business,” as well as in this report generally.
      Actual events or results may differ materially from those discussed in
      forward-looking statements as a result of various factors, including, without
      limitation, the risks outlined under “Risk Factors” and matters described in
      this report generally. In light of these risks and uncertainties, there can
      be
      no assurance that the forward-looking statements contained in this filing will
      in fact occur. You should not place undue reliance on these forward-looking
      statements.





The
      forward-looking statements speak only as of the date on which they are made,
      and, except to the extent required by federal securities laws, we undertake
      no
      obligation to update any forward-looking statement to reflect events or
      circumstances after the date on which the statement is made or to reflect the
      occurrence of unanticipated events.





The
      Private Securities Litigation Reform Act of 1995, which provides a “safe harbor”
for similar statements by certain existing public companies, does not apply
      to
      us because our stock qualifies as “penny stock.”




Unless
      otherwise noted, all currency figures in this filing are in U.S. dollars.
      References to "yuan" or "RMB" are to the Chinese yuan (also known as the
      renminbi), which we use as our functional currency. Results of operations and
      cash flow are translated at average exchange rates during the reporting period,
      and assets and liabilities are translated at the end-of-period exchange rates.
      According to the currency-exchange website Xe.com, as of March 26, 2007, $1
      =
      7.7374 yuan.





**Company
      History**




China
      Software Technology Group Co., Ltd. (“we,” “us,” the “Company,” or “China
      Software”) is a Delaware corporation which was redomiciled from British Columbia
      on November 14, 2006. We were incorporated in British Columbia under the name
      Jackpine Mining Co., Inc. on December 23, 1991 and changed our name to US Voice
      Telemanagement, Inc. on July 10, 1996. On June 19, 2000 the Company was
      continued under the Canada Business Corporations Act by filing Articles of
      Continuance under that Act and the Company also changed its name to E*Comnetrix
      Inc. On July 24, 2002 the Company changed its name to Moving Bytes, Inc. and
      on
      March 23, 2006 the Company changed its name to China International Enterprises
      Inc..





3




On
      November
      14, 2006, we filed a Certificate of Incorporation with the Delaware Secretary
      of
      State under our new name, "China Software Technology Group Co., Ltd." and also
      simultaneously filed a Certificate of Domestication whereby China International
      Enterprises Inc., the Canadian company, was re-domiciled in Delaware under
      the
      Company's new name. Effective on the opening of business on November 16, 2006,
      our common stock began trading on the National Association of Securities
      Dealers’ OTC Bulletin Board under the symbol CSWT.OB.




On
      August 19,
      2005 we entered into a Share Exchange Agreement pursuant to which we acquired
      100% of the outstanding stock of HXT Holdings, Inc. a Delaware corporation
      originally called China International Enterprises Corp. (the name of such
      company was changed in August 2006) which we refer to as "HXT Holdings." HXT
      Holdings in turn owns 100% of the outstanding stock of Heng Xing Technology
      Group Development Limited, a British Virgin Islands corporation which we refer
      to as "XHT." XHT's only asset is 100% of the stock of Shenzhen Hengtaifeng
      Technology Co., Ltd., a People's Republic of China ("PRC" or “China”)
      corporation we refer to as "HTF." HTF is classified as a wholly-owned
      foreign


enterprise
      under PRC law by virtue of its ownership by XHT.





The
      result of the above transactions, as set forth in the following diagram, is
      that
      HXT Holdings is our direct wholly owned subsidiary and both of XHT and HTF
      are
      now our indirect wholly-owned subsidiaries.




China
                Software Technology Group Co., Ltd. (“China Software”)|
                100%HXT
                Holdings, Inc. (“HXT
                Holdings”)|
                100%Heng
                Xing Technology
              Group
                DevelopmentLimited (“XHT”)|
                100%Shenzhen Hengtaifeng
              Technology
                Co., Ltd.(“HTF”)




**Our
      Business**





We
      are a
      Delaware corporation that owns a software company organized under the laws
      of,
      and operating in, China. The software company operating in China, which we
      hold
      through HXT Holdings and XHT, is Shenzhen Hengtaifeng Technology Co., Ltd.,
      or
      HTF. Neither we nor HXT Holdings nor HXT has any operations other than acting
      as
      a holding company and management company for HTF and raising money for its
      operations. In this annual report, for the sake of convenience and where context
      allows, we sometimes use the words “we,” “us,” and the “Company” to refer to us
      together with our subsidiaries, or to refer to HTF alone.





4


HTF
      is a
      provider of applications software and system integration services in China.
      Specifically, HTF develops and produces four types of industry-specific software
      and provides related systems-integration services to customers purchasing its
      proprietary products at no additional charge. In addition, HTF markets software
      products produced by other companies as a value-added reseller; in such cases,
      HTF provides installation and related systems-integration services at an
      additional cost to the customer.





HTF
      currently
      markets its products and services exclusively within the PRC. Our software
      application products are highly specialized and designed for use in targeted
      industries as well as developed to meet the specified needs of our customers.
      Once we have developed a product line, we may seek to market it to other
      customers in the same or similar industries. To date, we have developed and
      sold
      four types of applications software: housing accumulation fund software, credit
      guarantee software, family planning software and property management software.





Our
      core
      product is Housing Accumulation Fund software, which accounted for 36% of our
      revenues in 2006. HTF entered this market in 1996 and has more than 150
      customers in over 25 provinces throughout China. Our Housing Accumulation Fund
      software provides information-management and -sharing capabilities to a variety
      of groups of participants in China's Housing Accumulation Fund program, a social
      welfare program funded by contributions from workers and their employers which
      provides employees with savings accounts intended to enable them to purchase
      housing. The program was instituted in 1991 by the PRC Ministry of Construction
      and is administered by regional Housing Accumulation Fund Centers, which in
      turn
      are under the supervision of local governments, the Ministry of Construction
      and
      the Ministry of Finance.





Our
      Housing
      Accumulation Fund software is available in four versions, which are tailored
      for
      use by different kinds of participants in the program: a "User" version, which
      enables the contributing employers and employees to submit and retrieve
      information regarding the accounts; a "Center" version, for use by the local
      and
      regional branches that administer the program and manage the contributed funds;
      a "Bank" version, for use by the commercial banks where the funds are deposited
      and held; and a Supervisor's version, for use by the government agencies that
      supervise the regional Centers. Sales of Housing Accumulation Fund software
      accounted for approximately 36% of HTF's revenues in 2006.





Our
      Credit
      Guarantee software is designed to provide an information-management and
      record-keeping system for entities that provide credit guarantees to prospective
      borrowers of funds. China's Credit Guarantee System was established by the
      National Economic and Trading Commission in 1999 in order to facilitate the
      financing of small and medium-sized enterprises ("SMEs"), which often have
      difficulty obtaining bank loans. The government-sponsored Credit Guarantee
      System supplements the existing commercial credit guaranty industry, which
      is
      composed of various for-profit commercial enterprises. Under the Credit
      Guarantee System, government-funded local and regional agencies and non-profit
      organizations provide guarantees to enable SMEs to obtain loans. Our software,
      which was developed at the request of one such local agency, provides a means
      of
      collecting and organizing data from SMEs and performs risk-management functions,
      such as financial analysis, credit evaluation and risk estimation. The software
      is marketed for use both by participants in the government-sponsored system
      and
      by private, commercial credit guarantors. Since its development in 2003, this
      product has experienced rapid sales growth. We believe our product is the first
      credit guarantee software available in China, and as of the date of this annual
      report, we are not aware of any other professional software company that is
      marketing a competing product. Sales of Credit Guaranty software accounted
      for
      26 % of HTF's revenues in 2006.




5


Our
      property
      management software was developed as a number of customized products designed
      at
      the request of some of our Housing Fund Accumulation software customers and
      related customers. The primary function of our property management software
      is
      to provide users with access to official government property ownership and
      use
      rights registries and enable them to search the databases for records on file.
      We hope to be able to market our property management software to real estate
      exchange centers, commercial property management companies, government property
      management bureaus, real estate developers and real estate agents in the future.
      Customers currently using HTF's property management software include four
      government property management bureaus, one commercial real estate developer
      and
      one real estate agent. As of December 31, 2006, sales of property management
      software have been sporadic and have not generated significant
      revenues.





Family
      planning software is our newest product. HTF began developing this product
      in
      2003 for use by government family planning management departments, public
      education organizations and nonprofit family planning associations, and recently
      completed its first sales of the software.





Our
      family
      planning software is designed for use in connection with the national network
      for disseminating family planning information which was established pursuant
      to
      a mandate by the PRC government. The product creates a large-scale, networked
      database that can be accessed by users. Its functional capabilities include
      data
      collection and processing, statistical reporting, search engine features, an
      "early warning" system for monitoring rapid population increases and system
      maintenance. Sales of family planning software accounted for approximately
      2% of
      our revenues in 2006.




In
      addition
      to our four lines of proprietary software products, we also offer software
      products made by other manufacturers as a value-added reseller. In such cases,
      we provide installation, configuration and related systems integration services.
      We currently market products made by two other companies: Lenovo, which is
      the
      largest information technology company in China, and Microsoft(R). Sales of
      such
      products and services accounted for 36% of our revenues in 2006.




Our
      U.S.
      executive offices are located at 100 Wall Street, 15th Floor, New York, New
      York
      10005 and our telephone number is 212-232-0120. HTF's principal offices are
      located at No.5 Floor 6, Block A, Skyworth Building, Hi-tech Industrial Park,
      Nanshan District, Shenzhen, 518057, P.R.China. Shenzhen is a southern Chinese
      city which is located near Hong Kong.








**Products
      and Services**





**Housing
      Accumulation Fund Software**





The
      system of a public accumulation fund for housing construction in China was
      introduced in 1991 by the PRC Ministry of Construction. "Housing Accumulation
      Funds" are long-term housing reserve accounts which are maintained for the
      benefit of employees and are funded with mandatory contributions by both the
      employees and their employers. The contributions are deposited in accounts
      at
      designated commercial banks ("Bank") and managed by regional Housing
      Accumulation Fund Management Centers ("Centers"), which in turn are supervised
      by local governments, the PRC Ministry of Construction and the PRC Ministry
      of
      Finance (collectively referred to as "Supervisors").





6


Although
      employees own their respective shares of the Housing Accumulation Funds, they
      do
      not have any control over the investment of the funds. An employee can withdraw
      his or her respective share of the funds in any of the following situations:
      to
      purchase, build or renovate a home; to retire; if unable to work; if the
      employee is relocating outside of China; if the employee is repaying debt
      secured by a mortgage; or if the employee's rent exceeds a designated percentage
      of his salary.





The
      Housing
      Accumulation Fund program was established by the PRC Government as a social
      welfare system in an attempt to address the problems of low employee salaries
      and insufficient savings for purchasing housing. It was designed as a stable,
      long-term reserve fund for improving housing conditions. The PRC Central
      Government State Council issued "Administrative Regulations for Housing
      Accumulation Funds" on March 24, 2002 to promote and more effectively manage
      the
      system. By the end of 2002, the regulations had been adopted in nearly 2,000
      counties across China and the total amount by the PRC Government deposited
      in
      the system had reached approximately RMB 500 billion (approximately U.S. $62.5
      billion).





HTF
      developed
      its first version of Housing Accumulation Fund software in 1996. By the end
      of
      2006, HTF had sold a total of over $6 million of such software. HTF currently
      holds registered PRC copyrights on this product category and sells to over
      150
      customers in over 25 provinces in China. HTF had $799,891 in revenues for this
      product category in the fiscal year ended December 31, 2006, and $899,875 in
      the
      fiscal year ended December 31, 2005. Approximately 69% of sales of Housing
      Accumulation Fund software were made to the ten largest purchasers and 53%
      to
      the five largest purchasers of this product.





Our
      Housing
      Accumulation Fund software provides a complete, computerized information
      management solution for the national Housing Accumulation Fund Management
      system. The Housing Accumulation Fund system involves four types of users:
      Housing Accumulation Fund Management Centers, which are local government
      agencies that manage and administer the system; Supervisors, as described above;
      designated commercial banks where the contributed funds are deposited and held;
      and the participating employees and employers, which include a large number
      of
      government offices, state-owned and private companies, for-profit and non-profit
      organizations that contribute to the funds (collectively "Units").





HTF
      offers
      four versions of its Housing Accumulation Fund software --- a "Center version",
      a "Supervisor version", a "Bank version" and a "Unit version". Each of these
      versions was developed to serve the specific needs of the various groups of
      participants, allowing them to create, manage and analyze a database of
      information relating to Housing Accumulation Funds, including employee
      information, deposits and withdrawals, individual loans, housing subsidies,
      housing purchases and sales, property records and other information. HTF
      believes it was the first company to bring Housing Accumulation Fund software
      to
      market, and, to our knowledge, it is still the only company in the industry
      that
      offers multiple, user-specific "versions" of this type of software.





The
      four
      versions of software are compatible with each other and with products sold
      by
      other companies, allowing data to be migrated and reconciled from one user's
      system to another.





7


Thus,
      the
      original data recorded by each Unit (including personal and account information
      for each employee participating in the system) is automatically submitted via
      telephone modem or through an internet network to its regional Center, which
      records the information in the designated employee account and automatically
      produces relevant documentation for each account. The documentation is then
      forwarded to the designated bank for the fund, which performs clearing and
      settlement using the Bank version software.





Supervisors
      can use their version of the software to retrieve relevant data from the Centers
      and the Banks and receive detailed information concerning deposits, withdrawals
      and loans through the statistical reporting and analytical
      functions.





At
      the end of
      each month, users can run checks through a special "module"


to
      reconcile their information with that of the other users in the system, thereby
      ensuring the accuracy of data at each point in the system. Centers can also
      use
      the software to produce statistical reports and perform analysis for
      decision-making.





Our
      software
      replaces the previous system of manual input and handling of information, which
      often produced errors, especially with the dramatic increase in the number
      of
      employees participating in the system, and which we believe was inefficient.
      We
      believe that by automating many of the recordkeeping functions which were
      formerly performed by hand, our software system provides more scientific,
      robust, and efficient management for the national Housing Accumulation Fund
      system and standardizes the flow of information among the various different
      types of users in the system.





The
      design
      and operation of any applications software must be based on certain operating
      systems and database platforms. The software structure design must also meet
      the
      needs of clients' current and future businesses. We believe that HTF's Housing
      Accumulation Fund software series meets these criteria. Our products are
      compatible with most international operating systems and database platforms,
      and
      are designed to meet the complicated needs of different customers, as described
      below. Certain characteristics of HTF's Housing Accumulation Fund software
      are
      set forth below:





·
            Operating
                system: supports Microsoft Windows and UNIX operating
                systems


·
            Development
                platform: Sybase Powerbuilder


·
            Database:
                simultaneously supports multiple databases such as Microsoft SQL
                Server,
                Informix, Oracle and Sybase.


·
            Software
                system structure: combines B/S (internet browser server maintained
                by the
                internet service provider) and C/S (the local area network server
                maintained by customer)





HTF's
      software products are designed
      with various different functions packaged in discrete modules; this modular
      design allows users to select individual functions according to their specific
      needs when purchasing our software. We believe that this ability to customize
      the functionality of our products to meet the specific needs of our customers
      will enable us to effectively address their changing requirements.




**Credit
      Guarantee Software**





HTF
      began to
      develop its credit guarantee software in 2002, at the request of the Shenzhen
      City Small-to-Medium-Sized Enterprises Credit Guarantee Center. The project
      was
      funded by a $36,000 (RMB 300,000) grant from the Shenzhen Science &
Technology Bureau, which we received in 2003. In September 2003, HTF released
      its first version of the software, "Credit Guarantee Management Information
      System," which was then successfully implemented in Shenzhen City
      Small-To-Medium-Sized Enterprises Credit Guarantee Center. The product generated
      approximately $552,700 (RMB 4,406,000) of revenue in 2006 and approximately
      $432,000 (RMB3,544,000) in revenue in 2005. Sales of the product accounted
      for
      26% of our revenues in 2006.





8


China's
      Credit Guarantee System was established by the National Economic and Trading
      Commission in 1999 in order to facilitate the financing of small and
      medium-sized enterprises ("SMEs"), which have difficulty obtaining bank loans.
      The government-sponsored Credit Guarantee System supplements the existing
      commercial credit guaranty industry, which is composed of various for-profit
      commercial enterprises. Under the Credit Guarantee System, government-funded
      local and regional agencies and nonprofit organizations provide guarantees
      to
      enable SMEs to obtain loans.





HTF's
      software provides a means of collecting and organizing data from SMEs and
      performs risk management functions, such as financial analysis, credit
      evaluation and risk estimation. The software is marketed for use both by
      participants in the government-sponsored system and by private, commercial
      credit guarantors.





At
      present,
      HTF's credit guarantee software is sold to 54 credit guarantee organizations
      in
      Shanxi, Jiangshu, Ningxia, Guangdong, Neimeng, Shandong and other provinces.
      In
      2006, approximately 76% of sales were to the ten largest customers for this
      product and approximately 36% of sales were to the five largest customers for
      this product.





As
      of the
      date of this prospectus, we are not aware of any other credit guarantee software
      available in China. Furthermore, we believe that our existing relationships
      with
      municipal credit guarantee organizations which purchase our software will enable
      us to retain a large market share for this product even if competitors enter
      the
      field. Based upon statements by the President of China Economics Technology
      Investment Guarantee Co., Ltd., we estimate that in several years there will
      be
      approximately 5,220 credit guarantee entities in China.





Assuming
      an
      average price of approximately $12,100, (RMB 100,000) per system, we estimate
      that the potential market for this product may be up to $63 million (RMB
      521,419,500).




