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, 2004

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

                     For the Transition Period From __ to __
                          Commission File No. 000-33483

                            GENERAL COMPONENTS, INC.
                 (Name of Small Business Issuer in its Charter)

                Nevada                                          88-0496645
       (State of Incorporation)                              (I.R.S. Employer
        (Small Business Issuer)                            Identification No.)

  Suite 2021, 20/F, Two Pacific Place                    88 Queensway, Hong Kong
(Address of principal executive offices                         (Zip Code)

         Issuer's telephone number, Including Area Code: (852) 2167 8298

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

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

                    Common Stock, par value $0.001 per share

Check whether the Issuer (1) has 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 requirement for the past 90 days. Yes [X] No [X]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  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]

Issuer's revenues for the fiscal year ended December 31, 2004 were $1,714,457.

As of March 31,  2005,  the  aggregate  market value of the common stock held by
non-affiliates of the Registrant was approximately $45,067,500.

As of March 31, 2005, there were 20,030,000  shares of Common Stock,  $.0001 par
value per share, outstanding.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

Documents incorporated by reference:  None.


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
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<S>                                                                                                           <C>
PART I..........................................................................................................1

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

         Item 2.           Description of Property.............................................................13

         Item 3.           Legal Proceedings...................................................................14

         Item 4.           Submission of Matters to a Vote of Security Holders.................................14

PART II........................................................................................................14

         Item 5.           Market for Common Equity and Related Stockholder Matters............................14

         Item 6.           Management's Discussion and Analysis or Plan of Operation...........................15

         Item 7.           Financial Statements................................................................18

         Item 8.           Changes in and Disagreements with Accountants on Accounting and Financial
                           Disclosure..........................................................................18

         Item 8A.          Controls and Procedures.............................................................18

         Item 8B.          Other Information...................................................................18

PART III.......................................................................................................19

         Item 9.           Directors, Executive Officers, Promoters and Control Persons; Compliance
                           with Section 16(a) of the Exchange Act..............................................19

         Item 10.          Executive Compensation..............................................................21

         Item 11.          Security Ownership of Certain Beneficial Owners and Management......................22

         Item 12.          Certain Relationships and Related Transactions......................................23

         Item 13.          Exhibits............................................................................24

         Item 14.          Principal Accountant Fees and Services..............................................24


         INDEX TO FINANCIAL STATEMENTS........................................................................F-1
</TABLE>


                                       i
<PAGE>

                                    PART I.

Item 1.  Description of Business

         General Components,  Inc. ("we", "us", "our", the "Company",  or "GCI")
was incorporated under the laws of the State of Nevada on January 14, 2000 under
the name of Pro-Active  Solutions,  Inc. On July 7, 2004, we changed our name to
General Components,  Inc. Our predecessor was founded in 1998. We are engaged in
the development,  manufacture and marketing of broadband networking products and
systems for the "last mile" broadband  connectivity market. We currently offer a
wide  range  of basic to  high-end  modular,  upgradeable  systems  that  enable
end-users  to send  and  receive  high-speed  data  communications  through  the
Internet Backbone  Network.  Our products include cables,  patch cords,  panels,
adapters,  converters,  switches and  wireless  devices that are produced by OEM
manufacturers and sold under the "General Components" and "Reachhome" brands. We
are also developing  plastic optical fiber ("POF") cable  technology and related
networking equipment. We have filed patents in the United States and Asia on our
proprietary  POF  technology.  We currently offer a wide range of entry-level to
high-end modular,  upgradeable systems in the "last mile" broadband connectivity
market. We also license our POF technology and manufacturing  process to procure
production machinery for select customer partners. We distribute our products in
China, the Pacific Rim, the Middle East and Eastern Europe primarily through our
distributors, resellers and/or system integrators to both office and residential
markets. It is our intention to expand our distribution  channels into the North
American  market.  We are  headquartered  in Hong Kong and have numerous offices
throughout China.

         Your attention is specifically  called to the risk factors in this Item
1 below and the detailed  information  within the financial  statements  and the
explanatory notes which appear elsewhere in this Form 10-KSB.

Recent Events

         On  September  24,  2004,  the  Company  consummated  a Share  Exchange
Agreement (the "Exchange Agreement") with General Components,  Inc., a privately
owned Cayman Islands company ("GCI Cayman"), and GCI Cayman's shareholders, (the
"Shareholders"),  pursuant to which the Company  acquired  all of the issued and
outstanding  shares of stock of GCI Cayman in exchange  for the  issuance in the
aggregate  of  20,000,000  of our shares of common  stock (the  "Shares") to the
Shareholders.

         As a result  of the  transaction,  GCI  Cayman  became  a  wholly-owned
subsidiary of the Company and, upon the issuance of the Shares, the Shareholders
owned  approximately  80% of all of the Company's issued and outstanding  common
stock. Immediately following the share exchange, a total of 25,000,000 shares of
common stock were issued and  outstanding.  Stockholders of record as of October
14, 2004 of the Company  received a dividend  paid in shares of common  stock on
October  25,  2004 on a  one-for-one  basis  per  share  of  common  stock  (the
"Dividend"). The transaction increased the total number of outstanding shares of
common stock from 5,000,000 to 10,000,000. Prior to the payment of the Dividend,
the  Company  effected  a  recapitalization  of the  Company  pursuant  to which
20,000,000  shares of the Company's  outstanding  common stock was exchanged for
10,000,000 shares of the Company's Series A Preferred Stock.

         Each share of Series A Preferred  Stock is  convertible  into eight (8)
shares of common stock and each share of Series A Preferred Stock is entitled to
eight (8) votes,  voting  together  with the holders of common stock as a single
class.  Further,  holders of Series A  Preferred  Stock are  entitled to receive
cumulative  dividends on a pro-rata basis with all other holders of common stock
on an as-converted basis.  Holders of Series A Preferred Stock also are entitled
to receive a liquidation preference as follows: for each one (1) share of common
stock,  the holders of Series A Preferred Stock then outstanding are entitled to
cash in amount  equal to eight (8) times (i) par value,  as  adjusted,  plus all
accrued and unpaid  dividends  and (ii) pro rata share of any proceeds  with all
other holders of common stock on an as-converted basis.