HTF's
      credit
      guarantee management software is based on the Microsoft(R) Visual Studio.net
      software development platform and database technology. Some basic specifications
      of the software are as follows:





·
            Operating
                system: supports Microsoft Windows(R) operating system but can also
                be
                operated on IBM and HP UNIX operating
                systems.


·
            Development
                platform: Microsoft Visual
                Studio.net


·
            Database:
                capable of supporting various different databases such as Microsoft
                SQL
                Server, Oracle and Sybase.





As
      with our
      Housing Accumulation Fund software, HTF's credit guarantee software is packaged
      in modules, allowing users to "customize" their systems by selecting and
      purchasing particular functions to meet their needs. Presently available
      functions for this software include business flow control, risk management,
      data
      analysis, and decision-making features. It also has two general application
      modules: a document management module and an office management module, which
      provide assistance to customers in their daily operations.





9
 
 **Property
        Management Software**





HTF
      has
      developed property management software and real estate exchange and information
      management systems pursuant to the request of several of its Housing
      Accumulation Fund software customers and related parties. The software was
      originally developed as "custom" products and, to date, has been sold only
      on an
      occasional basis. Customers currently using our property management software
      include four government property management bureaus, one commercial real estate
      developer and one real estate agent. We did not sell any property management
      software in 2006.




In
      China all
      records related to rights to use real property are filed at local and regional
      "Real Estate Exchange Centers," which maintain official databases of such
      information, Real Estate Exchange Centers are subject to supervision by property
      management bureaus regulated by the PRC Ministry of Construction.





The
      primary
      function of our property management software is to enable users to access
      official government property ownership and use rights registries. Users can
      search for official documents on file and process and analyze information
      relating to property ownership. Although there were no sales of this product
      in
      2006, we have continued to update the software and believe that it could
      potentially be marketed to the general real estate industry in China. This
      would
      include Real Estate Exchange Centers, property management bureaus, commercial
      property management companies and a large number of real estate
      agents.





We
      estimate
      that in China there are over 3,000 Real Estate Exchange Centers, about 300
      property management bureaus, over 1,000 commercial property management companies
      and a large number of real estate agents. Based on the foregoing, we estimate
      that the total potential market for property management software and related
      systems integration services, which includes various applications software,
      system software platforms, systems integration and software upgrade services,
      is
      approximately $145 million (RMB 1.2 billion).




**Family
      Planning Software**





Family
      planning software is our newest product. HTF began developing this product
      in
      2003 for use by government family planning management departments, public
      education organizations and nonprofit family planning associations, and recently
      completed its first sales of the software. In 2006, we sold family planning
      software to one customer.





Family
      planning is a basic national policy which was officially instituted by the
      PRC
      government during the 1970's and 1980's. The PRC government has committed to
      building a national network for disseminating population and family planning
      information, and calls for 80% of China's 3,000 counties to have access to
      a
      central information system for child-bearing age women in the near future.





HTF's
      family
      planning software is designed for use in connection with such central
      information system. It creates a large-scale, networked database that can be
      accessed by users without connecting to the internet and automatically switches
      between the "online" and "offline" status. The system combines the "internet
      browser server and client local server" structure.





HTF's
      population and family planning management software provides such functions
      as
      data collection, processing, statistical reporting, search engine capabilities,
      an "early warning" system for monitoring rapid population increase and system
      maintenance. The system is used by different levels of government family
      planning management departments, public education organizations and family
      planning associations. The system is intended to automate the input, processing
      and analysis of information, thereby enabling faster information exchange than
      is currently possible under the existing manual input system. In addition,
      by
      creating a central database which can be accessed by various organizations
      throughout China, our system will allow for increased sharing of information
      and
      data resources, which we believe will improve the quality and consistency of
      services offered by the organizations participating in the network and allow
      such organizations to operate more efficiently.





10


Based
      upon recent population and demographic statistics, we estimate that the number
      of potential users of the software is over 400,000. Sales of family planning
      management software accounted for 2% of revenues in 2006.




**Systems
      Integration Services**





In
      addition
      to our four proprietary lines of software products, HTF also markets software
      products produced by other companies as a value-added reseller. In such cases,
      HTF provides value-added services, such as installation, configuration and
      similar systems integration services, for an additional charge over the "base"
      price of the software. HTF currently has agreements with Lenovo, Inc. (the
      largest information technology company in China) and Microsoft(R) Corporation
      pursuant to which we sell value-added systems integration services. Sales of
      such services accounted for approximately 36% of revenues in 2006. Approximately
      89% of sales of systems integration services were made to our 10 largest
      purchasers and 79% of sales were made to our five largest purchasers of these
      services.





**The
      Overall Computer Software Market in China**





The
      overall
      market for computer software in China has experienced rapid growth in recent
      years. Considered to be a "strategic industry" by the PRC government, the
      software industry has received strong support from the PRC government in the
      form of grants and other funding to individual companies, rewards, preferential
      tax treatment, patronage by government organizations seeking to establish
      computerized information and record-keeping systems and encouragement of
      software exports.





Modernization
      efforts in China, including the competitive transformation of many of China’s
      traditional industries following the country’s entry into the World Trade
      Organization in 2001, have greatly increased the demand from governments at
      the
      national, provincial and local levels for computerized data reporting and
      information management and exchange capabilities, and the demand from private
      industry for various operations-related software applications. Given China's
      status as a "developing nation," we believe that this growth in demand will
      continue well into the future. To date, much of the Chinese software industry's
      product offerings have consisted of highly specialized or customized products
      which target specific industries or geographic markets and have limited
      applicability to larger, more general audiences. Because design of these
      products requires specialized knowledge of the Chinese government and its
      programs and industries specific to China, we believe that barriers to market
      entry for foreign competitors are high.





In
      addition,
      the Chinese software market consists of a large number of small companies and
      is
      highly fragmented. We believe that this creates an opportunity for us to achieve
      growth and improve our profitability through consolidating acquisitions, which
      will enable us to realize economies of scale in our operations.





11


Under
      the
      Software Products Registration Administrative Regulations promulgated by the
      Ministry of Information Industry in 2001, no software products are permitted
      to
      be sold in the PRC unless they are registered with the local authority
      designated by the Ministry. All of our products are registered with the State
      Economic Development Bureau and Shenzhen Information Offices.





Software
      products include system software and applications software. System software
      markets are mostly dominated by foreign software manufacturers, while most
      Chinese software companies, including HTF, are dedicated to the applications
      software market. Applications software products can be divided into three
      categories: industry-specialized software, general enterprise software, and
      generally-used software. Industry-specialized software is designed for use
      in a
      particular industry such as telecommunications, finance or taxation. General
      enterprise software is designed to perform a specific, particular function
      (such
      as accounting) but can be used in a number of different industries.
      Generally-used software is designed to perform a basic computing function (such
      as internet web browsing, word processing or anti-virus protection) and is
      widely used by government, private enterprise and individuals for business,
      personal and recreational purposes. All of our products—Housing Accumulation
      Fund software, credit guarantee software, property management software and
      family planning software—are industry-specialized software
      products.





**HTF
      in the Overall Computer Software Market in China**





As
      a producer
      of our own software, from June 2000 through December 2010, we are eligible
      for a
      refund of 14% of the value-added tax we pays to be returned to us. If the
      returned funds are used for operations, these repayments are exempt from income
      tax.





HTF
      was
      designated a "National Certified Software Company" in 2002. Under the
      regulations promulgated by the Ministry, "National Certified Software Company"
      status is accorded only to software companies which own the intellectual
      property rights to their products and have at least 50% of their employees
      engaged in research and development. The Company recently hired additional
      employees, bringing our total number of employees to 83; we intend to hire
      additional Research and Development employees and thereby regain compliance
      with
      the requirement. While such status is not required to produce or sell software
      in the PRC, it entitled us to certain privileges and benefits.





**Housing
      Accumulation Fund Software Market**





China
      has 31
      provinces and 4 municipalities directly under the PRC central government, in
      which are located in 332 cities and 2,860 counties. According to the
      "Administrative Regulations for Housing Accumulation Funds," every city must
      have one Center and every county must have branch Centers. We estimate that
      every Center will have at least two banks to work with, that every Center will
      have about 1,500 Units (employers that deposit funds), and every branch Center
      will have 350 Units. Therefore, we estimate that there will be approximately
      332
      Centers, 2,860 branch Centers, more than 6,000 Banks (branches of the five
      national commercial Banks), and more than 1.5 million Units which can be
      potential users of our Housing Accumulation Fund software.





12


The
      cost of
      our Housing Accumulation Fund software to different types of users can vary
      significantly depending upon which function modules are selected and purchased.
      The four versions available incorporate different sets of functions and
      therefore vary substantially in price. For example, the price of the Unit
      version software is much less than that of the Center version software because
      it includes fewer function modules. In addition, the Center version software,
      which incorporates multiple modules, can vary in price depending upon the number
      and type of modules selected by the customer.





Based
      upon
      the foregoing, we estimate the potential total size of China's Housing
      Accumulation Fund software market at over $5 billion (RMB 42.3 billion). Within
      such market, the total potential market for applications software is
      approximately $430 million (RMB 3.53 billion), the total potential market for
      related systems integration services is approximately $4.4 billion (RMB 36.02
      billion), and the total potential market for other related software services
      is
      approximately $170 million.





Aside
      from
      large demand for software and systems integration services from Centers, Banks
      and employers, we believe that there may also be increasing demand for software
      and system upgrade services. While a recent reorganization of the Housing
      Accumulation Fund Center system has temporarily decreased the demand for our
      Housing Accumulation Fund software, we believe that, once the reorganization
      is
      completed, there will be an increase in demand for software updates and
      upgrades. Our goal is to maintain our market position and expand.





**Credit
      Guarantee Software Market**





Historically,
      China's SMEs have had difficulty gaining access to financing, particularly
      bank
      loans. This has hindered the development or even the survival of many SMEs.
      The
      PRC government's establishment of a national SME Credit Guarantee System was
      intended to provide a solution for SME financing.





On
      January 1,
      2003, the "Small-to-Medium-Sized Enterprises Promotion Act" was released. The
      law ensures legal protection for various credit guaranty organizations that
      provide credit guarantees to SMEs. The Act stipulates that county level and
      higher government organizations establish and promote a government-funded SME
      credit guarantee system, to supplement the commercial credit guaranty industry
      and create an environment conducive to SME financing. The system is composed
      of
      three levels of credit guarantee organizations: government credit guarantee
      entities, commercial credit guarantee entities, and inter-enterprise financing
      guarantee entities.





The
      number of
      credit guarantee entities has increased from 203 in 2000 to 582 in 2001, 848
      in
      2002, and over 1,000 by year-end 2003. These entities are spread over all of
      China's 31 provinces except Tibet, with annual growth of 125%, according to
      the
      Small-to-Medium Sized Enterprises Net website. These entities have guaranteed
      a
      total of approximately $14.3 billion (RMB 117.9 billion) of loans for 48,318
      enterprises. We believe that this high growth rate reflects strong government
      backing and pressing demands from SMEs for credit guarantees.





At
      the end of
      2006, only a small number of the more than 1,000 existing credit guarantee
      organizations have computerized systems for their operations flow and service
      management. According to the President of China Economic Technology Investment
      Guarantee Co., Ltd., the total market for credit guarantee software and systems
      integration could be as large as $68 million (RMB 558 million).





13


We
      believe
      that the credit guarantee software business will be HTF's fastest growing
      segment for the foreseeable future. The annual sales of this product were
      $552,700 (RMB 4,405,800) in 2006 and $432,490 (RMB 3,543,700) in 2005. As of
      the
      date of this prospectus, we are not aware of any other applications software
      companies that have developed a software system that targets the credit
      guarantee industry.




**Property
      Management Software Market**





As
      previously
      discussed, sales of our property management software to date have been sporadic,
      as our products have been designed to the particular specifications of a handful
      of customers; however, we believe our products will prove suitable for use
      by
      the general property management industry.





We
      estimate
      that in China there are over 3,000 Real Estate Exchange Centers, about 300
      property management bureaus, over 1,000 commercial property management companies
      and a large number of real estate agents. Based on the foregoing, we estimate
      that the total potential market for property management software and related
      systems integration services, which includes various applications software,
      system software platforms, systems integration and software upgrade services,
      is
      approximately $145 million (RMB 1.2 billion).





**Family
      Planning Software Market**





The
      family
      planning software market is composed of various levels of government family
      planning management departments, public education organizations and family
      planning organizations. Currently, there are approximately 2,860 counties in
      China, each of which has at least 130 branch offices dealing with population
      and
      family planning. We estimate the total number of potential users for family
      planning software at over 400,000.





Shortfalls
      in
      local and regional government budgets, combined with additional government
      funding requirements due to the recent outbreak of SARS (Severe Acute
      Respiratory Syndrome) in China, have resulted in cutbacks in funding for
      implementation of China's national family planning policies. As a result, the
      market in many provinces for family planning software has been weak over the
      past two years. Accordingly, we have concentrated our marketing efforts on
      certain provinces such as Guangdong Province, where strong economic development
      has generated higher tax revenues for local governments.





**Competition**





The
      market
      for software products is highly competitive, with a large number of new
      companies entering the Chinese market each year. Although competition is largely
      on the basis of technological innovation, functional design and price,
      conditions vary according to the type of software involved. Foreign companies
      currently have a clear advantage over Chinese companies in system software;
      however, in the field of applications software, where there is a great need
      for
      specialization, we believe that local Chinese software enterprises have unique
      advantages.





The
      first
      such advantage comes from product localization; the design of applications
      software requires an in-depth understanding of local business customs,
      management systems, culture and traditions. A second advantage enjoyed by local
      Chinese companies comes from service localization; because of the logistical
      barriers involved, it is more difficult for foreign companies to establish
      a
      national service network to support their products within China in a short
      time
      period.





14


HTF
      develops
      industry-specialized applications software and principally serves domestic
      Chinese customers. Our software products are, to a large extent, based on
      Chinese platforms and interfaces; we believe that it is more difficult for
      foreign businesses to develop and sell specialized applications software in
      China because they do not have the depth of understanding of local business
      customs.





At
      present,
      the domestic Chinese applications software market is very fragmented. There
      are
      many identified subsectors, such as accounting software, translation software,
      commercial software and Chinese system-based management software. We do not
      directly compete with companies producing products in other subsectors. In
      addition, many of our competitors and potential competitors are small companies
      with limited resources and undiversified product lines.





*Competition
      in the Housing Accumulation Fund Software Market*





Because
      Housing Accumulation Fund software is a very specialized market, there are
      only
      a small number of companies that compete in this market. Our three major
      competitors in this market are:





-
      Beijing
      Jintianpeng Software Technology Co Ltd. -- This company entered the Housing
      Accumulation Fund software market in 1999 through its relationship with clients
      in the oil industry. The Housing Accumulation Fund software is that company's
      only product.





-
      Beijing
      Zhongfangyuan Housing Reformation and Information Network Co Ltd. This company
      is a subsidiary of China Urban Housing System Reform Committee and entered
      the
      market in 1996. It has a strong industry background and, as a state-owned
      company, has access to government funding and resources; however, its business
      is limited to providing software services to the several municipalities directly
      under the control of the PRC central government.





-
      Xi'an
      Gildsoft Technology Development Co Ltd. -- This company was founded in 1998.
      Its
      key employees were formerly top-ranking personnel of Xi'an Province Housing
      Accumulation Fund Management Center. Therefore, this company has expertise
      in
      dealing with local governments and established relationships with many
      government agencies.





*Competition
      in the Credit Guarantee Software Market*





We
      are not
      aware of any other commercial software company that offers a product in direct
      competition with our credit guarantee software in China. Some credit guarantee
      centers have begun to use software platforms similar to ours; however, we
      believe that such platforms do not have the technical function, work-flow
      definition and product flexibility offered by our product.





*Competition
      in the Family Planning Software Market*





15


Our
      closest
      competition in the family planning software market is Shenzhen WanGuo Software,
      which developed the "Pregnant-age Women Pregnancy Planning Information
      Management System" in 1998 for customers such as Shenzhen Municipal Population
      Planning Commission which is part of Shenzhen Municipal Government and its
      subsidiaries. Due to the lack of post-sale service, however, Shenzhen Municipal
      Government has stated that it will change to a new system.





Another
      major
      competitor of ours is Shenzhen MaiKeLong: This company has a special
      relationship with the National Population Planning Commission. Their products
      are currently in use throughout Guangdong province as well as part of Beijing
      Municipality and Fujian Province. We believe that Shenzhen MaiKeLong is our
      most
      powerful competitor.





There
      are
      also a number of companies whose products are marketed only on a local or
      regional basis. These include: Luzhou HongSheng Technology, whose software
      products are only promoted in the 52 counties of Luzhou Municipality; Guizhou
      XinTian PC, which is located in Zunyi Municipality and its 13 counties;
      Zhengzhou YueTai Software, which is a local company whose products are sold
      in
      Henan Province; and Hunan JinQiao Software, which is a subsidiary of the Hunan
      Province Population Planning Commission.





*Competition
      in the Property Management Software Market*





Currently,
      there are three types of entities in China which are engaged in the development
      of property management software. The first category includes professional
      software companies, such as Huangzhou Aowei, HTF and Chuanda Software. The
      second category of entities currently involved in developing property management
      software is non-professional computer companies. Although such companies can
      develop systems for their customers, they lack the ability to maintain and
      update the software and focus on marketing hardware rather than software. The
      third category of property management software developers consists of government
      Housing Departments, which sometimes employ their own professionals to design
      and develop the software they use. In many cases, Housing Departments rely
      upon
      a single professional for software development and system maintenance, and
      therefore are limited by a lack of resources.




**Research
      and Development Activities**





Most
      of our
      products were originally developed according to specifications supplied by
      a
      particular customer, who also typically provides funding for the projects.
      If we
      judge that certain products have long-term market promotion value, we may invest
      additional time and our own resources in order to improve and commercialize
      them. In 2006, we invested an aggregate of $353,150 (RMB 2,815,000) in research
      and development activities, 78% of which was used for the improvement of our
      credit guarantee software and 22% of which was used to improve our Housing
      Accumulation Fund and Property Management software. In addition, we received
      $482,508 from our clients (RMB 3.73 million) for research and development of
      elements of our Housing Accumulation Fund software and credit guarantee
      software.





In
      2005, we
      invested an aggregate of $270,700 (RMB 2.2 million) in research and development
      activities, 57% of which was used for the improvement of our Housing
      Accumulation Fund and property management software and 43% of which was used
      to
      develop our credit guarantee and family-planning software. We also received
      $525,998 (RMB 4.35 million) from our clients for research and development in
      2005.





As
      of
      December 31, 2006, we employed 47 people who were engaged in research and
      development activities.





**Intellectual
      Property**





16


All
      of our
      products are protected under the PRC Copyright Law, which was enacted by the
      General Committee of the PRC National People's Representative Committee in
      1991,
      and the PRC Computer Software Protection Regulations ("Software Regulations")
      promulgated by the PRC State Counsel in 2001.





Under
      the PRC
      Copyright Law, a copyright protects both the design of a software product and
      the name of the product. Copyrights are granted for a term of 50 years from
      the
      date of first publication or, if there is no publication, from the date of
      development. Publication is not necessary to obtain copyright protection in
      the
      PRC.





Under
      the PRC
      Copyright Law, a copyright entitles its owners to obtain various injunctions
      against infringers. These include an injunction against further infringement,
      an
      injunction to preserve evidence of infringement and an injunction freezing
      the
      infringer's bank accounts. In addition, an aggrieved copyright owner can also
      seek monetary damages, either by means of a lawsuit or through arbitration.
      As
      previously discussed, there are many uncertainties in China's legal system,
      and
      enforcement of intellectual property rights has been difficult. In the event
      that we are unable to enforce our copyrights, we might not be able to obtain
      one
      or more of the foregoing forms of relief.





We
      have
      registered the following products with the National Copyrights Bureau of the
      PRC.





**Registered
                Name**
            **Registered
                No.**
            **Copyright
                No.**
            **Date
                of Issuance and Term**1
            HOUSING
                property exchange and information management system V2.0
            2001SR0147
            0007080
            01/15/2001;
                50 years from 08/01/20002
            HOUSING
                accumulation fund management software (Office version)
                V1.0
            2001SR0145
            0007078
            01/15/2001;
                50 years from 09/01/20003
            HOUSING
                accumulation fund management center software (C/S version)
                V3.0
            2001SR0222
            0007155
            01/31/2001;
                50 years from 04/13/19984
            HOUSING
                Estate Property Management Software V2.0
            2001SR0146
            0007079
            01/15/2001;
                50 years from 08/01/20005
            HOUSING(R)
                House Property Application Information Management (IC card) System
                (C/S
                Version) V1.0
            2001SR0138
            000138
            06/10/2002;
                50 years from 11/10/20016
            HOUSING(R)
                accumulation fund personal loan management system V1.0
            2001SR1184
            001184
            07/12/2002;
                50 years from 10/08/20017
            HOUSING(R)
                Record Management V1.0
            2001SR1205
            001205
            07/15/2001;
                50 years from 09/10/20018
            HTF
                OA System V1.0
            2001SR0464
            005555
            01/20/2003;
                50 years from 06/06/20029
            HTF
                Population & Family-planning Management Software V2.0
            2003SR12654
            017745
            12/09/2003;
                50 years from 05/01/200310
            CGC
                Credit Guarantee Management Information System (GMIS) V1.0
            2001SR12275
            017366
            12/02/2003;
                50 years from 08/01/200311
            HOUSING(R)
                Subsidy Management System V3.3
            2001SR9331
            014422
            09/01/2003;
                50 years from 01/27/200212
            HTF
                Credit Guarantee Management Software V10.0
            2006SR16626
            064292
            07/19/2006;
                50 years13
            Hengtaifeng
                Housing AccumulationFund Internet Management Software
            2006SR06986
            054652
            10/01/2005;
                50 years14
            HOUSING
                House Fund Management Center Software V3.60
            2006SR06985
            054651
            10/01/2004;
                50 years15
            HOUSING
                House Fund Management Software(Office Version) V2.0
            2006SR06984
            054650
            10/01/2004;
                50 years16
            Hengtaifeng
                Loan Risk Control Software V1.0
            2006SR06983
            054649
            05/20/2005;
                50 years17
            HTF
                Small Amount Loan Guarantee Management Software (PGMIS)
                V1.0
            2006SR06982
            054648
            50
                years








17


We
      are the
      sole owner of all of the above copyrights except as to our CGC Credit Guarantee
      Management Information System, which we own jointly with the Shenzhen
      Small-to-Medium-Sized Enterprises Credit Guarantee Center. Under the PRC
      Copyright Law, ownership rights to software vest in the party which develops
      the
      software unless otherwise agreed to. In the event that the two or more parties
      collaborate in developing software, then ownership rights to various portions
      of
      the software will vest in the respective party responsible for developing such
      portions or, if the portions are not severable, then jointly in all of the
      parties. In cases of joint ownership, rights and licensing fees are apportioned
      either pro rata or as otherwise agreed by the parties.





The
      following
      software products of HTF are registered with Shenzhen Software Industry
      Association, which is an organization approved by the PRC Ministry of
      Information. Registration with the Shenzhen Software Industry Association is
      recognized all over China.


Software
                Registered Names
              
              Registration
                No.HOUSING
                  accumulation fund management center software(C/S
                  Version) V3.0
              
              SZ
                  DGY-2001-0056HOUSING
                  property exchange and information management SoftwareV4.0
              
              SZ
                  DGY-2001-0058HOUSING
                  Accumulation Fund management software(Unit
                  version)
                  V 1.0
              
              SZ
                  DGY-2001-0057HOUSING
                  Property Management Software V2.0
              
              SZ
                  DGY-2001-0059HOUSING
                  accumulation fund management software(Unit
                  Version)
              
              SZ
                  DGY-2003-0156HOUSING
                  accumulation fund management center softwareV
                  3.60
              
              SZ
                  DGY-2003-0157HTF
                  Population and Family-planning Management Software V2.0
              
              SZ
                  DGY-2003-0523HTF
                  Credit Guarantee Management Software V1.0
              
              SZ
                  DGY-2003-0582HTF
                  Credit Guarantee Management Software V10.0
              
              SZ
                  DGY-2006-0587




18


**Vendors
      and Suppliers**





We
      make
      advances to certain of our suppliers for our purchases of materials in order
      to
      receive bulk discounts and reserve the unit cost of our supplies at a lower
      price. Our relationship with our vendors and suppliers is good, and we are
      not
      aware of any circumstance which would cause any of our vendors or suppliers
      to
      discontinue doing business with us. Because our products consist largely of
      intangible technology and data, our supply needs are minimal, consisting mostly
      of data storage media and packaging materials, are minimal, and can be easily
      be
      satisfied by many different vendors.





**Employees**





As
      of
      December 31, 2006, we had 83 employees, of whom 81 were full-time
      employees.





**Development
      and Operating Strategies**





Our
      development strategy is to:





·
            Continue
                to develop specialized applications software products in partnership
                with
                our clients.


·
            Maintain
                our positions in the Housing Accumulation Fund software market and
                the
                credit guarantee software market, and continue to increase our market
                share for these products.




Achieve
      product diversification and economies of scale by acquiring other software
      companies and consolidating their operations with our own.


Our
      business plan contains the following specific operating strategies:





**Marketing
      Strategy**





Our
      products
      and services are currently marketed and sold directly to our customers primarily
      through our employee sales force. Our sales representatives identify and contact
      potential customers by telephone, brochure mailings, and personal meetings.
      Potential customers are also invited to visit our facilities. In addition,
      we
      participate in various activities organized by the administrative bureaus to
      explore new business opportunities.





The
      specifics of our marketing strategy are as follows:





·
            Monitor
                changes in market demand to be able to timely establish and adjust
                our
                marketing system and sales network.


·
            Continue
                to target government and other large, "strategic" clients through
                joint
                design and development efforts.


·
            Develop
                strategic partnerships with other well-known, reputable information
                technology manufacturers.


·
            Promote
                our products through media, our company website and industry
                exhibitions.





**Sales
      Strategy**





Since
      our
      applications software is industry-specialized, our basic sales model principally
      focuses on the "direct sale" method, complemented by agent sales. Our main
      sales
      technique is to provide individual clients with targeted, integrated solution
      plans for achieving their computerization objectives.





19


**Pricing
      Strategy**





We
      currently
      employ three different pricing strategies:





Pricing
      policy: for products with the same technology content as competitors, we
      generally set our price at the same level as or slightly higher than that of
      the
      highest-priced competitor. It is our policy not to engage in or precipitate
      any
      price wars with other companies; however, we may occasionally offer lower prices
      in order to gain customers who we feel could have an important influence on
      our
      long-term development strategy.





Pricing
      by
      the size of customers: Generally, the larger the customer, the greater the
      expense for software installation, testing, training and maintenance;
      accordingly, we set different price levels based on the size of our customers.
      In the case of Housing Accumulation Fund software, the size of the user is
      measured by the number of employees participating in the fund; the larger the
      number of employees, the higher the price we charge for our
      software.





Pricing
      by
      the software module: Each module of our software has a separately quoted price.
      Customers can choose to purchase different modules according to their
      needs.





We
      do not
      charge separately for systems-integration or training services related to sales
      of our products. We do charge for such services when they are provided in
      connection with sales of other companies' products; such charges are recognized
      as part of the overall price charged for those products.





**Product
      Strategy**





Our
      business plan includes the following strategies for product
      development:





·
            Continuously
                invest in product research and development, and develop new generations
                of
                software systems that fit future business
                models.





·
            Pursue
                development of a number of different
                products.





·
            Study
                competitors and their products and promote innovation and originality
                in
                our product concept and technology.





·
            Develop
                different versions of our software specifically designed for various
                different groups of users.





**Strategic
      Alliances**




We
      currently have the strategic alliances described below:




20





We
      are a
      licensed "Microsoft(R) OEM System Builder", which allows us to make bundled
      sales of the Microsoft Windows and SQL Server software products together with
      our own products. As an authorized member of the "Microsoft(R) dealer
      coalition," we can also sell other Microsoft software products on a stand-alone
      basis. Our Housing Accumulation Fund software received a Windows(R) Server
      2003
      product certification, which grants us the right to use the "Windows(R) 2003"
      logo in conjunction with sales of our own products. We believe that this
      significantly increases the value of our products.





On
      August 30,
      2003, we signed a PartnerWorld Agreement with IBM, pursuant to which we pair
      the
      IBM P-server product together with our Housing Accumulation Fund software to
      create the "IBM-HTF Housing Accumulation Fund System Solution."





Lenovo
      Group
      is China's largest information technology manufacturer. On March 24, 2003,
      HTF
      entered a Cooperative Agreement with Lenovo and became a value-added service
      provider of Lenovo's server storage products. Together with Lenovo, we provide
      data storage solutions for clients in such market sectors as government,
      education, small businesses, finance, telecommunications, among others. Under
      the terms of the agreement, we are entitled to sell Lenovo's products with
      Lenovo's brand as an independent sales agent and bundled products which
      incorporate Lenovo's products. We purchase Lenovo's products at up to a discount
      of up to 15%, depending on the quantity purchased and other factors. We also
      provide our own maintenance services to purchasers of such products.





On
      November
      12, 2002, we signed a cooperative development agreement with the Shenzhen SME
      Credit Guarantee Center for the purpose of developing a credit guarantee
      information system for SMEs. Under the agreement, both parties jointly own
      the
      copyright of the cooperative product and share the post-tax profits from sales
      of the product such that 20% go to the Center and 80% to HTF until the
      expiration of the copyright. The term of the contract is from August 1, 2003
      to
      December 31, 2052.





We
      intend to
      continue to pursue strategic partnerships with other domestic and international
      information technology companies.





**Strategic
      Acquisitions**




On
      January
      25, 2007, we signed a letter of intent with American Wenshen Steel Group, Inc.
      ("AWSG"), a Delaware Corporation, to acquire Chaoyang Liaoyang Special Steel
      Co.
      Ltd., a company that is registered in the People Republic of China and a wholly
      owned subsidiary of AWSG. The closing of the acquisition is contingent on
      approval from our Board of Directors of and AWSG along with the satisfactory
      exchange of due diligence materials between the two parties. We believe this
      reorganization will bring value to our shareholders. AWSG is a high-tech company
      that produces high quality moulded and forged steel. The company is also a
      member company of China Die and Mould Industry Association.




**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**





We
      lease
      approximately 640 square meters of space for HTF's executive offices and
      operations in Shenzhen, China from Shenzhen Chuangwei-RGB Electronic Co., Ltd.
      The lease is for a term of two years, from February 2006 to February 2008.
      Monthly rent under the lease is approximately $4,850 (RMB 37,500) (including
      property management and maintenance fees).





21


On
      December
      15, 2003 HTF entered into a purchase agreement for approximately 600 square
      meters of space which was to be used as our executive offices and for operations
      at Shenzhen Municipal Tian'an Digital Chuang Ye Garden Suite A, Room 802. The
      property was purchased for $513,577 (RMB 4,250,724). In connection with the
      purchase, Mr. Yuan Qing Li obtained a loan from China Xing Ye Bank, Shenzhen
      Xiang Mi Hu Branch in the amount of $359,129 (RMB 2,970,000) for HTF and HTF
      granted a mortgage on the property to secure repayment of the loan. The Company
      sold the property on April 20, 2005 for $540,050 (RMB4,463,230). The mortgage
      on
      the property was released prior to the time of the sale.





HTF
      leases a
      sales office in Beijing, China on a yearly basis. The current term is from
      September 1, 2006 to August 31, 2007 at a monthly rent of $896.





HTF
      also owns
      approximately 170 square meters of office space at Room 202 and 702 of Xu Yuan
      #27, Unit 4 of Sunny Garden, Dian Chi Rd, Kunming, China. The property is used
      as a sales office. HTF purchased the property for $25,227 (RMB 209,027.73)
      on
      January 15, 2001. On November 5, 2003, HTF paid another $3,560 (RMB29,461)
      to
      cover the shortfall between the commercial property price and governmental
      subsidized property price, as local real property policy requires.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**





Neither
      the
      Company nor any of our subsidiaries is currently a party to any pending legal
      proceeding.




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




On
      March 7,
      2006, we held a special shareholder meeting at which our shareholders approved
      the name change from “Moving Bytes, Inc.” to "China International Enterprises
      Inc.", the trading under the symbol "CIETF" and a 1:32 reverse split of its
      outstanding common stock.





On
      November
      13, 2006, we held a special shareholder meeting at which our shareholders
      approved our name change from “China International Enterprises Inc.” to our
      current name, “China Software Technology Group Co., Ltd.,” and approved our
      change of jurisdiction of incorporation from Canada to the State of
      Delawar.




No
      other
      matters were presented for a vote or consent of our shareholders in
      2006.








22


**PART
      II**





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





Market
      Information





On
      November 16, 2006 we begin trading our common stock on the Over-the-counter
      Bulletin Board under the symbol “CSWT.OB”. Prior to that, we have been quoted on
      the Over the Counter Bulletin Board since September 7, 1999, first, under the
      symbol "YDSLF", under the symbol "ECNXF" from June 20, 2000 through July 31,
      2002, under the symbol "MBYTF" from July 31, 2002 to March 22, 2006 and under
      the symbol "CIETF" from March 23, 2006 to November 15, 2006.





For
      the
      quarter ended December 31, 2006, the high bid price was $3.06 and the low bid
      price was $2.95.





The
      high
      and low bid prices for the fiscal quarters for fiscal years ended on December
      31, 2005 and December 31, 2006 are set forth below:





Quarter
                Ended
            High
            Low03/31/2005
            $0.04
            $0.00206/30/2005
            $0.18
            $0.04109/30/2005
            $0.13
            $0.02512/31/2005
            $0.03
            $0.01003/31/2006
                (1)
            $1.70
            $1.1106/30/2006
            $1.20
            $0.3009/30/2006
            $0.75
            $0.2512/31/2006
            $1.12
            $0.25




(1)
            The
                Common Shares were consolidated on a 1 for 32 basis on March 23,
                2006.




The
      above
      prices reflect inter-dealer prices, without retail mark-up, mark-down or
      commission and may not necessarily represent actual transactions.





Holders





As
      of
      December 31, 2006, we had approximately 81 stockholders of record. At that
      date,
      we had 21,502,679 shares of common stock outstanding.





Dividends





We
      have
      not paid dividends. Declaration of dividends on our common stock is at the
      discretion of the Board of Directors. We have never paid dividends on our common
      stock and do not anticipate paying any dividends in the foreseeable
      future.