         Additionally,  in connection with the transactions  contemplated by the
Exchange  Agreement,  the  Company  and  certain  investors  (the  "Investors"),
executed  and  delivered  a Stock  Purchase  Agreement  in which such  Investors
received  10,000,000  shares of common stock of the Company for consideration of
$2,000,000.  As at March 31, 2005, there were 20,030,000  shares of common stock
of the  Company  issued  and  outstanding  and  10,000,000  shares  of  Series A
Preferred Stock of the Company issued and outstanding on an undiluted basis.



                                       1
<PAGE>

Proposed Industry

         During the last several years, through a collaborative arrangement with
Nottingham Optical Technology Ltd., a Sino-foreign joint venture we created with
three other  investors,  we have been engaged in the  development of proprietary
technologies  for the  production  of plastic  optical fiber ("POF") and related
networking equipment.  POF offers the promise of a low cost, higher transmission
speed  alternative  to copper in both the consumer  electronics  and  automotive
markets (Step Index POF or "SI POF") and the Local Area Network  ("LAN")  market
(Graded  Index POF or "GI POF").  POF cables will also  provide a practical  and
cost-effective  alternative to glass optic fiber. According to industry research
firm IGI Group, the total global market size for POF will exceed US$1 billion by
2006. We have filed patent  applications  in the United States,  Europe and Asia
for our proprietary POF technology.

         We have also recently entered the growing voice over Internet  protocol
("VOIP")  enterprise  market in China  through a license and reseller  agreement
with  VocalData,  Inc., a leading  provider of VOIP  software  applications  and
subsidiary  of  Tekelec,   Inc.  (NYSE:   TKLC).  We  intend  to  integrate  the
VocalData/Tekelec software with OEM servers,  firewalls, IP phones, gateways and
integrated  access device  ("IAD")  technology to develop a complete VOIP system
that we will market under our own brands and trademarks to the enterprise market
in China. We have successfully  completed beta site testing at Phoenix Satellite
Television, a Hong Kong-based subsidiary of Shen Zhou Television Company Limited
that  broadcasts in Hong Kong,  East Asia,  Australia,  Europe and the U.S., and
plan on leveraging that  relationship to expand our customer base in the Chinese
media industry.

         We  intend  to  develop  our   U.S.-based   research  and   development
capabilities and restructure our China-based manufacturing operations to provide
us with  competitive  strengths to meet the growing  global demand for broadband
products in the "last mile" market.

Our Products and Solutions

         We are focused on three areas of "last mile" broadband technologies:

      o     Traditional networking cables and systems;

      o     Plastic optical fiber technology; and

      o     Voice over Internet Protocol enterprise solution.

Traditional Networking Cables and Systems

         To date, our core business has been the manufacture and distribution of
a  full  line  of  structured  cabling  systems  and  three-level  router-switch
equipment for multi-family  residential and commercial buildings.  Our products,
which are  capable of  delivering  information  at 100 Mbps  bandwidth,  include
cables, patch cords, panels, adapters, converters, switches and wireless devices
that are produced by OEM manufacturers  and sold under the "General  Components"
and "Reachhome" brands.

         Our Ethernet system, which includes router/switch  systems,  structured
cable and adapters and software,  has been widely  distributed in China.  By the
end of 2004, we authorized approximately 106 distributors,  resellers and system
integrators  throughout  China. We also trained and certified  approximately 383
Chinese   engineers   who  are   qualified  to  customize   system  design  with
GCI/Reachhome  products for end users. We also developed five major distributors
in the Middle East,  Russia and Eastern  Europe.  In 2004, a distributor  in the
Middle East  successfully  bid on a school  network,  which will be delivered in
2005.



                                       2
<PAGE>

         Plastic Optical Fiber (POF) and POF LAN

         Industry Background

         While glass  optical  cable  comprises  the  majority of cable used for
backbone data transmission  because of its high capacity and transmission speed,
traditionally,  copper  cable  has  been  used for  data  transmission  from the
backbone  to the home and office  (i.e.,  the "last mile"  market).  The primary
drawback to their use in the "last  mile"  market is that while  multi-Giga  bit
transfer was being carried by backbone optical cable, the data transfer capacity
of a copper  cable was at about  100Mbps for  Category 5 copper  cables.  Though
optical glass fiber is sometimes used in the "last mile" market,  its widespread
use has been hindered by its high installation cost.

         POF has drawn industry attention over the last few years as a potential
low-cost,  high  quality  solution  for  segments of the  following  industries:
consumer electronics, broadband telecommunications (home and office networking),
automotive, medical and military. The growing demand for bandwidth has increased
the need for fiber  installation  and provided an opportunity to access networks
and  develop  closer  relationships  with  customers.  According  to an  article
co-written  by Dr.  James  Walker  published  in Cabling  Business  Magazine  in
December 2002, recent developments in POF technology make it possible to use POF
at data  rates up to 500 Mbps (SI POF) and up to 10 Gbps (GI POF) of  bandwidth.
The  technology  is also moving  rapidly on multimode  and single mode POF, high
temperature fibers, integrated POF circuits, laminated light-guides,  active and
passive discrete components and optical switching.

         POF technology offers low-cost, broadband LAN to complement glass optic
fiber  networks.  POF's  physical  and media  transport  characteristics,  wider
bandwidth,  low cost and ease of installation compared to copper and glass fiber
make it a promising transport media in the "last mile" market. To date, however,
there have been  technical  difficulties  associated  with the  manufacture  and
purification  of GI POF that  have lead to  unacceptable  levels of data loss or
dispersion that have delayed its  commercialization.  We believe we are one of a
small  number  of  companies  that are  working  on  completing  development  of
production that address these shortcomings.

         Our Solution

         Together with our collaborative partner,  Nottingham Optical Technology
Ltd., we have devoted substantial  resources to addressing the manufacturing and
purification  issues  associated with current POF cable products.  We believe we
have made  considerable  progress in developing a proprietary POF  manufacturing
and  purification  process  capable  of  producing  a  consistent  product  with
commercial potential as a reliable transmission media capable of high-speed Giga
base  transmission  that can be conveniently  and safely used in the "last mile"
market.

         We believe that if we are successful in our technology development, our
POF  products  and systems  will be able to offer the  promise of the  following
advantages  over  copper  wire and glass  optical  fiber:

      o     Cost Savings.  The principal  advantages of POF over glass fiber are
            lower installation and maintenance costs, potentially as much as 50%
            less and the  need  for less  technical  expertise  to  develop  and
            maintain  it. In  addition,  a glass  fiber-based  system must use a
            laser diode or an expensive  light-emitting diode ("LED") as a light
            source.  POF,  on the other  hand,  uses a  photodiode  or a simple,
            inexpensive, and widely available type of LED.

      o     Higher  Transmission  Speed.  GI POF  eventually  will be capable of
            transmission  speeds of 1 Gbps at a distance  of 100  meters,  which
            covers  95% of the LAN  market.  Laboratory  results  indicate  that
            polymethylmethacrylate   ("PMMA")   based  GI  POF  is   capable  of
            transmission of 1 Gbps at 50 meters and 10 Gbps at 30 meters. GI POF
            transmission  speed is much  faster  than  copper  wire,  one of the
            methods of physically  linking  sources to transfer and  communicate
            data,  and the maximum data  transfer  capacity of Category 5 copper
            cable is only 100Mbps.

      o     Easy Connection and Installation.  POF is more flexible, durable and
            able to withstand a bend radius with no change in transmission. This
            property makes it easier to install  through walls.  The most common
            method of POF  installation  is the "hot plate  method"  where fiber
            ends are  heated  and  softened,  then  pushed  against  a  mirrored
            surface.  The process is quick and can be repeated  with very little
            deviation.  POF is much cheaper to install  than glass  fiber,  with
            only a simple  molded plug  required  to align and  connect  plastic
            fibers.



                                       3
<PAGE>

      o     No Electromagnetic  Interference.  Optical transmission is known for
            its   insulation   properties,   but  POF   does  not   create   any
            electromagnetic  interference.  Traditional  use of copper wire as a
            transmission  medium  creates  electromagnetic  charges.  By  way of
            example,  wire  harnesses  are used in cars to  manage  the  complex
            tangle of  cables.  The  result is that a  multitude  of  individual
            cables  can be  packed  with  other  high-speed  cables  in the same
            harness.   This,   coupled  with  voltage   variations,   can  cause
            electromagnetic  interference in cars if copper wires are used. Even
            if surrounded by a plastic jacket,  the exposure of electronic atoms
            transmitted would still be substantial.  This, in turn,  affects the
            operation of certain electronic devices.  For medical equipment that
            is used in hospitals and special devices installed in aircraft,  any
            magnetic  interference  could jeopardize  patient care and cause the
            failure of  critical  plane  equipment.

      o     Eye Safety Feature. The optical transceiver module of POF is a 650mm
            Red LED light source.  Since the Red LED is within the visible light
            spectrum,  it acts as an eye safety  feature  since users can always
            tell when someone is in danger of directly viewing the light beam.

      o     Energy  Savings.  Since POF transmits very little infrared light, it
            can be used for cold lighting (lighting that does not produce heat),
            semiconductor  manufacturing  equipment and the lighting displays of
            artwork.

         Relationship with Nottingham

      In November  2002,  we entered into a joint venture  agreement  with three
other  investors to create a  Sino-foreign  joint  venture  company,  Nottingham
Optical  Technology  Ltd.  ("Nottingham")  to manufacture  POF with our patented
technology.  We contributed the exclusive license of our POF technology in China
to Nottingham in exchange for 20% of the equity in the joint venture,  which has
an  ascribed  value of  US$1,549,398  (though  no value for this  investment  is
recorded in the balance  sheet).  During the year ended  December 31, 2003,  the
Company sold a set of plant and equipment to Nottingham  at a  consideration  of
US$94,738.  An unrealized  gain of US$4,000 from the sale of plant and equipment
has been eliminated on consolidation.  Nottingham manufactures POF solely for us
and we have the  exclusive  right to  distribute  the products  manufactured  by
Nottingham under our brand name. The other three investors  contributed cash for
the remaining 80% equity interest.  Nottingham has its own production facilities
including land,  buildings,  equipment and utility  facilities.  Nottingham also
accumulated a substantial  amount of production  knowledge which complements our
POF technology.  We are currently in discussions with the other  shareholders of
Nottingham  to acquire  their 80%  interest in exchange for shares of our common
stock and expect to effect that transaction in June 2005.

         Voice Over Internet Protocol (VOIP) Products

      VOIP is a  technology  that  allows you to make  telephone  calls  using a
broadband Internet connection instead of a regular (or analog) phone line, known
as "plain old telephone  system"  ("POTS").  Some  services  using VOIP may only
allow you to call other people using the same service,  but others may allow you
to call anyone who has a  telephone  number - including  local,  long  distance,
mobile, and international numbers. Also, while some services only work over your
computer or a special VOIP phone,  other services allow you to use a traditional
phone  through an adaptor.  In contrast,  the primary phone system we use today,
POTS,  is a  collection  of  interconnected  systems  operated  by  the  various
telephone  companies  and  administrations  around  the world.  POTS  started as
human-operated analog circuit switching systems (plugboards), progressed through
electromechanical switches. By now this has almost completely been made digital,
except for the final connection to the subscriber  (i.e., the "last mile").  The
signal coming out of the phone set is analog.  It is usually  transmitted over a
twisted pair cable as an analog signal.

         In January  2005,  we  finalized  a three year,  renewable  license and
reseller agreement with VocalData, Inc., a subsidiary of Tekelec (Nasdaq: TKLC),
to market and sell  VocalData's  VOIP software to enterprise users in the China,
Hong Kong and Taiwan. We intend to integrate the VocalData/Tekelec software with
the OEM servers,  firewalls, IP phones, gateways and IAD technology to develop a
complete   and   cost-effective   system   for  our   two   target   markets   -
small-to-medium-sized  enterprises ("SMEs") and large corporations.  We recently
completed a beta site test at Phoenix  Satellite  Television,  a Hong Kong-based
cable and television  satellite station that broadcasts in Hong Kong, East Asia,
Australia,  Europe and the U.S.,  and plan on leveraging  that  relationship  to
target additional customers in the Chinese media industry.