Equity
      Compensation Plan Information





*The
      following table summarizes the equity compensation plans under which our
      securities may be issued as of the date of the Annual Report on Form 10-KSB.*




23




******Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            Number
                of securities remaining available for future issuance under
                equitycompensation
                plans (excluding securities reflected in column (a))Equity
                compensation plans approved by security holders
            
            
            5,000,000
            
            $
            0.96
            
            
            4,989,219Equity
                compensation plan not approved by security holders
            
            
            -0-
            
            
            --
            
            
            --





On
      May 7,
      2003, our Board of Directors approved the Stock Option Plan (2003) (the "2003
      Plan"). The 2003 Plan authorized the granting of 5,000,000 options to purchase
      common stock. The 2003 Plan subsequently received shareholder approval at an
      annual meeting held on June 30, 2003. As of December 31, 2006, no options to
      purchase common stock had been issued under the 2003 Plan. All of the remaining
      options available for grant pursuant to the terms of the 2003 Plan may be
      granted without further regulatory or stockholder approvals.





On
      March
      11, 2005, the Company granted one director 10,781 stock options vesting over
      5
      years proportionately. The option exercise price is $0.03 per share. The fair
      value of the shares at the time of granting of the options was $0.02 per
      share.





Recent
      Issuances of Securities





There
      were no sales of unregistered securities by the Company during the year ended
      December 31, 2006.





Transfer
      Agent





The
      Company's stock transfer agent is Interwest Transfer Company, located at 1981
      East Murray Holloday Rd., Suite 100, Salt Lake City, UT 84117. Their telephone
      number is (801)272-9294, and their facsimile number is
      (801)277-3147.





Penny
      Stock Regulations





The
      Commission has adopted regulations which generally define a “penny stock” to be
      an equity security that has a market price of less than $5.00 per share. The
      Company’s common stock, when and if a trading market develops, may fall within
      the definition of penny stock and be subject to rules that impose additional
      sales practice requirements on broker-dealers who sell such securities to
      persons other than established customers and accredited investors (generally
      those with assets in excess of $1,000,000, or annual incomes exceeding $200,000
      or $300,000, together with their spouse).





For
      transactions covered by these rules, the broker-dealer must make a special
      suitability determination for the purchase of such securities and have received
      the purchaser’s prior written consent to the transaction. Additionally, for any
      transaction, other than exempt transactions, involving a penny stock, the rules
      require the delivery, prior to the transaction, of a risk disclosure document
      mandated by the Commission relating to the penny stock market. The broker-dealer
      also must disclose the commissions payable to both the broker-dealer and the
      registered representative, current quotations for the securities and, if the
      broker-dealer is the sole market-maker, the broker-dealer must disclose this
      fact and the broker-dealer’s presumed control over the market. Finally, monthly
      statements must be sent disclosing recent price information for the penny stock
      held in the account and information on the limited market in penny stocks.
      Consequently, the “penny stock” rules may restrict the ability of broker-dealers
      to sell the Company’s common stock and may affect the ability of investors to
      sell their common stock in the secondary market.





24




**ITEM
      6.**   **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**





This
      section includes a discussion of our operations that may contain forward-looking
      statements that anticipate results based on management’s plans that are subject
      to uncertainty. The
      following discussion should be read in conjunction with our consolidated
      financial statements for the years ended December 31, 2005 and December 31,
      2006 and notes thereto included in this report. This discussion and analysis
      contains predictive statements that involve risks, uncertainties and
      assumptions. Actual results may differ materially from those anticipated in
      these predictive statements as a result of certain factors, including, but
      not
      limited to, those set forth under "Risk Factors" and elsewhere in this
      report.





**Overview**





We
      are a
      Delaware corporation since November 14, 2006. Prior to that, we were organized
      under the laws of Canada.





On
      August
      18, 2005, we acquired a Delaware holding company called China International
      Enterprises Corp. through a share exchange transaction. The Delaware holding
      company owned all the stock of HXT, which in turn owned all the stock of HTF.





On
      November 14, 2006, we changed our name from China International Enterprises
      Inc.
      to China Software Technology Group Co., Ltd. and changed our domicile such
      that
      we were, from that point forward, organized not under the laws of Canada but
      under the laws of Delaware.





Because
      we indirectly acquired all of the shares of HTF, through its holding companies,
      in the share exchange transaction on August 18, 2005, we are now engaged,
      through our subsidiaries, in the business of HTF. Neither we nor our
      subsidiaries is engaged in any business other than serving as a holding company
      and management company for, and raising capital for, HTF. For this reason,
      the
      following discussion is focused on HTF.





We
      have
      three main core products, namely:





·
            Housing
                Accumulation Fund software;


·
            Credit
                guarantee management software; and


·
            Family
                planning software





We
      also
      provide systems integration services.





Housing
      Accumulation Fund Software, credit guarantee software and family planning
      software accounted for 36%, 26% and 2%, respectively, of our sales revenue
      for
      the fiscal year ended December 31, 2006, as compared to 48%, 23% and 2% of
      our
      total sales revenue for the fiscal year ended December 31, 2005.




25


We
      have
      also developed a property management software at the request of some of our
      Housing Accumulation Fund software and related customers.  Sales of
      property management software have been sporadic to date, and did not generate
      significant revenues in 2006.




We
      do not
      charge our customers who have purchased our proprietary software products
      separately for related systems-integration services. However, we charge for
      our
      services as a value-added reseller of other companies’ products. Sales of
      value-added systems-integration services accounted for approximately 36% of
      our
      revenues for the fiscal year ended December 31, 2006 as compared to 27% for
      the
      same period in 2005.




**Results
      of Operations--** **Years
      ended December 31, 2006 and 2005**




For
                the 12 months ended December 31,2006
            2005
            ChangeUS$
            US$
            %Net
                Sales
            2,151,435
            1,880,143
            14.4Gross
                Profit
            1,154,041
            1,307,779Operating
                Income
            10,563
            49,593
            -78.7Net
                Income
            94,190
            170,573
            -44.8Gross
                Margin
            53.6%
            69.6%Net
                Margin
            4.4%
            9.0%







Net
      Sales




Net
      Sales
      increased by $271,292, or approximately 14.4%, from $1,880,143 for the fiscal
      year ended December 31, 2005 to $2,151,435 for the fiscal year ended December
      31, 2006. The primary reasons for the increase in net sales in 2006 are (i)
      a
      $108,153 increase in revenue from sales of our credit guarantee management
      software and (ii) a $262,767 increase in revenue from sales of our systems
      integration services, which were partially offset by a decrease of $145,141
      in
      revenue from sales of our Housing Accumulation Fund software.





*Sales
      of Housing Accumulation Fund Software*





Sales
      of
      our Housing Accumulation Fund Software decreased by $120,084, or 13.3%, from
      $899,975 in 2005 to $779,891 in 2006. This decrease was largely due to our
      introduction in 2006 of the Network Management Software version of our Housing
      Accumulation Fund product for use by the Housing Accumulation Fund Management
      Centers. Because the process of adoption of this new product takes time, we
      have
      seen what we believe is a temporary decrease in sales. As more of our customers
      complete process of upgrading to the new product, we anticipate that the sales
      of our Housing Accumulation Fund Software will increase. Also, many of the
      Housing Accumulation Fund Management Centers are undergoing an internal audit
      and their time and efforts have been focused away from the transactions between
      banks and companies who pay into the Housing Accumulation Fund. Once their
      attention reverts back to the Housing Accumulation Fund, we anticipate that
      sales of this software will consequently improve.




26


*Sales
      of Credit Guaranty Management Software*




Sales
      of
      our credit guaranty management software were $552,684 in 2006, an increase
      of
      $120,194, or 27.8%, from $432,490 in 2005. Small- to medium-sized enterprises
      (“SMEs”) in the PRC have traditionally faced difficulty in gaining access to
      financing, especially bank loans, because of the dearth of publicly-available
      credit information about them and this has hindered the development of many
      SMEs. The Chinese government recently established a national SME credit
      guarantee system pursuant to the “Small- to-Medium-Sized Enterprises Promotion
      Act”. An increasing number of credit guarantee agencies have been adopting this
      System and have been using our credit guarantee management software to ascertain
      the credit-worthiness of those of their customers that are SMEs. We see this
      trend as growing and anticipate more customers in 2007. Additionally, we have
      introduced a credit guarantee standard information management software product,
      which is targeted at small credit guarantee agencies. Our objective in
      introducing this application is to maintain our market share by covering a
      greater number of SMEs. We expect this software to contribute to the sales
      of
      our credit guarantee management software.




*Sales
      of Family Planning Software*




Sales
      from our family
      planning software was
      $34,806 for the fiscal year ended December 31, 2006, a decrease of $4,354,
      or
      11%, from $39,160 in 2005. We did not gain new
      family planning software customers in fiscal 2006, and at the same time the
      demand from our existing customers decreased .




*Sales
      of systems integration services*




Sales
      from our systems integration services were $784,052 for the fiscal year ended
      December 31, 2006, an increase of $276,887 or 54.6% from $507,165 in 2005.
      We
      gained three
      new customers for these services in fiscal 2006, and at the same time the
      demands for our systems
      integration services
      from an important existing customer increased significantly.





Gross
      Profit





Gross
      profit for the fiscal year ended December 31, 2006 was approximately $1,154,041,
      representing a decrease of $153,738 or approximately 11.8% from $1,307,779
      for
      2005. The decrease in gross profit was primarily due to a decrease in revenue
      from sales of our Housing Accumulation Fund Software.





For
      the
      fiscal year ended December 31, 2006, approximately 56% of our total sales were
      made to our 10 largest customers, approximately 44% of our sales were made
      to
      our five largest customers, and approximately 19% of sales were made to our
      largest customer. During the fiscal year ended December 31, 2005, approximately
      40% of our total sales were made to our 10 largest customers, approximately
      27%
      of our sales were made to our five largest customers, and approximately 10%
      of
      sales were made to our largest customer.





27


In
      2006,
      approximately 69% of sales of our Housing Accumulation Fund software were made
      to the ten largest purchasers, 53% to the five largest purchasers, and 16%
      to
      the largest purchaser. In 2005, approximately 51% of sales of our Housing
      Accumulation Fund software were made to our ten largest purchasers of the
      product, 32% to our five largest purchasers, and 8% our largest
      purchaser.





In
      2006,
      approximately 76% of sales of our Credit Guarantee Software were made to our
      10
      largest customers, 60% to our five largest customers, and 36% to our largest
      customer. In 2005, approximately 78% of our sales were to our 10 largest
      customers, 63% of our sales to our five largest customers, and 44% to our
      largest customer.





In
      2006,
      approximately 89% of sales of our systems integration services were made to
      our
      10 largest purchasers, 79% to our five largest purchasers, and 54% to our
      largest purchaser. In 2005, approximately 76% of sales were to our 10 largest
      purchasers, 61% to our five largest purchasers, and 20% to our largest
      purchaser. }





Cost
      of sales





Cost
      of
      sales increased by approximately 74%, to $997,394 for the fiscal year ended
      December 31, 2006 from approximately $572,364 in 2005, primarily due to the
      increase in sales described above. The effect of the increase in sales was
      increased because a higher proportion of our 2006 sales were sales of system
      integration services, which have a higher cost than sales of
      software.





The
      cost
      of sales of our Housing Accumulation Fund software increased by $90,404, or
      73.34%, from $123,257 in 2005 to $213,661 in 2006. The increase in cost of
      these
      sales is largely due to a Housing Accumulation Fund software project we
      undertook in Guangdong Province, at a cost of approximately $130,000.





The
      cost
      of sales for our systems integration services increased $305,461, or 69.92%,
      to
      $742,281 for the fiscal year ended December 31, 2006 from $436,820 for the
      same
      period in 2005, due primarily to the increase in sales described above, and
      to
      the increase in 2006 in the proportion of systems integration services sales
      compared with software sales.





Selling,
      General and Administrative Expenses





Selling,
      general and administrative expenses were approximately $1,143,478 for the fiscal
      year ended December 31, 2006, or approximately 53% of net sales, compared to
      approximately $1,258,186, or approximately 67% of net sales, for the fiscal
      year
      ended December 31, 2005.





28


The
      changes in selling, general and administrative expenses are attributable to
      a
      $230,914 decrease in general and administrative expenses, a $82,469 increase
      in
      research and development expenses and a $33,741 increase in selling
      expenses.





General
      and administrative expenses decreased to $407,887 from $638,805 in 2005 is because
      of we paid $250,000 in acquisition expenses in fiscal 2005, and there is no
      such
      expense in fiscal 2006.





In
      fiscal
      2006, research and development expenses increased to $353,141 from $270,672
      in
      fiscal 2005 because of the hiring of research and development staff.





Selling
      expense increased to $382,485 from 348,709 in 2005 due to the increase in sales
      and revenues as mentioned above.





Non-Operating
      Income





Non-operating
      income decreased from 120,980 in 2005 to $83,627 in 2006, due to a $39,353
      decrease in Value Added Tax (VAT) refund received from the government of the
      PRC. We received a refund in the amount of $51,328 in 2006, and a refund in
      the
      amount of $90,681 in 2005. The value added tax refund is given by the government
      to support the software industry. The decrease in the tax refund is primarily
      due to the decrease in revenues from our Housing Accumulation Fund software
      described above.








Income
      Taxes




The
      Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
      the
      recognition of deferred tax assets and liabilities for the expected future
      tax
      consequences of events that have been included in the financial statements
      or
      tax returns. Under this method, deferred income taxes are recognized for the
      tax
      consequences in future years of differences between the tax bases of assets
      and
      liabilities and their financial reporting amounts at each period end based
      on
      enacted tax laws and statutory tax rates applicable to the periods in which
      the
      differences are expected to affect taxable income. Valuation allowances are
      established, when necessary, to reduce deferred tax assets to the amount
      expected to be realized.




According
      to the Provisional Regulations of the People's Republic of China on Income
      Tax,
      the Document of Reductions and Exemptions of Income Tax for the Company has
      been
      approved by the Shenzhen local tax bureau, the Company is exempted from income
      tax in 2003 and 2004. The Company will also have half of its income taxes exempt
      from 2005 to 2007. According to the Provisional Regulations of the People's
      Republic of China on Income Tax, the taxable income for the years ended December
      31, 2006 and 2005 are negative, so no income tax is incurred.





29


**Liquidity
      and Capital Resources**





We
      have
      historically financed our operations and capital expenditures through cash
      flows
      from operations and bank loans. The Company’s cash flows from operations had so
      far been sufficient to keep pace with the growth of our business and provide
      sufficient working capital to meet increased new orders and purchase necessary
      new equipment.





We
      regularly review our cash funding requirements and attempt to meet those
      requirements through a combination of cash on hand; cash provided by operations,
      available borrowings under bank lines of credit and possible future public
      or
      private equity offerings. At times, we may evaluate possible acquisitions of,
      or
      investments in, businesses that are complementary to ours, which may require
      the
      use of cash. We believe that our cash, operating cash flows, credit arrangements
      taken together, provide adequate resources to fund our ongoing operating
      expenditures for the next 12 months. In the event that they do not, we may
      require additional funds in the future to meet our working capital needs or
      for
      other purposes and may seek to raise such additional funds through the sale
      of
      public or private equity, as well as from other sources.





As
      of
      December 31, 2006, we had $241,338 in cash and cash equivalents, representing
      a
      decrease of $134,518, or approximately 36%, from $375,856 one year prior. The
      primary reason for the decrease is an increase of $167,860 in advances to
      certain vendors, described below.




We
      believe that our working capital, which was $1,745,662 as of December 31, 2006,
      together with the cash flows provided by our continued operations will be
      sufficient to meet our working capital requirements in 2007 and the foreseeable
      future. We will continue to rely on our cash flows from operations to meet
      our
      liquidity and capital needs in the next 12 months.








Cash
      and cash equivalents





Cash
      and
      cash equivalents decreased from $375,856 as of the fiscal year ended December
      31, 2005 to $241,338 as of the fiscal year ended December 31, 2006. The primary
      reasons for the decrease in cash and cash equivalents were a $167,860 increase
      in advances to certain vendors.





Net
      cash
      used by operating activities for the fiscal year ended December 31, 2006 was
      $123,994 as compared to net cash provided by operating activities of $40,648
      for
      fiscal year ended December 31, 2005. The increase in net cash used by operating
      activities in fiscal 2006 was mainly a result of a $72,077 increase in accounts
      receivable and $205,678 in other assets used, partially offset by a $68,514
      decrease in accounts payable.





30





Net
      Cash from Financing Activities





Net
      cash
      provided from financing activities for fiscal 2006 was $4,000, as compared
      to
      net cash used in financing activities of $122,046 in fiscal 2005. The increase
      in net cash provided from financing activities in 2006 was primarily a result
      of
      a $4,000 increase in cash contribution to capital.





Net
      Cash from Investing Activities





Net
      cash
      used in investing activities for fiscal 2006 was $24,239 as compared to $258,777
      provided by financing activities for fiscal 2005. The increase in net cash
      used
      in investing activities in fiscal 2006 was primarily a result of acquiring
      additional property and equipment, including one vehicle and several computers.




Accounts
      Receivable





The
      increase in accounts receivable from $431,218 for the fiscal year ended December
      31, 2005 to $519,546 for the fiscal year ended December 31, 2006 is primarily
      attributable to the increase in net sales from 2005 to 2006 and to our three
      new
      systems-integration services customers, who have a longer credit term as
      compared with other customers.




Other
      Assets





Other
      assets include advances to suppliers and prepaid expense. As of December 31,
      2006, we had other assets of $249,148, representing an increase of $211,471
      compared with other assets of $37,677 as of one year earlier. This increase
      was
      due primarily to an increase in advances to certain suppliers of materials
      we
      use in our operations so that we qualify to receive a bulk discount on these
      purchases. Once we have received the materials, we subtract the purchase price
      of those materials from the advance on our books. As of December 31, 2006,
      advances to suppliers amounted to $248,833, and prepaid expense amounted to
      $315
      at.