                                       4
<PAGE>

         SMEs normally have limited IT resources  and lower  corporate  budgets.
However,  they are under pressure from mounting  administrative costs. We intend
to provide  SME users with a publicly  centralized  server to host IP calls.  We
expect our VOIP  service  for SMEs to assist in  reducing  the  difficulties  of
establishing  and  configuring  proper networks and servers to host the internal
calls and reduce the cost to a premium unlimited call package as low as US$2 per
month per user for first three years of the contract in China.

         Enterprise  solutions for large  corporations  consist of both hardware
and  software  components.  Hardware  includes  a  server,  firewall,  IP phone,
gateway, and IAD. Software includes the VocalData/Tekelec  system customized for
local  enterprises.  With an affordable  subscription,  corporations  can reduce
internal  call costs while  departments  or branches at different  locations can
increase their  communication and increase  productivity.  Corporate callers can
also enjoy conference call, voice mail, call forwarding,  3-way calling and many
other  advanced  features.  Many  carriers  prefer the  VocalData/Tekelec  voice
application  server for several reasons:

      o     Tight  Application  Integration on an Open Platform.  In addition to
            the basic call control and hosted PBX features,  our enterprise VOIP
            system incorporates several key applications including conferencing,
            messaging and firewall  traversal as part of its  solution.  Because
            our  enterprise  VOIP  system  incorporates  these  capabilities  as
            integral  applications  within  its  hosted IP  telephony  solution,
            enterprises  pay less per  application  and reduce the time required
            for system  integration,  which we expect to  translate  into a more
            cost-effective solution with a faster time-to-market. In particular,
            the system session border controller provides a cost benefit,  since
            the system's firewall  traversal  solution is 75% less expensive per
            user than external border or session controller products,  which may
            require  extra  customer  hardware or software or a truck roll to do
            firewall reconfiguration.

      o     Standards-Based.  Since  our  enterprise  VOIP  system  is open  and
            standards-based,  enterprise  planning to interface with third-party
            applications  can be done easily.  The system  supports  SIP,  TAPI,
            SOAP,  Corba,  and  AMIS-A,  the  most  widely  used  protocols  for
            integration with third-party voicemail.  In addition, our enterprise
            VOIP system provides a powerful  Application  Programming  Interface
            ("API") for customized development.

      o     Carrier-Grade  Quality.   Carrier-grade  represents  a  fundamental,
            ongoing  commitment to deliver  high-quality,  reliable systems that
            can  support  large  numbers  of  enterprise  users.  By  using  the
            industry's  most  reliable   architecture,   configuration   of  our
            enterprise VOIP system is designed for 99.999%  availability.  Based
            upon  NEBS-compliant SUN Netra servers,  we provide a standby server
            for every  active  call  agent  server.  This  means  that  calls in
            progress  should  remain  connected  even in the  event  of a server
            failure.  Customer  tests have  demonstrated  that the system is the
            most powerful voice applications  server, with three times the calls
            per second  throughput of our nearest  competitor.  At 200 calls per
            second, our enterprise VOIP system supports 100,000 subscribers on a
            single server pair.  This results in total server costs that are 80%
            lower than alternatives.

      o     Broadest Interoperability. To give businesses maximum selection, our
            enterprise VOIP system is committed to operating with a wide variety
            of partners in the gateway,  softswitch,  endpoint, and applications
            and technology  areas.  Our enterprise VOIP system is designed to be
            compatible  with a broad  range of IP phones  because it is the only
            voice  application  server to support all four  endpoint  protocols:
            SIP, MGCP, Cisco SCCP or "skinny" and Mitel MiNet. By supporting all
            protocols,  we enable additional features and can provide a smoother
            transition for IP PBX businesses converting to hosted solutions.



                                       5
<PAGE>

      o     Differentiating  Features  and  Applications.  Our  enterprise  VOIP
            system  comes  with  a  full  set  of   ready-to-use   features  and
            applications.  Service  providers  can attract new  customers,  grow
            revenues per user, and help to retain existing customers by offering
            services  based on the  software  core  feature  sets and  converged
            applications.   There  are  four  application   areas  available  to
            customers: Desktop Integration,  Productivity, Mobility and Business
            Applications.  Desktop Integration includes the Web Portal which not
            only makes it easy for users to take  advantage  of their  telephony
            features  but  takes  advantage  of  IP  telephony  to  display  the
            corporate  phone  directory,  voice  mail  and  user  call  log with
            click-to-dial  capability.  Mobility applications offer a variety of
            features  that enable  business  travelers to work more  effectively
            while away from the office and also provide  802.11 or Wi-Fi support
            for "in building" mobility.  Our enterprise VOIP system provides the
            most  comprehensive  set  of  PBX  features,  because  of  its  more
            extensive  protocol  support.

      o     Ease of Administration.  With its multiple levels of administration,
            our    enterprise    VOIP    system    provides    companies    with
            self-administration  and end-user communications  controls.  Wizards
            and  profiles  hasten  account  set  up  and  the  bulk-provisioning
            capability  can be  used  for a rapid  data  upload.  The  web-based
            administration  interface enables companies to handle administrative
            tasks either centrally or on a distributed basis. Additionally,  its
            convenient  organization  simplifies data entry and maintenance.  In
            addition,  office moves and layout changes are simplified due to the
            "plug and play" self-discovery capability of IP-based addresses. Our
            integrated applications can help enterprises increase revenues while
            minimizing  investment  costs because of the use of standard servers
            and open interfaces.

         To increase communication of family and friends, especially the growing
population of  expatriates  from other  countries and because of the  employment
relocation of individuals  from other regions within China, we intend to provide
an i-Net membership  service where this group of people can communicate over our
VOIP  network.  This service aims to help family,  friends and special  interest
groups  minimize  phone service costs and maximize voice  communication.  To the
best of our knowledge,  this  enterprise type of VOIP service is not impacted by
telecommunications regulation.