Accounts
      Payable





Accounts
      payable and accrued expenses decreased from $140,899 as of December 31, 2005
      to
      $74,846 as of December 31, 2006, primarily as a result of a decrease in our
      purchases of materials and the fact that we made payments to some of our
      suppliers used in 2006 prior to the beginning of that year.





Payroll
      Payable





Payroll
      payable increased from $46,433 as of December 31, 2005 to $53,143 as of December
      31, 2006, primarily as a result of an increase in our employees.





31


Unearned
      revenue





The
      Company's revenue recognition policies are in compliance with Staff Accounting
      Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to
      customers or services has been rendered when a formal arrangement exists, the
      price is fixed or determinable, the delivery is completed, no other significant
      obligations of the Company exist and collectibility is reasonably assured.
      Payments received before all of the relevant criteria for revenue recognition
      are satisfied are recorded as unearned revenue. As of December 31, 2006,
      unearned revenue is $141,604, and it includes $98,605 of customer deposit and
      $42,999 of unearned software service revenue. The software service revenue
      were
      approximately $42,999 during year ended December 31, 2006 and insignificant
      during year ended December 31, 2005.








**Critical
      Accounting Policies and Estimates**




Accounts
      receivable




The
      Company maintains reserves for potential credit losses on accounts receivable.
      Management reviews the composition of accounts receivable and analyzes
      historical bad debts, customer concentrations, customer credit worthiness,
      current economic trends and changes in customer payment patterns to evaluate
      the
      adequacy of these reserves. Reserves are recorded primarily on a specific
      identification basis. Allowance for doubtful debts amounted to $199,299 as
      of
      December 31, 2006.




Inventory






Inventory
      comprised software, compact discs, computer servers and macro-storage equipment.
      Inventory is valued at the lower of cost (determined on a weighted average
      basis) or market. Management
      compares the cost of inventory with the market value and allowance is made
      for
      writing down the inventory to their market value, if lower. Inventory is
      typically sold through distributors.




Inventory
      as of December 31, 2006 consisted of the following:







Raw
                and packing materials
            
            $
            48,333Finished
                goods
            
            $
            397,700Work
                in process
            
            $
            2,929Total
            
            $
            448,962






Property
      & Equipment




Property
      and equipment are stated at cost. Expenditure for maintenance and repairs are
      charged to earnings as incurred; additions, renewals and betterments are
      capitalized. When property and equipment are retired or otherwise disposed
      of,
      the related cost and accumulated depreciation are removed from the respective
      accounts, and any gain or loss is included in operations. Depreciation of
      property and equipment is provided using the straight-line method for
      substantially all assets with estimated lives of: 39
      years
      for building, 5 or 7 years for machinery and equipments, and 7 years for
      vehicles.




32


Net
      property and equipment as of December 31, 2006 and 2005 are as
      follows:







**2006**
            
            
            **2005**Building
                & improvement
            
            $
            36,347
            
            
            35,148Machinery&
                equipment
            
            
            211,643
            
            
            195,417Vehicles
            
            
            88,024
            
            
            72,501Furniture
                and fixture
            
            
            25,476
            
            
            23,807Software
            
            
            277,087
            
            
            267,230638,577
            
            
            594,103Less:
                Accumulated depreciation
            
            
            (326,105
            )
            
            (240,423
            )$
            312,472
            
            
            353,680




Depreciation
      expenses for the years ended December 31, 2006 and 2005 were $76,110 and
      $60,814, respectively.




Software
      development costs




We
      charge
      costs incurred internally to creating a computer software product or develop
      an
      enhancement to an existing product to research and development expense until
      technological feasibility for the respective product is established. Thereafter,
      all software development costs are capitalized and reported at the lower of
      unamortized cost or net realizable value. Capitalization ceases when the product
      or enhancement is available for general release to customers.




We
      make
      on-going evaluations of the recoverability of its capitalized software projects
      by comparing the amount capitalized for each product to the estimated net
      realizable value of the product. If such evaluations indicate that the
      unamortized software development costs exceed the net realizable value, we
      write
      off the amount which the unamortized software development costs exceed net
      realizable value. Capitalized and purchased computer software development costs
      are being amortized ratably based on the projected revenue associated with
      the
      related software or on a straight-line basis over three years, whichever method
      results in a higher level of amortization.




33


Revenue
      recognition




License
      Revenue. The Company recognizes revenue from license contracts when a
      non-cancelable, non-contingent license agreement has been signed, the software
      product has been delivered, no uncertainties exist surrounding product
      acceptance, fees from the agreement are fixed and determinable and collection
      is
      probable. Any revenues from software arrangements with multiple elements are
      allocated to each element of the arrangement based on the relative fair values
      using specific objective evidence as defined in the SOPs. If no such objective
      evidence exists, revenues from the arrangements are not recognized until the
      entire arrangement is completed and accepted by the customer. Once the amount
      of
      the revenue for each element is determined, the Company recognizes revenues
      as
      each element is completed and accepted by the customer. For arrangements that
      require significant production, modification or customization of software,
      the
      entire arrangement is accounted for by the percentage of completion method,
      in
      conformity with Accounting Research Bulletin (“ARB”) No. 45 and SOP
      811.




Services
      Revenue. Revenue from consulting services is recognized as the services are
      performed for time-and-materials contracts and contract accounting is utilized
      for fixed-price contracts. Revenue from training and development services is
      recognized as the services are performed. Revenue from maintenance agreements
      is
      recognized ratably over the term of the maintenance agreement, which in most
      instances is one year. Revenue from software services is recognized ratably
      over
      the service period. Payment received in advance is recorded on the balance
      sheet
      as unearned revenue.




As
      of
      December 31, 2006, unearned revenue is $141,604, and it includes $98,605 of
      customer deposit and $42,999 of unearned software service revenue. The software
      service revenue was approximately $42,999 during year ended December 31, 2006
      and insignificant during year ended December 31, 2005.




Earnings
      per share




Basic
      net
      income per share is based upon the weighted average number of common shares
      outstanding. Diluted net income per share is based on the assumption that all
      dilutive convertible shares and stock options were converted or exercised.
      Dilution is computed by applying the treasury stock method. Under this method,
      options and warrants are assumed to be exercised at the beginning of the period
      (or at the time of issuance, if later), and as if funds obtained thereby were
      used to purchase common stock at the average market price during the period.
      Basic net income per share was 0.004 and 0.008 for the years ended December
      31,
      2006 and 2005, and diluted net income per share was 0.004 and 0.008 for the
      years ended December 31, 2006 and 2005.




34


Off-Balance
      Sheet Arrangements




The
      Company does not have any off-balance sheet arrangements.




**ITEM
      7.**   **FINANCIAL
      STATEMENTS**




Our
      financial statements appear toward the end of this annual report beginning
      on
      page F-1.





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





None.




**ITEM
      8A. CONTROLS AND PROCEDURES**





(a)
      Evaluation of Disclosure Controls and Procedures





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized and reported within the time periods specified in the
      Commission's rules and forms, and that such information is accumulated and
      communicated to our management to allow timely decisions regarding required
      disclosure. Management necessarily applied its judgment in assessing the costs
      and benefits of such controls and procedures, which, by their nature, can
      provide only reasonable assurance regarding management's control
      objectives.





At
      the
      conclusion of the period ended December 31, 2006, we carried out an evaluation,
      under the supervision and with the participation of our management, including
      our principal executive officer and principal financial officer and principal
      accounting officer, of the effectiveness of the design and operation of our
      disclosure controls and procedures. Based upon that evaluation, principal
      executive officer and principal financial officer concluded that our disclosure
      controls and procedures were effective in alerting them in a timely manner
      to
      information relating to the Company required to be disclosed in this report.




35


(b)
      Changes in Internal Controls




During
      the period ended December 31, 2006, there has been no change in internal control
      over financial reporting that has materially affected, or is reasonably likely
      to materially affect our internal control over financial reporting.








**ITEM
      8B. OTHER INFORMATION**





None.








**PART
      III**





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





**DIRECTORS
      AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS**





The
      following are our executive officers and directors as of December 31, 2006.
      All
      of our executive current officers and directors are residents of China. As
      a
      result, it may be difficult for investors to effect service of process within
      the United States upon them or to enforce court judgments obtained against
      them
      in the United States courts.





The
      following sets forth the name, age and position of each of our directors and
      officers:




Name
            Age
            PositionMr.
                Yuan Qing Li
            38
            Chairman
                and PresidentMr.
                Xiao Kang An
            56
            DirectorMs.
                Ding Hong Shen
            38
            Chief
                Financial Officer and Chief Accounting OfficerMr.
                Qing Biao Yu
            39
            Secretary




Mr.
      Yuan
      Qing Li has been the Chairman, President and a Director since August 19, 2005.
      He has been the Chairman, President and Director of HXT Holdings since January
      2005, the Executive Director of XHT since 2004 and the Chairman of HTF since
      2003. He has been a director of HTF for more than five years and was the CEO
      of
      HTF from 2000 to 2004. Mr. Li has also served as the Director of Jiangsu Qi
      Hang
      Digital Control Engine Bed Co., Ltd. and Jiangsu Zhenjiang Xinzhou Mechanics
      Factory, and as the Executive Director of Hengtaifeng International Holdings
      Co., Ltd. He graduated from Shenzhen University in 1989 and earned an Executive
      MBA degree from Zhongshan University in 2003.





36


Mr.
      Xiao
      Kang An has been our director since February 2006. He has served as the vice
      president of Bingzhou Pulaide Auto Co., Ltd from March 2001. Prior to that,
      he
      had been Chairman of China Auto Bingzhou Limousine Co., Ltd, Chairman of Beijing
      China Auto Henxin Auto Co., Ltd; and General Manager of Shandong Bingzhou Auto
      Trading Company. He graduated from Shandong Mineral College in
      China.





Ms.
      Ding
      Hong Shen has been our CFO and Chief Accounting Officer since August 19, 2005
      and a CFO and a Director, CFO and Chief Accounting Officer of HXT Holdings
      since
      January 2005. She has been Financial Manager of HTF since 2003. From 1999 to
      2002 she served as the Manager of He Zhong Heng Software Co., Ltd.




Mr.
      Qing
      Biao Yu has been our secretary since August 19, 2005 and the secretary of HXT
      Holdings since January 2005. During the past five years, he has worked for
      HTF
      serving as Assistant Manager of the Technology Department from June 1, 2001
      to
      December 31, 2001, Administrative Manager on Human Resource Administration
      from
      January 1, 2002 to December 31, 2002, vice president of HTF and manager of
      the
      HTF IT resource department from January 1, 2003 to December 31, 2003; executive
      vice president of HTF and manager of the HTF IT resource department from January
      1, 2004 to December 31, 2004 and vice president of HTF since January 1, 2005.
      Prior to his joining HTF, he had worked for Jing Zhong Daily as Editor and
      Director for the Computer Center for over 11 years.




**FAMILY
      RELATIONSHIPS**




There
      are
      no family relationships between or among any of our executive officers or
      directors, except that Yuan Qing Li, our Chairman and President, is the husband
      of Ling Chen, who is a director of our subsidiary, XHT.







**AUDIT
      COMMITTEE FINANCIAL EXPERT**




Our
      board
      of directors currently acts as our audit committee. Our board of directors
      has
      not yet determined whether we have a member who qualifies as an "audit committee
      financial expert" as defined in Item 401(e) of Regulation S-B, and is
      "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under
      the
      Exchange Act. Our board of directors is in the process of searching for a
      suitable candidate for this position.





37
 **AUDIT
        COMMITTEE**





We
      have
      not yet appointed an audit committee, and our board of directors currently
      acts
      as our audit committee. At the present time, we believe that the members of
      board of directors are collectively capable of analyzing and evaluating our
      financial statements and understanding internal controls and procedures for
      financial reporting. Our company, however, recognizes the importance of good
      corporate governance and intends to appoint an audit committee comprised
      entirely of independent directors, including at least one financial expert,
      during our 2007 fiscal year.








**SECTION
      16(A) BENEFICIAL REPORTING COMPLIANCE**





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's
      directors and executive officers, and persons who own more than 10% of a
      registered class of the Company's equity securities, to file with the Securities
      and Exchange Commission initial reports of ownership and reports of changes
      in
      ownership of common stock and other equity securities of the Company. These
      insiders are required by Securities and Exchange Commission regulations to
      furnish the Company with copies of all Section 16(a) forms they file, including
      Forms 3, 4 and 5. To the Company's knowledge, based solely on review of the
      copies of such reports furnished to the Company and written representations
      that
      no other reports were required, during the calendar year ended December 31,
      2006, and to date, all Section 16(a) filing requirements applicable to its
      insiders were complied with.








**ITEM
      10. EXECUTIVE COMPENSATION**








The
      following table reflects the compensation paid to our principal executive
      officer. We have not had any executive officer who earned more than $100,000
      in
      any of the previous two fiscal years.





Name
                and Principal Position
            Year
            Salary
              (cash
                or non-cash)
              ($)
            Bonus
              (cash
                or
              non-cash)
              ($)
            Stock
                Awards
              ($)
            Option
                Awards
              ($)
            Non-Equity
                Incentive Plan Compensation
              ($)
            Non-Qualified
                Deferred Compensation Earnings
              ($)
            All
                Other Compensation
              ($)
            Total
              ($)Yuan
                Qing Li
            2006
              2005
            14,877
              14,238
            --
              --
            --
              --
            --
              --
            --
              --
            --
              --
            --
              --
            14,877
              14,238








38


**Compensation
      Discussion and Analysis**





Overview
      of Compensation Program and Philosophy





The
      Company has three executive officers, Messrs Yuan Qin Li, Qin Biao Yu and Ding
      Hong Sheng. Mr. Yuan Qin Li is also a director of the Company and along with
      Messrs Xiao Kang An they now comprise the entire Board of Directors. The Board
      of Directors also serves as the Company’s compensation committee and audit
      committee.





The
      Board
      of Directors’ goal in determining compensation levels is to adequately reward
      the efforts and achievements of executive officers for the management of the
      Company. The Company has no pension plan, stock option plan, non-equity
      incentive plan or deferred compensation arrangement. The Company has not used
      a
      compensation consultant in any capacity but believes that its executive officer
      compensation package is comparable to similar businesses in its location of
      its
      operations.





The
      three
      executive officers do not have an employment agreement with the Company. In
      the
      absence of such employment agreements, the relevant PRC Labor Laws shall apply
      to provide for terms which include, but are not limited to: the term of
      employment, the provision of labor-related insurance, termination for cause,
      termination on 30 days’ notice and termination without notice and the provision
      of labor-related benefits.





Compensation
      of Directors





Persons
      who are directors and employees are not currently additionally compensated
      for
      their services as a director. There is no plan for compensation of persons
      who
      are directors who are not employees, but it is expected that in the future
      we
      will create a remuneration and expense reimbursement plan. It is anticipated
      that such a plan would be primarily based on stock options.








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





The
      following table sets forth, as of March 30, 2007, certain information with
      respect to the beneficial ownership of the Company's Common Stock by (i) any
      person or group owning more than 5% of the Company's outstanding securities,
      (ii) each director, (iii) each executive officer and (iv) all executive officers
      and directors as a group.




39






**Name
                and Address of Beneficial Owner**
            **Title
                of Class**
            **Amount
                and Nature of Beneficial Ownership**
            **Percent of Class(1)**Yuan
                Qing Li (President and Chairman of the Board and Director)
              Sutie
                2911 - 2912, 29th Floor
              Two
                International Finance Centre
              No.
                8 Finance Street
              Central,
                Hong Kong
            Common
                Stock
            10,800,000
            50.2%Zhen
                Liang Qiu
              Building
                86-306
              Yuanling
                Xincun
              Futian
                District
              Shenzhen,,
                PRC
            Common
                Stock
            5,400,000
            25.1%Ling
                Chen
              5-402
                Chiwei Building
              South
                Huaquiang Road
              Shenzhen,
                PRC
            Common
                Stock
            1,800,000
            8.4%Ding
                Hong Shen
              Skyworth
                Building, No. 5, Floor 6, Block A
              Hi-Tech
                Industrial Park
              Nanshan
                District, Shenzhen P.R.China
            Common
                Stock
            0
            -Qing
                Biao Yu
              Skyworth
                Building, No. 5, Floor 6, Block A
              Hi-Tech
                Industrial Park
              Nanshan
                District, Shenzhen P.R.China
            Common
                Stock
            0
            -Xiao
                Kang An (Director)
              Skyworth
                Building, No. 5, Floor 6, Block A
              Hi-Tech
                Industrial Park
              Nanshan
                District, Shenzhen P.R.China
            Common
                Stock
            0
            -All
                Directors and Officers of the Company as a group (3
                persons)
            Common
                Stock
            12,600,000
                (2)
            58.6%





(1)  Computed
      based upon a total of 21,502,568 shares of common stock outstanding as of March
      30, 2007.


(2)
      Includes 1,800,000 shares held by Ling Chen, Mr. Yuan Qing Li’s
      wife.







**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





Except
      for (a) the transactions described below, (b) the ownership of the Company’s
      securities, and (c) other advances to and by certain officers to or from the
      Company to cover expenses, all of which were reimbursed or repaid without
      interest, none of our directors or executive officers, any nominee for election
      as a director, any persons who beneficially owned, directly or indirectly,
      shares with more than 5% of the common stock or any relatives of any of the
      foregoing had or is to have a direct or indirect material interest, in any
      transaction to which the Company was or is a party during the fiscal year of
      2006 or any currently proposed transaction which may materially affect the
      Company.





40


HTF
      leases a sales office of approximately 133 square meters in Beijing, China
      from
      Ms. Ling Chen, the wife of our Chairman, President and Director, Mr. Yuan Qing
      Li, on a year-to-year basis. The current term is from September 1, 2006 to
      August 31, 2007 at a monthly rent of approximately $896 (including management
      and air-conditioning maintenance fees), which is at the level of the market
      rent.