Market Opportunity and Description of Market Segments

         There are two key  markets in which we intend to operate as we continue
to develop our products.  They are: the POF market, which is comprised of the SI
POF market and the GI POF market, and the VOIP products market.

         SI POF Market

         The SI POF market includes consumer  electronics,  large screen display
and  automotive  markets.  The initial  size  estimate for the SI POF market was
US$78 million  using  information  provided in February  2003 by Richard  Beach,
Ph.D.  of Beach  Communications.  We expect to enter  this  market in the fourth
quarter 2005. The market segments are highlighted as follows:

      o     Consumer products.  Networking and the applications  associated with
            connecting home electronics  products to each other  constitutes the
            largest use of the fiber cables. The range of use of POF is diverse.
            It can be used for  connection  of DVD  players,  CD players,  or MD
            players and amplifiers.  Further,  it can be used for  illumination,
            decoration,   screen   display   and  even   short   distance   data
            transmission.  We believe  the demand for our POF  products  will be
            driven  by  the  large  core   diameter,   as  well  as  their  cost
            effectiveness and ease of installation.

      o     POF-LSD.  The POF-Large  Screen Display  ("POF-LSD") may represent a
            new era for  large-screen  projection  displays.  The  technology is
            based on a procedure for projection and reflection.  When images are
            projected,  light  passes  through the POF  module.  Each of the POF
            modules acts as an optical fiber in which light is confined by total
            internal  reflection.  Application of the POF-LSD may be used in the
            following venues:

            - Shopping centers;
            - Stock exchanges;
            - Airport and railway stations; and
            - Stadiums.

                                       6
<PAGE>

      o     Automotive  Market.  POF can be used in a cars'  navigation or audio
            system,  and  in  telephone  connection.   Currently,   a  group  of
            automobile  manufacturers  and suppliers  have  developed a POF data
            base standard for automobiles known as MOST, which is an acronym for
            Media  Oriented  Systems  Transport.  The  objective  is to  have  a
            standard in which all auto  manufacturers  can  purchase and benefit
            from volume  production.  Industry research firm IGI Group indicated
            that over fifteen European auto makers have adopted POF in twenty of
            their vehicle models.

         GI POF Market Opportunity

         The GI POF  market  includes  the  business  and  residential  networks
markets.  We expect to enter this market in the fourth  quarter 2006. We believe
the  market   opportunity   for  GI  POF  solutions  under   development   lies,
specifically, in the following areas:

      o     Office  Networks.  POF can be used with office LAN  operations.  POF
            offers  many  advantages  for LANs.  First,  its  dielectric  nature
            assures  electromagnetic  compatibility  regardless  of  data  rate,
            providing  built-in  upgradeability.  Second,  there is a low  total
            system  cost;  plastic  fiber is made from a cheap  material,  PMMA,
            which is less than  1/30th of the cost of  quartz  glass by  weight.
            Therefore,  large-core fiber can be made independent of the material
            cost.

      o     Residential  Networks.  One of the  most  interesting  areas  in the
            consumer  PC  market  today is  connecting  PCs to each  other.  The
            obvious  reason for adopting POF as a home  networking  cable is its
            fast rate of data transmission. As the number of homes with multiple
            PCs  continues  to  grow  at a  faster  rate,  the  opportunity  for
            providing the networks within has become  increasingly  significant.
            Asahi  Glass,  for  example,  used POF to  complete  the network for
            Aoyama Park Tower in Tokyo in 2003.

      o     Health   Market.   POF  can  be  used  to  produce   efficient   and
            high-resolution  radiographic systems for x-ray medical diagnosis or
            non-destructive  inspection using thermal neutrons.  With respect to
            medical x-ray  applications  such as mammograms,  there is a need to
            produce a fewer  number  of  x-rays  that  produce  quality  images.
            Quality is increased  and number of x-rays is  decreased  because of
            higher detection  efficiency and their improved  electronic  readout
            system.

      o     Industrial Market. Industrial control is a good niche for POF and is
            being  developed  successfully  by many  companies.  The  electrical
            interference caused by motors on production lines makes it difficult
            for wireless and wire-based communications.  The advantage of POF is
            that  the data  will  not be  contaminated  by  electrical  pick-up.
            According  to IGI  Group  research,  POF  cables  have  been used in
            industrial control networks for over fifteen years. Many proprietary
            networks were configured on the factory floor to connect controllers
            to devices and sensors to monitor data and provide control  feedback
            to production lines.

      o     DVI and  HDMI  Links.  Digital  Visual  Interface  ("DVI")  and High
            Definition  Multimedia Interface ("HDMI") links are suitable for the
            linking   of   image   output   devices   such   as   tuners,    DVD
            players/recorders,  digital  set-top boxes and image display devices
            such as plasma screen TVs, big-screen LCD TVs and projectors used in
            home theater systems, stores and other public facilities. We believe
            this represents a market opportunity for both our SI POF and GI POF,
            depending on the particular use.

      o     Defense.   Defense  contractors  worldwide  are  now  required,  for
            security   purposes,   to  have  an  optical  connection  in  a  LAN
            environment.

         VOIP Products Market

         As in other  parts of the  world,  VOIP has  entered  the Asia  telecom
market at an  unprecedented  pace.  Market revenues for IP telephony in Asia are
expected to reach  US$420.6  million this year and US$1.14  billion by 2007,  as
projected  by Frost &  Sullivan.  IP  Telephony  or the IP-PBX  voice  equipment
segment  remains one of the leaders in the  enterprise  telephony  market and is
expected to surpass the PBX segments,  the largest enterprise  telephony segment
by 2007.



                                       7
<PAGE>

         A new survey of enterprise  customers from Deloitte & Touche Technology
concludes  that by 2006,  more than  two-thirds of Global 2,000  companies  will
begin deployment of VOIP technology.

         VOIP   has   become   the   fastest    growing   service   in   China's
telecommunications  industry with some analysts forecasting that it will capture
up to 30% of China's  long-distance market in 2005. Bundling VOIP with other LAN
products  may be our  premier  application  because  we may  become  capable  of
providing a "one stop shop" to many Chinese enterprises.

         China Market

         China has one of the  highest  growth  rates of  Internet  users in the
world.   According  to  statistics   released  by  the  China  Internet  Network
Information Center,  Internet users in China reached 80 million in 2003, growing
at a rate of about 5% per month.  This  increase in Internet  users and the fast
pace of new housing  construction will increase the demand for speedier Internet
access,  which will further stimulate the broadband  market.  China's demand for
glass  optical  fiber  will  reach 16 million  kilometers  by 2005,  up from 6.6
million in 1999,  an increase of over 140% and a compound  annual growth rate of
15% per year, according to IGI Consulting's new report. While demand for telecom
is growing, the need for speed in the "last mile" is increasing as well.

         Development  of POF is in the  preliminary  stages  in  China  with  no
production  currently  scheduled.  The use of POF  technology  is limited to the
product importation and generally is applied to non-telecommunication  services,
high interference and data  transmission with short distances (e.g.,  computers,
DVD players,  hi-fi cables,  radars and medical  equipment).  Our strategy is to
construct a portfolio of patented POF products and processes  that cover a broad
range of  products  which  will  provide a base to further  penetrate  the China
market.

Our Strategy

         Our business  strategy is to leverage our low cost Asian  manufacturing
base to meet the  growing  demand  for  broadband  products  in the "last  mile"
market. Our goal is to become a world player in POF development and in the "last
mile" optical market.

         We believe the  principal  components  of our business  strategy are as
follows:

      o     Sales and distribution.  Our business strategy is to utilize our low
            cost, Asian manufacturing base and customer pool and our new product
            development  group to increase  sales in China and our other current
            market areas, as well as to expand sales in the U.S. and other North
            American  countries.  We expect that sales  increases will be driven
            both by acquisition and development of our own sales force in target
            countries.  We intend to continue  to try to  identify  needs in the
            broadband  connectivity  sector,  and to try to acquire  and develop
            technology  and assemble  products  under our own brand name through
            OEM and ODM manufacturers.

      o     Research and  Development.  We consider  research and development as
            being the essential driving force of our business strategy.  Our POF
            research and development team includes  veteran chemical  engineers,
            mechanical  engineers  and research  scientists . Our  collaboration
            with  Nottingham  has  provided us with the  substantial  production
            facility and human resources  required to reach our current stage of
            product development.  With respect to VOIP, we will seek to leverage
            our new  partnership  with  Tekelec  to  develop a  product  line to
            accommodate the growing demand from the Chinese enterprise market.

      o     Patents.  To date,  we have filed three patent  applications  in the
            U.S.  and two in China for our GI POF  technology.  The three patent
            applications filed in U.S. consist of 1) a novel process in creating
            a graded index polymer  optical  fiber,  2) a method to maintain the
            uniform  quality  throughout  the  manufacturing  process and 3) the
            tools for the  manufacturing  process.  We intend to file for patent
            protection for any POF products we develop and improvements thereto.



                                       8
<PAGE>

Competition

         Our core business will operate  within an  established  industry and we
face competition from small and large companies worldwide.

         With  respect to our proposed POF  business,  we will face  competition
from  several  companies,  some of which  are  considerably  larger  and  better
capitalized  than we are. They include Asahi Glass (Japan),  Lucent (U.S.),  and
Mitsubishi  Rayon  (Japan).  Although  our  larger  competitors  have  developed
products  with similar  characteristics,  we believe that our  technology  has a
particular utility,  quality and efficiency.  Moreover,  our lower manufacturing
costs may provide a competitive advantage. We also believe there are significant
barriers  to entry to the POF  market in the form of  technical  competency  and
patent production.

         In the VOIP market, we will face competition from many companies,  both
local and  international.  We believe that our local presence,  the fact that we
have been in the  communications  market in China through our structured  cable,
wireless and telephony  business,  our  experience in  integrating  products and
services,  and our access to less expensive hardware components  manufactured in
Asia provides us with a competitive  advantage with respect to these groups.  In
comparing  ourselves with larger  competitors in the VOIP market,  such as Cisco
and Lucent,  we believe that we may have a more flexible  production  and a more
competitive cost structure.

         We will also  continue  to face  competition  from  companies  that are
developing  and  marketing  technologies  that compete  with ours.  For example,
evolving workgroup dynamics and the increasing  mobility of employees,  combined
with  falling  prices  makes  Wireless  Local Area  Network  ("WLAN")  solutions
attractive  to larger end users.  Largely as a result of  significant  marketing
efforts by vendors such as Apple, Compaq, Intel and Lucent, we expect the use of
WLANs in homes and small/medium-sized  businesses to increase with the growth of
broadband.

Risk Factors

         In  addition  to the  other  information  in this  annual  report,  our
business is subject to numerous  risks which should be  considered  carefully in
evaluating our business and prospects.

Risks Related to Our Industry and Operations

         Our operations  could be curtailed if we are unable to obtain  required
additional  financing.  As of December  31,  2004,  we had  approximately  $1.04
million  in cash  and cash  equivalents.  We  require  additional  financing  to
complete  development and  commercialization  of our SI POF and GI POF products,
expand our sales and  marketing  capabilities  and  continue  our  research  and
development  activities.  While we are seeking to raise additional funds through
the  sale  of  equity  securities,  there  can be no  assurance  that we will be
successful  in our efforts.  If we are unable to raise the capital we need,  our
business  strategy will be adversely  affected,  which could  severely limit our
ability to generate revenue.