The
      Board
      has determined that Xiao Kang An is independent as that term is defined under
      the Rules of NASDAQ, Marketplace Rule 4200(a)(15).








**ITEM
      13.**  **EXHIBITS**





Exhibit
      List





No.
            Description  3.1
            Certificate
                of Incorporation for Jackpine Mining Co., Inc. (Now ChinaSoftware
                Technology Group, Co., Ltd. - “China Software”) , dated December 23,1991.
                Incorporated by reference to Exhibit 1.1 to the Registration Statement
                on Form 20-F dated April 20, 1999 filed by USV TelemanagementInc.
                (now China Software)(the "1999
                20-F").





3.2
            Form
                1 (Section 5) Company Act Memorandum of Jackpine Mining Co., Inc.(now
                China Software), dated December 13, 1991. Incorporated byreference
                to Exhibit 1.2 to the 1999 20-F.





3.3
            Articles
                of Jackpine Mining Co., Inc. (now China Software).Incorporated
                by reference to Exhibit 1.3 to the 1999
                20-F.





3.4
            Certificate
                of name change of Jackpine Mining Co., Inc. to USVTelemanagement
                Inc., dated July 10, 1996. Incorporated by reference toExhibit
                1.4 to the 1999 20-F.





3.5
            Province
                of British Columbia Form 21 (Section 371) Company Act SpecialResolution
                filed July 10, 1996. Incorporated by reference to Exhibit 1.5to
                the 1999 20-F.





3.6
            Certificate
                of Continuance of E*Conmetrix Inc. (formerly, USVTelemanagement
                Inc.) filed on June 19, 2000. (Incorporated by reference to Exhibit3.6
                to the Proxy Statement/Prospectus in in the Registration Statement
                on
                FormS-4
                filed on September 1, 2006).





3.7
            Certificate
                of Amendment to Certificate of Continuance of E*ConmetrixInc.
                filed on July 10, 2001. (Incorporated by reference to Exhibit 3.7
                to the
                ProxyStatement/Prospectus
                in in the Registration Statement on Form S-4 filed on September 1,
                2006).






41






3.8
            Articles
                of Amendment to Articles of E*Conmetrix Inc. changing name ofcompany
                to Moving Bytes, Inc. filed on July 23, 2002. (Incorporated by reference
                toExhibit
                3.8 to the Proxy Statement/Prospectus in in the Registration
                Statement  on
                Form S-4 filed on September 1,
                2006).  3.9
            Articles of Amendment to Articles of
              Moving
              Bytes, Inc. changing name of company
              to China International Enterprises Inc. filed on March 23,2006.
              (Incorporated by reference to Exhibit 3.9 to the ProxyStatement/Prospectus
              in the
              Registration Statement on Form S-4 filed onSeptember
              1, 2006).




3.10
            Amended
                and Restated By-laws No. 2 of China International EnterprisesInc.
                Incorporated by reference to Exhibit 3.6 to the Current Report onForm
                8-K filed by Moving Bytes, Inc. on March 21, 2005 (the "March 20058-K").





3.11
            Form
                of Certificate of Incorporation of China Software (Incorporated byreference
                to Exhibit B to the Proxy Statement/Prospectus in in the
                RegistrationStatement
                on Form S-4 filed on September 1,
                2006).





3.12
            Form
                of Certificate of Domestication (Incorporated by reference to Exhibit
                Cto
                the Proxy Statement/Prospectus in in the Registration Statement on
                Form
                S-4filed
                on September 1, 2006).





3.13
            Form
                of Bylaws of China Software (Incorporated by reference to Exhibit
                D
                tothe
                Proxy Statement/Prospectus in the Registration Statement on Form
                S-4
                filedon
                September 1, 2006).





21.1
            List
                of Subsidiaries;





31.1
            Certification
                of Yuan Qing Li pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002;





31.2
            Certification
                of Ding Hong Shen pursuant to Exchange Act Rules 13a-14(a) and15d-14(a),
                as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002;





32.1
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
                Section906of
                the Sarbanes-Oxley Act of 2002.





**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**







42


Aggregate fees billed by the Company's current
      principal accountants, Kabani & Company, Inc., for audit services
      related to the most recent fiscal year, and for other professional 
services billed in the recent two fiscal years were as follows:






FISCAL
                2006
            
            FISCAL
                2005Audit
              Fees     
              (1)
            
            $
            58,000
            
            $
            30,000Audit-Related
              Fees
            
            
            --Tax
              Fees
            
            
            --All
              Other
              FeesTotal
            
            $
            58,000
            
            $
            30,000










(1) 
      Comprised of the audit of the Company's  annual  financial 
statements  and  reviews of the Company's  quarterly 
financial  statements,  as well as consents related to and reviews of
      other documents filed with the Securities and Exchange Commission.






Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed
      by the Company's independent accountants must now be approved in advance by
      the Audit Committee to assure that such  services  do not
      impair the  accountants' independence  from the Company.  The
      Company  does not have an Audit  Committee, therefore,  the Board
      of Directors  reviews and approves  audit and  permissible
      non-audit  services  performed by Kabani & Company, Inc.,  as
      well as the fees charged by them for such services.









43





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.












China Software Technology Group Co.,
              Ltd.Date: April
              6, 2007
            By:
            /s/
              Yuan
              Qing LiYuan
              Qing Li,President
              (principal executive officer)




By:
            /s/ Ding
              Hong
              ShenChief
              Financial Officer
              (principal
                financial officer and principal accounting
                officer)




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, this Report has been signed below by the following persons on behalf
      of
      the Registrant and in the capacities and on the dates indicated.





Date:
      April 6, 2007





/s/
      Yuan
      Qing Li


Yuan
      Qing
      Li, Director





/s/
      Xiao
      Kang An





Xiao
      Kang
      An, Director











44




**CHINA
        SOFTWARE TECHNOLOGY GROUP CO., LTD.**  **AND
        SUBSIDIARIES**
 **INDEX
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006**
  
 PageIndependent
                Auditors’ Report
              
              
              1Financial
                StatementsConsolidated
                Balance Sheet
              
              
              2Consolidated
                Income
                Statements
              
              
              3Statement
                of Stockholders'
                Equity
              
              
              4Consolidated
                Statement of Cash
                Flows
              
              
              5Notes
                to the Consolidated Financial
                Statements
              
              
              6-18















**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Stockholders and Board of Directors
 China
        Software Technology Group Co., LTD. and Subsidiaries
 
 We
        have
        audited the accompanying consolidated balance sheet of the China Software
        Technology Group Co., LTD. and Subsidiaries as of December 31, 2006 and the
        related statements of operations, stockholders’ deficit and cash flows for the
        two years ended December 31, 2006 and 2005. These financial statements are
        the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these financial statements based on our audits.
 
 We
        conducted our audits of these statements in accordance with the standards
        of the
        Public Company Accounting Oversight Board (United States). Those standards
        require that we plan and perform the audit to obtain reasonable assurance
        about
        whether the financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of China Software Technology
        Group Co., LTD. and Subsidiaries as of December 31, 2006 and the results
        of its
        operations and its cash flows for the two years ended December 31, 2006,
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 
 */s/
        Kabani & Company, Inc.*
 KABANI
          & COMPANY, INC.
 CERTIFIED
        PUBLIC ACCOUNTANTS
 
 Los
        Angeles, California
 February
        16, 2007










F-1




**CHINA
                  SOFTWARE TECHNOLOGY GROUP CO. LTD AND
                  SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEET****DECEMBER
                  31, 2006****ASSETS****CURRENT
                  ASSETS:**Cash
                  & cash equivalents
              
              
              
              
              $
              241,338Accounts
                  receivable, net
              
              
              
              
              
              519,546Inventory
              
              
              
              
              
              448,962Other
                  receivable
              
              
              
              
              
              114,250Loan
                  receivable
              
              
              
              
              
              461,693Other
                  assets
              
              
              
              
              
              249,148Deposits
              
              
              
              
              
              11,819Total
                  current assets
              
              
              
              
              
              2,046,756**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              
              
              
              312,472**TOTAL
                  ASSETS**
              
              
              
              
              $
              2,359,228**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES:**Accounts
                  payable & accrued expenses
              
              
              
              
              $
              74,846Tax
                  payable
              
              
              
              
              
              27,301Payroll
                  payable
              
              
              
              
              
              53,143Unearned
                  revenue
              
              
              
              
              
              141,604Welfare
                  payable
              
              
              
              
              
              4,200Total
                  current liabilities
              
              
              
              
              
              301,094**STOCKHOLDERS'
                  EQUITY:**Preferred
                  stock, (Class A; authorized shares 10,000,00, no par value, outstanding
                  none;Class
                  B, authorized shares 20,000,000, no par value; outstanding
                  none)
              
              
              
              
              
              -Capital
                  stock (no par value; unlimited authorized;21,502,679
                  shares issued and outstanding)
              
              
              
              
              
              1,215,380Statutory
                  reserve
              
              
              
              
              
              49,516Accumulated
                  other comprehensive income
              
              
              
              
              
              121,839Retained
                  earnings
              
              
              
              
              
              671,399Total
                  stockholders' equity
              
              
              
              
              
              2,058,134**TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              
              
              
              $
              2,359,228
    F-2
  **CHINA
                  SOFTWARE TECHNOLOGY GROUP CO. LTD AND
                  SUBSIDIARIES****CONSOLIDATED
                  INCOME STATEMENTS****FOR
                  THE YEARS ENDED DECEMBER 31, 2006 and 2005****2006**
              
              **2005****Net
                  Revenue**
              
              $
              2,151,435
              
              $
              1,880,143**Cost
                  of revenue**
              
              
              997,394
              
              
              572,364**Gross
                  profit**
              
              
              1,154,041
              
              
              1,307,779**Operating
                  expenses**Selling
                  expenses
              
              
              382,450
              
              
              348,709General
                  and administrative expenses
              
              
              407,887
              
              
              638,805Research
                  & development
              
              
              353,141
              
              
              270,672Total
                  operating expenses
              
              
              1,143,478
              
              
              1,258,186**Income
                  from operations**
              
              
              10,563
              
              
              49,593**Non-operating
                  income (expense):**Interest
                  expense
              
              
              (601
              )
              
              (5,934
              )Interest
                  income
              
              
              33,567
              
              
              13,794Gain
                  (loss) on sale of property
              
              
              (277
              )
              
              7,935Technology
                  subsidy
              
              
              -
              
              
              15,222Value
                  added tax refund
              
              
              51,328
              
              
              90,681Other
                  income
              
              
              148
              
              
              -Other
                  expense
              
              
              (538
              )
              
              (717
              )Total
                  non-operating income
              
              
              83,627
              
              
              120,980**Net
                  income**
              
              
              94,190
              
              
              170,573**Foreign
                  currency translation gain**
              
              
              67,350
              
              
              43,668**Comprehensive
                  Income**
              
              $
              161,540
              
              $
              214,241**Basic
                  weighted average shares outstanding**
              
              
              21,502,679
              
              
              20,502,649**Basic
                  net income per share**
              
              $
              0.004
              
              $
              0.008**Diluted
                  weighted average shares outstanding**
              
              
              21,502,624
              
              
              20,504,401**Diluted
                  net income per share**
              
              $
              0.004
              
              $
              0.008
    F-3
  **CHINA
                  SOFTWARE TECHNOLOGY GROUP CO. LTD AND SUBSIDIARIES****STATEMENT
                  OF STOCKHOLDERS' EQUITY****FOR
                  THE YEARS ENDED DECEMBER 31, 2006 AND 2005****Common**
              
              **Accumulative**
              
              
              
              
              
              **Total****Stock**
              
              **Other****Comprehensive**
              
              **Statutory**
              
              **Retained**
              
              **Stockholders'****Shares**
              
              **Amount**
              
              **Gain**
              
              **Reserve**
              
              **Earnings**
              
              **Equity****Balance
                  January 1, 2005**
              
              
              19,940,000
              
              $
              1,200,000
              
              $
              10,821
              
              $
              6,867
              
              $
              449,284
              
              $
              1,666,972Recapitalization
                  on reverse acquisition
              
              
              1,531,429
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Balance
                  after recapitalization
              
              
              21,471,429
              
              
              1,200,000
              
              
              10,821
              
              
              6,867
              
              
              449,284
              
              
              1,666,972Stock
                  issuance for service rendered
              
              
              31,250
              
              
              10,000
              
              
              -
              
              
              -
              
              
              -
              
              
              10,000Stock
                  option vested
              
              
              -
              
              
              276
              
              
              -
              
              
              -
              
              
              -
              
              
              276Cumulative
                  translation adjustment
              
              
              -
              
              
              -
              
              
              43,668
              
              
              -
              
              
              -
              
              
              43,668Net
                  income for the year ended December 31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              170,573
              
              
              170,573Statutory
                  reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              34,662
              
              
              (34,662
              )
              
              -**Balance
                  December 31, 2005**
              
              
              21,502,679
              
              
              1,210,276
              
              
              54,489
              
              
              41,529
              
              
              585,196
              
              
              1,891,490Contribution
              
              
              -
              
              
              4,000
              
              
              -
              
              
              -
              
              
              -
              
              
              4,000Stock
                  option vested
              
              
              -
              
              
              1,104
              
              
              -
              
              
              -
              
              
              -
              
              
              1,104Cumulative
                  translation adjustment
              
              
              -
              
              
              -
              
              
              67,350
              
              
              -
              
              
              -
              
              
              67,350Net
                  Income for the year ended December 31, 2006
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              94,190
              
              
              94,190Statutory
                  reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              7,987
              
              
              (7,987
              )
              
              -**Balance
                  December 31, 2006**
              
              
              21,502,679
              
              $
              1,215,380
              
              $
              121,839
              
              $
              49,516
              
              $
              671,399
              
              $
              2,058,134
    F-4
  **CHINA
                    SOFTWARE TECHNOLOGY GROUP CO. LTD AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS****FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND 2005****2006**
                
                **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES
                
                :Net
                    income
                
                
                
                
                $
                94,190
                
                $
                170,573Adjustments
                    to reconcile net income to net cashProvided
                    by (used in) operating activities:Depreciation
                
                
                
                
                
                76,110
                
                
                60,814Loss
                    (gain) on sale of property
                
                
                
                
                
                277
                
                
                (7,935
                )Stock
                    issued for consulting services
                
                
                
                
                
                -
                
                
                10,000Stock
                    option expenses
                
                
                
                
                
                1,104
                
                
                276(Increase)
                    / decrease in assets:Accounts
                    receivable
                
                
                
                
                
                (72,077
                )
                
                (167,224
                )Inventory
                
                
                
                
                
                3,657
                
                
                (116,431
                )Other
                    receivable
                
                
                
                
                
                15,643
                
                
                (325,520
                )Deposits
                
                
                
                
                
                (3,777
                )
                
                1,814Other
                    assets
                
                
                
                
                
                (205,678
                )
                
                270,521Increase
                    / (decrease) in current liabilities:Accounts
                    payable & accrued expenses
                
                
                
                
                
                (68,514
                )
                
                121,734Unearned
                    revenue
                
                
                
                
                
                35,317
                
                
                51,711Payroll
                    payable
                
                
                
                
                
                5,009
                
                
                23,978Welfare
                    payable
                
                
                
                
                
                42
                
                
                (6,862
                )Tax
                    payable
                
                
                
                
                
                (5,295
                )
                
                (46,802
                )Net
                    cash provided by (used in) operating activities
                
                
                
                
                
                (123,994
                )
                
                40,648CASH
                    FLOWS FROM INVESTING ACTIVITIES:Receipt
                    of cash on disposal of property
                
                
                
                
                
                276
                
                
                531,644Acquisition
                    of property & equipment
                
                
                
                
                
                (23,786
                )
                
                (98,604
                )Additions
                    to Intangible assets
                
                
                
                
                
                (729
                )
                
                (174,263
                )Net
                    cash provided by (used in) investing activities
                
                
                
                
                
                (24,239
                )
                
                258,777CASH
                    FLOWS FROM FINANCING ACTIVITIES:Cash
                    contribution to capital
                
                
                
                
                
                4,000
                
                
                -Payment
                    of note payable
                
                
                
                
                
                -
                
                
                (122,046
                )Net
                    cash provided by (used in) financing activities
                
                
                
                
                
                4,000
                
                
                (122,046
                )Effect
                    of exchange rate changes on cash and cash equivalents
                
                
                
                
                
                9,714
                
                
                7,312NET
                    INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS
                
                
                
                
                
                (134,518
                )
                
                184,691CASH
                    & CASH EQUIVALENTS, BEGINNING BALANCE
                
                
                
                
                
                375,856
                
                
                191,165CASH
                    & CASH EQUIVALENTS, ENDING BALANCE
                
                
                
                
                $
                241,338
                
                $
                375,856
    F-5
  **CHINA
          SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   **1.
          ORGANIZATION AND DESCRIPTION OF BUSINESS**
  On
          Nov
          14, 2006, China International Enterprises Inc.( OTC BB: CIETF.OB) re-domiciled
          the Company from Canada to Delaware. On Nov 16, 2006, the company begin
          trading
          under the symbol CSWT and be known as China Software Technology Group Co.,
          Ltd”
("we", "us", or the "Company") (OTC BB:CSWT.OB)
  The
          Company is a holding company for Heng Xing Technology Group Development
          Limited,
          a British Virgin Islands Corporation ("XHT"). XHT's sole asset is 100%
          of the
          outstanding shares of Shenzhen Hengtaifeng Technology Co., Ltd.
          ("HTC").
  HTC
          was
          founded in Hi-tech Technology Industrial Park in the city of Shenzhen,
          Guangdong
          Province of People’s Republic of China in July 1995, under the name Shenzhen
          Guangba Trade Development Co., Ltd. HTC amended its name to Shenzhen Hengtaifeng
          Technology Co. Ltd. on May 12, 2000. HTC is primarily engaged in developing
          and
          distributing software and hardware systems on housing fund, guarantee
          information management, and home plan management in the People’s Republic of
          China.
  On
          Mar
          23, 2006, the Company announced a 1:32 reverse split of its outstanding
          common
          shares. Both actions were approved by the Company's shareholders at a meeting
          held on March 7, 2006.
  On
          August
          19, 2005, the company acquired 9,970,000 shares of common stock, par value
          $0.001 per share of CIEC, representing 100% of the issued and outstanding
          capital stock of CIEC under a share exchange agreement dated August 15,
          2005
          (the “Share Exchange”). Under the Share Exchange, the Company agreed to issue an
          aggregate of 638,080,000 shares of common stock of Moving Bytes to the
          CIEC
          shareholders, representing 92.87% of the issued and outstanding capital
          shares
          of Moving Bytes, giving effect to the Share Exchange.
  On
          January 31, 2005, CIEC acquired 100% outstanding shares of XHT from its
          shareholders in exchange of 9,000,000 shares of common stock of CIEC
          representing 83.33% of its issued and outstanding common stock on the date
          of
          acquisition.
  On
          December 14, 2004, XHT entered into an agreement with all the shareholders
          of
          HTC to acquire all of the outstanding stock of HTC. The acquisition has
          been
          recorded as a recapitalization of HTC, with HTC being treated as the continuing
          entity.
  **2
          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  **Use
          of estimates**
  The
          preparation of financial statements in conformity with generally accepted
          accounting principles requires management to make estimates and assumptions
          that
          affect the reported amounts of assets and liabilities and disclosure of
          contingent assets and liabilities at the date of the financial statements
          and
          the reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.
  **Principles
          of consolidation**
  The
          acquisition of CIEC on August 19, 2005 and the acquisition of XHC on January
          31,
          2005, has been accounted for as a purchase and treated as a reverse acquisition.
          The accompanying consolidated financial statements include the accounts of the Company and
          its
          wholly owned subsidiary, CIEC, XHT and HTC. All significant inter-company
          accounts and transactions have been eliminated in consolidation.
  F-6
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   The
          acquisition of HTC on December 14, 2004, was accounted for as a purchase
          and
          treated as a reverse acquisition.
  **Cash
          and cash equivalents**
  Cash
          and
          cash equivalents include cash in hand and cash in time deposits, certificates
          of
          deposit and all highly liquid debt instruments with original maturities
          of three
          months or less.
  **Accounts
          receivable**
  The
          Company maintains reserves for potential credit losses on accounts receivable.
          Management reviews the composition of accounts receivable and analyzes
          historical bad debts, customer concentrations, customer credit worthiness,
          current economic trends and changes in customer payment patterns to evaluate
          the
          adequacy of these reserves. Reserves are recorded primarily on a specific
          identification basis. Allowance for doubtful debts amounted to $199,299
          as of
          December 31, 2006.
  **Other
          assets**
  Other
          assets include advances to suppliers and prepaid expense, and it amounted
          to
          $249,148 as of December 31, 2006. The Company advances to certain vendors
          for
          purchase of its material in order to receive bulk discount and reserve
          the unit
          cost of the merchandise at a bargain rate. Once the inventory is received
          by the
          Company, the advance is adjusted against the purchased price. The advances
          to
          suppliers amounted to $248,833, and prepaid expense amounted to $315 at
          December
          31, 2006.
  **Inventories**
  Inventories
          comprised of software Compact disk, Computer server and macro-storage equipment.
          Inventories are valued at the lower of cost (determined on a weighted average
          basis) or market. The
          Management compares the cost of inventories with the market value and allowance
          is made for writing down the inventories to their market value, if lower.
          Inventories are typically sold through distributors.
  **Property
          & Equipment**
  Property
          and equipment are stated at cost. Expenditures for maintenance and repairs
          are
          charged to earnings as incurred; additions, renewals and betterments are
          capitalized. When property and equipment are retired or otherwise disposed
          of,
          the related cost and accumulated depreciation are removed from the respective
          accounts, and any gain or loss is included in operations. Depreciation
          of
          property and equipment is provided using the straight-line method for
          substantially all assets with estimated lives of: 39
          years
          for building, 5 or 7 years for machinery and equipments, and 7 years for
          vehicles.
  **Software
          development costs**
  The
          Company capitalizes certain computer software development costs in accordance
          with SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold,
          Leased, or Otherwise Marketed.” Costs incurred internally to create a computer
          software product or to develop an enhancement to an existing product are
          charged
          to expense when incurred as research and development expense until technological
          feasibility for the respective product is established. Thereafter, all
          software
          development costs are capitalized and reported at the lower of unamortized
          cost
          or net realizable value. Capitalization ceases when the product or enhancement
          is available for general release to customers.
  F-7
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   The
          Company makes on-going evaluations of the recoverability of its capitalized
          software projects by comparing the amount capitalized for each product
          to the
          estimated net realizable value of the product. If such evaluations indicate
          that
          the unamortized software development costs exceed the net realizable value,
          the
          Company writes off the amount which the unamortized software development
          costs
          exceed net realizable value. Capitalized and purchased computer software
          development costs are being amortized ratably based on the projected revenue
          associated with the related software or on a straight-line basis over three
          years, whichever method results in a higher level of amortization.
  **Long-lived
          assets**
  Effective
          January 1, 2002, the Company adopted Statement of Financial Accounting
          Standards
          No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
          ("SFAS
          144"), which addresses financial accounting and reporting for the impairment
          or
          disposal of long-lived assets and supersedes SFAS No. 121, "Accounting
          for the
          Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
          Of,"
          and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
          the Results of Operations for a Disposal of a Segment of a Business." The
          Company periodically evaluates the carrying value of long-lived assets
          to be
          held and used in accordance with SFAS 144. SFAS 144 requires impairment
          losses
          to be recorded on long-lived assets used in operations when indicators
          of
          impairment are present and the undiscounted cash flows estimated to be
          generated
          by those assets are less than the assets' carrying amounts. In that event,
          a
          loss is recognized based on the amount by which the carrying amount exceeds
          the
          fair market value of the long-lived assets. Loss on long-lived assets to
          be
          disposed of is determined in a similar manner, except that fair market
          values
          are reduced for the cost of disposal. Based on its review, the Company
          believes
          that, as of December 31, 2006, there were no significant impairments of
          its
          long-lived assets.
  **Fair
          value of financial instruments**
  Statement
          of financial accounting standard No. 107, Disclosures about fair value
          of
          financial instruments, requires that the Company disclose estimated fair
          values
          of financial instruments. The carrying amounts reported in the statements
          of
          financial position for current assets and current liabilities qualifying
          as
          financial instruments are a reasonable estimate of fair value.
  **Revenue
          recognition**
  The
          Company's revenue recognition policies are in compliance with Staff Accounting
          Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment
          to
          customers or services has been rendered when a formal arrangement exists,
          the
          price is fixed or determinable, the delivery is completed, no other significant
          obligations of the Company exist and collectibility is reasonably assured.
          Payments received before all of the relevant criteria for revenue recognition
          are satisfied are recorded as unearned revenue.
  License
          Revenue. The Company recognizes revenue from license contracts when a
          non-cancelable, non-contingent license agreement has been signed, the software
          product has been delivered, no uncertainties exist surrounding product
          acceptance, fees from the agreement are fixed and determinable and collection
          is
          probable. Any revenues from software arrangements with multiple elements
          are
          allocated to each element of the arrangement based on the relative fair
          values
          using specific objective evidence as defined in the SOPs. If no such objective
          evidence exists, revenues from the arrangements are not recognized until
          the
          entire arrangement is completed and accepted by the customer. Once the
          amount of
          the revenue for each element is determined, the Company recognizes revenues
          as
          each element is completed and accepted by the customer. For arrangements
          that
          require significant production, modification or customization of software,
          the
          entire arrangement is accounted for by the percentage of completion method,
          in
          conformity with Accounting Research Bulletin (“ARB”) No. 45 and SOP
          81-1.
  F-8
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
  Services
          Revenue. Revenue from consulting services is recognized as the services
          are
          performed for time-and-materials contracts and contract accounting is utilized
          for fixed-price contracts. Revenue from training and development services
          is
          recognized as the services are performed. Revenue from maintenance agreements
          is
          recognized ratably over the term of the maintenance agreement, which in
          most
          instances is one year. Revenue from software services is recognized ratably
          over
          the service period. Payment received in advance is recorded on the balance
          sheet
          as unearned revenue.
  As
          of
          December 31, 2006, unearned revenue is $141,604, and it includes $98,605
          of
          customer deposit and $42,999 of unearned software service revenue. The
          software
          service revenue were approximately $42,999 during year ended December 31,
          2006
          and insignificant during year ended December 31, 2005.
  **Advertising
          costs**
  The
          Company expenses the cost of advertising as incurred or, as appropriate,
          the
          first time the advertising takes place. Advertising costs for the years
          ended
          December 31, 2006 and 2005 were $376 and $366, respectively.
  **Research
          and development costs**
  Research
          and development costs are charged to operations as incurred and amounted
          to
          $353,141 and $270,672 in 2006 and 2005, respectively.
  **Stock-based
          compensation**
  In
          October 1995, the FASB issued SFAS No. 123, “Accounting for Stock-Based
          Compensation”. SFAS No. 123 prescribes accounting and reporting standards for
          all stock-based compensation plans, including employee stock options, restricted
          stock, employee stock purchase plans and stock appreciation rights. SFAS
          No. 123
          requires compensation expense to be recorded (i) using the new fair value
          method
          or (ii) using the existing accounting rules prescribed by Accounting Principles
          Board Opinion No. 25, “Accounting for stock issued to employees” (APB 25) and
          related interpretations with proforma disclosure of what net income and
          earnings
          per share would have been had the Company adopted the new fair value method.
          The
          Company uses the method prescribed by SFAS No.123. On March 11, 2005, the
          Company entered into an incentive stock agreement by which the Company
          grants
          345,000 incentive stock options to a director of the Company. These options
          are
          fully vested and exercisable proportionally on or before the close of the
          business on March 11, 2006. The company has recorded $1,104 stock option
          expenses in the current year financial statements.
  **Income
          taxes**
  The
          Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
          the
          recognition of deferred tax assets and liabilities for the expected future
          tax
          consequences of events that have been included in the financial statements
          or
          tax returns. Under this method, deferred income taxes are recognized for
          the tax
          consequences in future years of differences between the tax bases of assets
          and
          liabilities and their financial reporting amounts at each period end based
          on
          enacted tax laws and statutory tax rates applicable to the periods in which
          the
          differences are expected to affect taxable income. Valuation allowances
          are
          established, when necessary, to reduce deferred tax assets to the amount
          expected to be realized.
  F-9
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   According
          to the Provisional Regulations of the People's Republic of China on Income
          Tax,
          the Document of Reductions and Exemptions of Income Tax for the Company
          has been
          approved by the Shenzhen local tax bureau, the Company is exempted from
          income
          tax in 2003 and 2004. The Company will also have half of its income taxes
          exempt
          from 2005 to 2007. According to the Provisional Regulations of the People's
          Republic of China on Income Tax, the taxable income for the years ended
          December
          31, 2006 and 2005 are negative, so no income tax is incurred.
  **Foreign
          currency transactions and comprehensive income**
  Accounting
          principles generally require that recognized revenue, expenses, gains and
          losses
          be included in net income. Certain statements, however, require entities
          to
          report specific changes in assets and liabilities, such as gain or loss
          on
          foreign currency translation, as a separate component of the equity section
          of
          the balance sheet. Such items, along with net income, are components of
          comprehensive income. The functional currency of HTC is Chinese Renminbi.
          The unit of Renminbi is in Yuan.  Cumulative
          translation adjustment amount and translation adjustment gain amounted
          to
          $67,350 and $43,668 for the years ended December 31, 2006 and 2005. Accumulated
          other comprehensive income amounted to $121,839 on December 31,
          2006.
  **Earnings
          per share**
  Net
          loss
          per share is calculated in accordance with the Statement of financial accounting
          standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
          Accounting Principles Board Opinion No.15 (APB 15). Net loss per share
          for all
          periods presented has been restated to reflect the adoption of SFAS No.
          128.
          Basic net income per share is based upon the weighted average number of
          common
          shares outstanding. Diluted net income per share is based on the assumption
          that
          all dilutive convertible shares and stock options were converted or exercised.
          Dilution is computed by applying the treasury stock method. Under this
          method,
          options and warrants are assumed to be exercised at the beginning of the
          period
          (or at the time of issuance, if later), and as if funds obtained thereby
          were
          used to purchase common stock at the average market price during the period.
          Basic net income per share was 0.004 and 0.008 for the years ended December
          31,
          2006 and 2005, and diluted net income per share was 0.004 and 0.008 for
          the
          years ended December 31, 2006 and 2005.
  **Statement
          of cash flows**
  In
          accordance with Statement of Financial Accounting Standards No. 95, "Statement
          of Cash Flows," cash flows from the Company's operations is calculated
          based
          upon the local currencies. As a result, amounts related to assets and
          liabilities reported on the statement of cash flows will not necessarily
          agree
          with changes in the corresponding balances on the balance sheet.
  **Segment
          reporting**
  Statement
          of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about
          Segments of an Enterprise and Related Information" requires use of the
          "management approach" model for segment reporting. The management approach
          model
          is based on the way a company's management organizes segments within the
          company
          for making operating decisions and assessing performance. Reportable segments
          are based on products and services, geography, legal structure, management
          structure, or any other manner in which management disaggregates a company.
          SFAS
          131 has no effect on the Company's consolidated financial statements as
          substantially all of the Company's operations are conducted in one industry
          segment.
  F-10
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   **Recent
          pronouncements**
 
 In
          February 2007, FASB issued FASB Statement No. 159, The Fair Value Option
          for
          Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
          years beginning after November 15, 2007. Early adoption is permitted subject
          to
          specific requirements outlined in the new Statement. Therefore, calendar-year
          companies may be able to adopt FAS 159 for their first quarter 2007 financial
          statements.
 
 The
          new
          Statement allows entities to choose, at specified election dates, to measure
          eligible financial assets and liabilities at fair value that are not otherwise
          required to be measured at fair value. If a company elects the fair value
          option
          for an eligible item, changes in that item's fair value in subsequent reporting
          periods must be recognized in current earnings. FAS 159 also establishes
          presentation and disclosure requirements designed to draw comparison between
          entities that elect different measurement attributes for similar assets
          and
          liabilities.
 
 In
          September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
          Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
          88, 106, and 132(R)’ This Statement improves financial reporting by requiring an
          employer to recognize the over funded or under funded 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. This Statement also improves financial reporting
          by
          requiring 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.
          An
          employer with publicly traded equity securities is required to initially
          recognize the funded status of a defined benefit postretirement plan and
          to
          provide the required disclosures as of the end of the fiscal year ending
          after
          December 15, 2006. An employer without publicly traded equity securities
          is
          required to recognize the funded status of a defined benefit postretirement
          plan
          and to provide the required disclosures as of the end of the fiscal year
          ending
          after June 15, 2007. However, an employer without publicly traded equity
          securities is required to disclose the following information in the notes
          to
          financial statements for a fiscal year ending after December 15, 2006,
          but
          before June 16, 2007, unless it has applied the recognition provisions
          of this
          Statement in preparing those financial statements:
  a.  A
          brief
          description of the provisions of this Statement
  b.  The
          date
          that adoption is required
  c.  The
          date
          the employer plans to adopt the recognition provisions of this Statement,
          if
          earlier.
  The
          requirement to measure plan assets and benefit obligations as of the date
          of the
          employer’s fiscal year-end statement of financial position is effective for
          fiscal years ending after December 15, 2008. The management is currently
          evaluating the effect of this pronouncement on financial
          statements.
 
 In
          September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
          defines fair value, establishes a framework for measuring fair value in
          generally accepted accounting principles (GAAP), and expands disclosures
          about
          fair value measurements. This Statement applies under other accounting
          pronouncements that require or permit fair value measurements, the Board
          having
          previously concluded in those accounting pronouncements that fair value
          is the
          relevant measurement attribute. Accordingly, this Statement does not require
          any
          new fair value measurements. However, for some entities, the application
          of this
          Statement will change current practice. This Statement is effective for
          financial statements issued for fiscal years beginning after November 15,
          2007,
          and interim periods within those fiscal years. The management is currently
          evaluating the effect of this pronouncement on financial
          statements.
  F-11
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   In
          March
          2006 FASB issued SFAS 156 'Accounting for Servicing of Financial Assets'
          this
          Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing
          of Financial Assets and Extinguishments of Liabilities, with respect to
          the
          accounting for separately recognized servicing assets and servicing liabilities.
          This Statement:
   1.
          Requires an entity to recognize a servicing asset or servicing liability
          each
          time it undertakes an obligation to service a financial asset by entering
          into a
          servicing contract.
  2.
          Requires all separately recognized servicing assets and servicing liabilities
          to
          be initially measured at fair value, if practicable.
  3.
          Permits an entity to choose 'Amortization method' or 'Fair value measurement
          method' for each class of separately recognized servicing assets and servicing
          liabilities.
  4.
          At its
          initial adoption, permits a one-time reclassification of available-for-sale
          securities to trading securities by entities with recognized servicing
          rights,
          without calling into question the treatment of other available-for-sale
          securities under Statement 115, provided that the available-for-sale securities
          are identified in some manner as offsetting the entity's exposure to changes
          in
          fair value of servicing assets or servicing liabilities that a servicer
          elects
          to subsequently measure at fair value.
  5.
          Requires separate presentation of servicing assets and servicing liabilities
          subsequently measured at fair value in the statement of financial position
          and
          additional disclosures for all separately recognized servicing assets and
          servicing liabilities.
  This
          Statement is effective as of the beginning of the Company's first fiscal
          year
          that begins after September 15, 2006. Management believes that this statement
          will not have a significant impact on the consolidated financial
          statements.
  In
          February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
          Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
          Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
          for Transfers and Servicing of Financial Assets and Extinguishments of
          Liabilities".  SFAS No. 155, permits fair value remeasurement for any
          hybrid financial instrument that contains an embedded derivative that otherwise
          would require bifurcation, clarifies which interest-only strips and
          principal-only strips are not subject to the requirements of SFAS No. 133,
          establishes a requirement to evaluate interest in securitized financial
          assets
          to identify interests that are freestanding derivatives or that are hybrid
          financial instruments that contain an embedded derivative requiring bifurcation,
          clarifies that concentrations of credit risk in the form of subordination
          are
          not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
          on the qualifying special-purpose entity from holding a derivative financial
          instrument that pertains to a beneficial interest other than another derivative
          financial instrument.  This statement is effective for all financial
          instruments acquired or issued after the beginning of the Company's first
          fiscal
          year that begins after September 15, 2006.  The Company has not evaluated
          the impact of this pronouncement its financial statements.
 