         We may  experience  problems that could delay or prevent the commercial
introduction of our POF products.  Our POF products are in various stages of the
development   and   commercialization   process  and  we  may  face   technical,
manufacturing,  regulatory  or  marketing  problems  that  adversely  affect our
ability to  introduce  either or both of our SI POF and GI POF  products.  These
products may prove to be uneconomical or otherwise commercially  unfeasible,  or
may fail to meet with consumer  acceptance as a viable  alternative  to existing
products and technologies. Since POF is merely a transmission medium, it is part
of a POF data  network.  A  complete  POF  network  will  consist  of many parts
produced by different  manufacturers.  The system will not be  functional if any
part of the system is not completed with similar  standards.  The Company has no
capability  or resources to coordinate  such large scale  industrial  effort.  A
significant   delay  or  failure  to  successfully   complete   development  and
commercialization  of our proposed POF  products  would have a material  adverse
impact on our near term prospects.

         Revenues  from  our core  business  may  fluctuate.  Our  revenues  are
characterized by significant  fluctuation based on customer demand.  Many of our
products have short  lead-times and uneven seasonal demand.  Fluctuating  demand
results  from  a  variety  of  factors,  including,  but  not  limited  to,  the
cancellation  of  large  orders,   price  concessions  on  high  volume  orders,
competitive pressures and changing technological requirements.  In addition, our
sales volume and product mix impact our gross  margin.  Therefore,  if our sales
volume  does not  improve,  or we have an  unfavorable  product  mix, we may not
achieve  the gross  margin  rate we expect,  resulting  in lower  than  expected
results of operations. These factors may fluctuate from quarter to quarter.



                                       9
<PAGE>

         We operate in a highly competitive  industry.  The industry in which we
operate is highly  competitive,  and we expect that this level of competition on
pricing and product  offerings  will  continue.  Factors  that could  affect our
ability  to  compete   successfully   in  the  industry   include  the  quality,
performance,  price,  reliability,  mix and market  acceptance  of our products;
market  acceptance of our competitors'  products;  efficiency and quality of the
production  and  implementation  of our products;  and our customer  support and
reputation.

         We have numerous  competitors in our core  business,  some of which are
very large,  with substantial  technological  and financial  resources and brand
recognition  and some of our  competitors  have  very low  cost  structures  and
support from  governments  in their home  countries.  In addition,  we will face
numerous competitors in our new VOIP business and our POF business, (assuming it
can be  successfully  launched).  We cannot  assure  you that we will be able to
compete successfully against existing or future competitors.  Competitors may be
able to offer lower prices, additional products or services or a more attractive
mix of products or services,  or services or other  incentives that we cannot or
will not match or do not offer.  These competitors may be in a stronger position
to respond quickly to new or emerging  technologies and may be able to undertake
more extensive marketing  campaigns,  adopt more aggressive pricing policies and
make more  attractive  offers to potential  customers,  employees  and strategic
partners.

         If we fail to maintain a product  portfolio  that is  attractive to our
customers,  enhance  our  existing  products  and keep pace  with  technological
advances  in our  industry,  or if we  pursue  technologies  that do not  become
commercially  accepted,  customers may not buy our  products,  and our revenues,
profitability  and cash  flow may be  adversely  affected.  The  demand  for our
products  can  change  quickly  and in ways that we may not  anticipate  because
markets  for  our  principal   products  are   characterized  by  the  following
conditions:  rapid, sometimes disruptive  technological  developments;  evolving
industry and  certification  standards;  frequent new product  introductions and
enhancements;  changes in customer  requirements;  and short product life cycles
with declining prices over the lives of products.

         Our operating results depend to a significant  extent on our ability to
maintain a product portfolio that is attractive to our customers, to enhance our
existing products, and to continue to introduce new products successfully and on
a timely basis. New  technological  innovations  generally require a substantial
investment  before any assurance can be given as to their commercial  viability.
If we fail to make sufficient investments or if we focus on technologies that do
not become  widely  adopted,  other  technologies  could  render our current and
planned products obsolete.

         We rely on third  parties to  manufacture  most of our  products and to
provide  substantially  all of our  components.  If these third  parties fail to
deliver quality products and components at reasonable  prices on a timely basis,
we may alienate some of our customers, and our revenues,  profitability and cash
flow may decline. We use contract manufacturers  significantly as an alternative
to  manufacturing  products  ourselves.  If these contract  manufacturers do not
fulfill  their  obligations  to  us,  or if  we do  not  properly  manage  these
arrangements,  our customer relationships may suffer. In addition, since we rely
more heavily now than  previously on contract  manufacturers,  we may have fewer
employees with the expertise needed to manage these third-party arrangements. In
relying  more on  third  parties,  we run  the  risk  that  the  reputation  and
competitiveness  of our products and  services may  deteriorate  because we have
less control over quality and delivery schedules.  We also may experience supply
interruptions,  cost  escalations and competitive  disadvantages if our contract
manufacturers  fail to  develop,  implement  or maintain  manufacturing  methods
appropriate for our products and customers.

         If we fail to protect our intellectual  property  rights,  our business
and prospects may be harmed.  Intellectual property rights, such as patents, are
vital to our business,  and  developing new products and  technologies  that are
unique to us is  critical  to our  success.  We have filed a number of U.S.  and
foreign  patent  applications,  but we cannot  predict  whether any patents will
issue, will provide us with any competitive  advantage or will not be challenged
by third parties. Moreover, our competitors may already have applied for patents
that,  once issued,  could prevail over our patent rights or otherwise limit our
ability to sell our products.  Our competitors also may attempt to design around
our patents or copy or otherwise obtain and use our proprietary  technology.  If
we do not  receive  the  patents  we seek or if other  problems  arise  with our
intellectual  property,  our  competitiveness  could be significantly  impaired,
which would limit our future revenues and harm our prospects.



                                       10
<PAGE>

         Many of our planned products are highly complex and may contain defects
or errors that are detected only after  deployment in networks.  If that occurs,
our reputation  may be harmed.  Our POF products  under  development  are highly
complex,  and there is no  assurance  that our  extensive  product  development,
manufacturing  and  integration  testing will be adequate to detect all defects,
errors, failures and quality issues that could impact customer satisfaction.  As
a result, we could have to replace certain components and/or provide remediation
in response to the  discovery of defects in products  that are shipped.  Most of
these  occurrences  can be  rectified  without  incident,  as has  been the case
historically.  However,  the  occurrence  of any  defects,  errors,  failures or
quality  issues  could  result  in  cancellation  of  orders,  product  returns,
diversion of our resources, legal actions by our customers or our customers' end
users and other losses to us or to our customers or end users. These occurrences
could also result in the loss of or delay in market  acceptance  of our products
and loss of sales,  which  would  harm our  business  and  adversely  affect our
revenues and profitability.