  **3.
          INVENTORIES**
  Inventories
          as of December 31, 2006 consist of the following:
  
 Raw
                    and packing materials
                
                $
                48,333Finished
                    goods
                
                
                397,700Work
                    in process
                
                
                2,929Total
                
                $
                448,962
   F-12
 **CHINA
          SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   **4.
          PROPERTY AND EQUIPMENT**
  Net
          property and equipment as of December 31, 2006 is as follows:
  
 Building
                    & improvement
                
                $
                36,347Machinery&
                    equipment
                
                
                211,643Vehicles
                
                
                88,024Furniture
                    and fixture
                
                
                25,476Software
                
                
                277,087638,577Less:
                    Accumulated depreciation
                
                
                (326,105
                )$
                312,472
  Depreciation
          expenses for the years ended December 31, 2006 and 2005 were $76,110 and
          $60,814, respectively.
  **5.**
              **OTHER
                  RECEIVABLE**  Other
          receivable as of December 31, 2006 consists of the following:
  
 Subsidy
                    receivable
                
                8,740Advances
                    to other companies
                
                
                26,211Advances
                    to employees
                
                
                79,299Total
                
                $
                114,250
  The
          Company has a subsidy receivable from the local government amounting $8,740
          for enhancement
          of the Company’s technology.
  F-13
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   Advances
                    to other companies amounted to $26,211 as of December 31, 2006.
                    It
                    includes advances to other unrelated parties, which are unsecured,
                    interest free, and due on demand.
  Advances
                    to employees amounted to $79,299. These advances are unsecured,
                    interest
                    free, and due on demand.
  **6.**
              **LOAN
                  RECEIVABLE**  Loan
          receivable amounted to $461,693 as of December 31, 2006. This loan is first
          signed for a term from May 2005 to May 2006 and renewed for a term from
          May 2006
          to May 2007. This loan is unsecured, to an unrelated party, with interest
          rates
          of 6.12% and 6.138% for the years ended December 31, 2006 and 2005. The
          interest
          incomes were $26,407 and $13,105 for the years ended December 31, 2006
          and
          2005.
  **7.**
              **DEPOSITS**  As
          of
          December 31, 2006, deposit amounted to $11,819, and it consisted of rent
          deposit
          and supplier deposit under current asset.
  **8.**
              **ACCOUNTS
                  PAYABLE & ACCRUED EXPENSES**  The
          Company has accounts payable and accrued expense amounting $74,846 as of
          December 31, 2006. Accounts payable includes payable to vendors and accrued
          expenses include accrued professional expenses.
  **9.**
              **TAX
                  PAYABLE AND INCOME TAX**  The
          Company has tax payable amounting $27,301 as of December 31, 2006. The
          taxes
          payable consisted of Value-added tax of $26,701 and other miscellaneous
          taxes of
          $600.
 
 The
          Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
          the
          recognition of deferred tax assets and liabilities for the expected future
          tax
          consequences of events that have been included in the financial statements
          or
          tax returns. Under this method, deferred income taxes are recognized for
          the tax
          consequences in future years of differences between the tax bases of assets
          and
          liabilities and their financial reporting amounts at each period end based
          on
          enacted tax laws and statutory tax rates applicable to the periods in which
          the
          differences are expected to affect taxable income. Valuation allowances
          are
          established, when necessary, to reduce deferred tax assets to the amount
          expected to be realized.
 
 The
          Company will also have half of its income taxes exempt (income tax rate
          15%)
          from 2005 to 2007.
  The
          provision for taxes on earnings for the years 2006 and 2005 consisted of:
  
 2
                    0
                    0 6
                
                2
                    0
                    0 5Tax
                    at statutory rate
                
                
                34%
                
                34%Foreign
                    tax rate difference
                
                
                <19%>
                
                <19%>Effective
                    tax rate
                
                
                15%
                
                15%
 
  Net
          operating loss carry forward for the US and China tax jurisdictions amounted
          to
          $0 for the years ended December 31, 2006, and 2005, respectively. A 100%
          valuation allowance has been recorded for the deferred tax asset of $4,000
          due
          to the uncertainty of its realization.
   F-14
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   **10.**
              **PAYROLL
                  PAYABLE**  The
          Company has payroll payable amounting $53,143 as December 31, 2006.
  **11.**
              **EMPLOYEE
                  WELFARE PLAN**  The
          Company has established its own employee welfare plan in accordance with
          Chinese
          law and regulations. The Company makes annual pre-tax contributions of
          14% of
          all employees' salaries for the year ended December 31, 2004. The total
          expense
          for the above plan amounted to $41,290 for the year ended December 31,
          2004.
  HTC
          is
          classified as a wholly-owned foreign enterprise under PRC law by virtue
          of its
          ownership by XHT. HTC has changed its employee welfare plan in accordance
          with
          Chinese law and regulations and does not make annual pre-tax contributions
          of
          14% of all employees' salaries for the years ended December 31, 2005. The
          total
          expense amounted to $15,212 and $49,993 for the years ended December 31,
          2006
          and 2005 .
          Welfare
          payable amounted to $4,200 as of December 31, 2006.
  **12.**
              **STATUTORY
                  RESERVE**  In
          accordance with the *Chinese
          Company Law* ,
          the
          company has allocated 10% of its annual net income, amounting to $5,325
          and
          21,797 as statutory reserve on December 31, 2006 and 2005,
          respectively.
  **13.**
              **STATUTORY
                  COMMON WELFARE FUND**  As
          stipulated by the Company Law of the People’s Republic of China (PRC), net
          income after taxation can only be distributed as dividends after appropriation
          has been made for the following:
  Making
          up
          cumulative prior years’ losses, if any;
  (i)
              Allocations
                  to the “Statutory surplus reserve” of at least 10% of income after tax, as
                  determined under PRC accounting rules and regulations, until the
                  fund
                  amounts to 50% of the Company's registered capital;  (ii)
              Allocations
                  of 5-10% of income after tax, as determined under PRC accounting
                  rules and
                  regulations, to the Company's “Statutory common welfare fund”, which is
                  established for the purpose of providing employee facilities and
                  other
                  collective benefits to the Company's employees; and  (iii)
              Allocations
                  to the discretionary surplus reserve, if approved in the shareholders’
                  general meeting.  The
          Company established a reserve for the annual contribution of 5% of net
          income to
          the welfare fund. The amount included in the statutory reserve amounted
          to
          $2,662 and $10,898 for the years ended December 31, 2006 and 2005,
          respectively.
  **14.**
              **SHAREHOLDERS’
                  EQUITY**  On
          Mar
          23, 2006, the Company announced a 1:32 reverse split of its outstanding
          common
          shares. Both actions were approved by the Company's shareholders at a meeting
          held on March 7, 2006.
  On
          August
          19, 2005, Moving Bytes Inc. acquired 9,970,000 shares of common stock,
          par value
          $0.001 per share, of CIEC, representing 100% of the issued and outstanding
          capital stock of CIEC under a share exchange agreement dated August 15,
          2005
          (the “Share Exchange”). Under the Share Exchange Agreement, Moving Bytes Inc.
          agreed to issue an aggregate of 638,080,000 shares of common stock of Moving
          Bytes to the CIEC shareholders, representing 92.87% of the issued and
          outstanding capital shares of Moving Bytes, giving effect to the Share
          Exchange.
  F-15
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
  The
          Share
          Exchange has been accounted for as a reverse acquisition under the purchase
          method of accounting since the shareholders of CIEC obtained control of
          Moving
          Bytes. Accordingly, the merger of the two companies has been recorded as
          a
          recapitalization of CIEC, with CIEC being treated as the continuing entity.
          The
          financial statements of the legal acquirer are not significant; therefore,
          no
          pro forma financial information is submitted.
  CIEC
          owns
          100% of the issued and outstanding shares of common stock, par value $1.00
          per
          share, of XHT owns 100% of the issued and outstanding shares of HTC. On
          December
          14, 2004, CIEC entered into an agreement with all the shareholders of XHT
          to
          acquire all of the outstanding stock of XHT. The acquisition has been recorded
          as a recapitalization of XHT, with XHT being treated as the continuing
          entity.
  XHT
          is a
          British Virgin Islands Corporation, which was incorporated on May 28, 2004.
          XHT
          issued 100 shares of its common stock of $1 par value to its founder on
          its
          inception. XHT is a non-operative holding company of HTC. On December 14,
          2004,
          XHT entered in to an agreement with all the shareholders of HTC to acquire
          all
          of the issued and outstanding stock of HTC for HK$2 (US $0.25).The shareholders
          of XHT owned HTC, prior to acquisition, in the same ratio as of their ownership
          ratio in the Company.
  The
          acquisition has been recorded as a recapitalization of HTC, with HTC being
          treated as the continuing entity.  The historical financial statements for
          the year ended December 31, 2004 include both XHT (from the acquisition
          date)
          and HTC (for full year) while the historical results for the year ended
          December
          31, 2003 includes only HTC.
  The
          company issued 138,000,000 shares for services rendered during the year
          ended
          December 31, 2005.
  **15.**
              **STOCK
                  OPTIONS**  The
          Company adopted SFAS No. 123 (Revised 2004), *Share
          Based Payment* (“SFAS
          No. 123R”), under the modified-prospective transition method on
          January 1, 2005. SFAS No. 123R requires companies to measure and
          recognize the cost of employee services received in exchange for an award
          of
          equity instruments based on the grant-date fair value. Share-based compensation
          recognized under the modified-prospective transition method of SFAS
          No. 123R includes share-based compensation based on the grant-date fair
          value determined in accordance with the original provisions of SFAS
          No. 123, *Accounting
          for Stock-Based Compensation,* for
          all
          share-based payments granted prior to and not yet vested as of January 1,
          2006 and share-based compensation based on the grant-date fair-value determined
          in accordance with SFAS No. 123R for all share-based payments granted after
          January 1, 2006. SFAS No. 123R eliminates the ability to account for
          the award of these instruments under the intrinsic value method proscribed
          by
          Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
          for Stock Issued to Employees* ,
          and
          allowed under the original provisions of SFAS No. 123. Prior to the
          adoption of SFAS No. 123R, the Company accounted for our stock option plans
          using the intrinsic value method in accordance with the provisions of APB
          Opinion No. 25 and related interpretations.
   Primarily
          as a result of adopting SFAS No. 123R, the Company recognized $1,104 and
          $276 in share-based compensation expense for the years ended December 31,
          2006
          and 2005. The impact of this share-based compensation expense on the Company’s
          basic and diluted earnings per share was $0.00 per share. The fair value
          of our
          stock options was estimated using the Black-Scholes option pricing model.
  F-16
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
   On
          March
          11, 2005, the Company granted one director 10,781 stock options vesting
          over 5
          years proportionately. The option exercise price is $0.03. The fair value
          of the
          shares at the time of granting of the options was $0.02. Following is a
          summary
          of the stock option activity:
 
 Options
                    outstanding
                
                Weighted
                    Average Exercise Price
                
                Aggregate
                    Intrinsic ValueOutstanding,
                    December 31, 2005
                
                
                10,781
                
                $
                0.96
                
                $
                0Granted
                
                
                -
                
                
                -
                
                
                -Forfeited
                
                
                -
                
                
                -
                
                
                -Exercised
                
                
                -
                
                
                -
                
                
                -Outstanding,
                    December 31, 2006
                
                
                10,781
                
                $
                0.96
                
                $
                4,636
 
 Following
          is a summary of the status of options outstanding at December 31, 2006:
 
 Outstanding
                    Options
                
                Exercisable
                    OptionsExercise
                    Price
                Number
                Average
                    Remaining
                  Contractual
                    Life
                Average
                    Exercise Price
                Number
                Average
                    Exercise Price$0.96
                10,781
                3.25
                $0.03
                3,773
                $0.96
  For
          options granted during the year ended December 31, 2005, the weighted-average
          fair value of such options was $0.51.
  The
          assumptions used in calculating the fair value of options granted using
          the
          Black-Scholes option- pricing model are as follows:
 
 Risk-free
                    interest rate
                6.0%Expected
                    life of the options
                5.00
                    yearsExpected
                    volatility
                430%Expected
                    dividend yield
                0
  **16.**
              **MAJOR
                  CUSTOMERS AND VENDORS**  Major
          customers and vendors represent those who accounted for 10% or over of
          the
          Company’s total net revenue or purchase, respectively.
  One
          major
          customer accounted for 19% and 10% of the revenue for the year ended December
          31, 2006 and 2005.
  Four
          major vendor provided 66% of the Company’s purchases for the year ended December
          31, 2006. One major vendor provided 31% of the Company’s purchases for the year
          ended December 31, 2005. The Company did not have a payable to these vendors
          on
          December 31, 2006.
  The
          Company extends credit to its customers based upon its assessment of their
          credit worthiness and generally does not require collateral.
  **17.**
              **NON-OPERATING
                  INCOME**  Value
          added tax (VAT) refund- The Company received an amount of $51,328 and $90,681
          as
          Value added tax refund from the state government for the year ended December
          31,
          2006 and 2005, respectively. The value added tax refund is given by the
          government to support software industry.
  F-17
 **CHINA
            SOFTWARE TECHNOLOGY GROUP CO., LTD. AND SUBSIDIARIES**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
  Technical
          subsidy - The Company received subsidy income of $0 and $15,222 from local
          government for the year ended December 31, 2006 and 2005, respectively.
          This
          income is given by the government to support local high-tech enterprises.
  **18.**
              **COMMITMENT**  HTC
          leases approximately 640 square meters of space used for its executive
          offices
          and operations in Shenzhen, China from Shenzhen Chuangwei-RGB Electronic
          Co.,
          Ltd. The lease is for a term of three years from February 25, 2003 to February
          24, 2006 at a monthly rent of approximately $4,400 (including property
          management and area condition maintenance fees). The lease is renewable
          for an
          indefinite period of time upon one month's prior notice.
  HTC
          has
          continued to lease approximately 640 square meters of space used for its
          executive offices and operations in Shenzhen, China from Shenzhen Chuangwei-RGB
          Electronic Co., Ltd. The lease is for a term of two years from February
          25, 2006
          to February 24, 2008. The monthly rent expenses are $4,843 and $5,225 for
          the
          twelve months ended February 24, 2007 and 2006, respectively (including
          property
          management and area condition maintenance fees).
  HTC
          leases a sales office in Beijing, China on yearly basis. The monthly rent
          expense is $867 from September 1, 2005 to August 31, 2006. The current
          term is
          from September 1, 2006 to August 31, 2007 at a monthly rent of $896.
  The
          rent
          expenses are $52,677 and $55,937 for the years ended 2006 and 2005.
  Future
          lease commitments for the twelve month periods ended December 31, 2007
          are as
          follows:
   2007
                
                $
                73,0942008
                
                $
                10,987Total
                
                $
                $84,081
   **19.**
              **SUPPLEMENT
                  DISCLOSURE OF CASH FLOWS**  The
          Company prepares its statements of cash flows using the indirect method
          as
          defined under the Financial Accounting Standard No. 95.
  The
          Company paid interest of $601 and $5,934 during the year ended December
          31, 2006
          and 2005. The Company did not pay income tax during the years ended December
          31,
          2006 and 2005.
  **20.**
              **CURRENT
                  VULNERABILITY DUE TO CERTAIN
                  CONCENTRATIONS**  The
          Company's operations are carried out in the PRC. Accordingly, the Company's
          business, financial condition and results of operations may be influenced
          by the
          political, economic and legal environments in the PRC, and by the general
          state
          of the PRC's economy.
  The
          Company's operations in the PRC are subject to specific considerations
          and
          significant risks not typically associated with companies in the North
          America
          and Western Europe. These include risks associated with, among others,
          the
          political, economic and legal environments and foreign currency exchange.
          The
          Company’s results may be adversely affected by changes in governmental policies
          with respect to laws and regulations, anti-inflationary measures, currency
          conversion and remittance abroad, and rates and methods of taxation, among
          other
          things.
  The
          Company does not maintain fire, theft or liability insurance. The Company
          is
          exposed to various risks of loss related to torts; theft of, damage to
          and
          destruction of assets; error and omissions and natural disasters.


F-18