         Rapid  changes to existing  regulations  or technical  standards or the
implementation  of new regulations or technical  standards  relating to products
and services not previously  regulated could be disruptive,  time-consuming  and
costly to us. Many of our products and services are  developed in reliance  upon
existing regulations and technical standards or our interpretation of unfinished
technical standards. Changes to existing regulations and technical standards, or
the  implementation  of new  regulations  and  technical  standards  relating to
products and services  not  previously  regulated,  could  adversely  affect the
development  of and  demand  for  our  products  and  services  or  require  the
expenditure of substantial additional funds.

         Our success depends on our ability to recruit and retain key personnel.
Our success  depends in large part on our  ability to recruit and retain  highly
skilled technical,  managerial,  sales and marketing personnel.  Competition for
these personnel is intense.  In addition,  our recent workforce  reductions have
increased our  dependence on our remaining  workforce,  as we are relying on our
current personnel to assume additional responsibilities. The loss of services of
any of our  key  personnel  or our  failure  to  attract  and  retain  qualified
personnel  in the  future  could  make  it  difficult  for us to  meet  our  key
objectives, such as timely product introductions.

         Our  relationship  with  Nottingham  and its potential to default on an
outstanding  loan  obligation  may  adversely  affect our  business  operations.
Nottingham through a collaborative arrangement, assists us in the development of
proprietary  technologies  to  create  POF  and  related  networking  equipment.
Nottingham has a loan  obligation to the  Agricultural  Bank of China to repay a
loan in the  principal  amount of  Renminbi  20  million  (approximately  US$2.4
million).  Because we have a 20% of equity interest in Nottingham and rely on it
to assist us in the  development of POF  technology,  if it defaults on its loan
obligations,  we may be forced to cease all  operations  or severely  curtail or
development and production of broadband networking products and systems.

         Efforts to comply with recently  enacted changes in securities laws and
regulations have required  substantial  financial and personnel resources and we
still may fail to comply. As directed by Section 404 of the  Sarbanes-Oxley  Act
of 2002, the SEC adopted rules requiring public companies to include a report of
management on the company's internal controls over financial  reporting in their
annual reports on Form 10-KSB. In addition,  the public accounting firm auditing
the company's  financial  statements  must attest to and report on  management's
assessment  of  the  effectiveness  of  the  company's  internal  controls  over
financial  reporting.  This requirement will first apply to our annual report on
Form 10-KSB for our fiscal year ending  December 31,  2006.  If we are unable to
conclude that we have effective  internal controls over financial  reporting or,
if our independent  auditors are unable to provide us with an unqualified report
as to the effectiveness of our internal controls over financial  reporting as of
December  31,  2006 and  future  year ends as  required  by  Section  404 of the
Sarbanes-Oxley  Act of 2002,  investors could lose confidence in the reliability
of our  financial  statements,  which could result in a decrease in the value of
our  securities.  The formal  process of evaluating  our internal  controls over
financial  reporting,  which has required the devotion of substantial  financial
and  personnel  resources,  is not  complete.  Given the status of our  efforts,
coupled with the fact that guidance from  regulatory  authorities in the area of
internal controls continues to evolve,  uncertainty exists regarding our ability
to comply by applicable deadlines.



                                       11
<PAGE>

Risks Associated With Doing Business In Greater China

         There are substantial  risks  associated with doing business in greater
China, as set forth in the following risk factors.

         The  establishment and expansion of international  operations  requires
significant  management attention. A substantial portion of our current, as well
as any anticipated future revenues, are or are expected to be derived from Asia.
Our  international  operations  are subject to risks,  including the  following,
which, if not planned and managed  properly,  could materially  adversely affect
our business, financial condition and operating results:

      o     legal  uncertainties or unanticipated  changes regarding  regulatory
            requirements, liability, export and import restrictions, tariffs and
            other trade barriers;

      o     longer   customer   payment  cycles  and  greater   difficulties  in
            collecting accounts receivable;

      o     uncertainties of laws and enforcement  relating to the protection of
            intellectual property; and

      o     potentially uncertain or adverse tax consequences.

         Fluctuations  in the value of the RMB  relative  to foreign  currencies
could affect our operating results. We have historically  conducted transactions
with customers,  paid payroll and other costs of operations in Chinese Renminbi.
To the extent future revenue is denominated in foreign  currencies,  we would be
subject  to  increased  risks  relating  to  foreign   currency   exchange  rate
fluctuations  that  could  have a  material  adverse  affect  on  our  financial
condition  and  operating  results.  To date, we have not engaged in any hedging
transactions in connection with our international operations.

         Our  operations  and assets in greater China are subject to significant
political and economic uncertainties.  Changes in laws and regulations, or their
interpretation,  or the imposition of  confiscatory  taxation,  restrictions  on
currency conversion,  imports and sources of supply, devaluations of currency or
the  nationalization or other  expropriation of private enterprises could have a
material  adverse  effect on our business,  results of operations  and financial
condition.  Under  its  current  leadership,  the  Chinese  government  has been
pursuing  economic reform policies that encourage  private economic activity and
greater  economic  decentralization.  There is no assurance,  however,  that the
Chinese  government will continue to pursue these policies,  or that it will not
significantly alter these policies from time to time without notice.

         We may have limited legal  recourse under Chinese law if disputes arise
under contracts with third parties. The Chinese government has enacted some laws
and  regulations  dealing  with  matters  such  as  corporate  organization  and
governance,  foreign investment,  commerce,  taxation and trade. However,  their
experience  in   implementing,   interpreting   and  enforcing  these  laws  and
regulations  is  limited,  and our  ability to enforce  commercial  claims or to
resolve  commercial  disputes is unpredictable.  The resolution of these matters
may be subject to the  exercise of  considerable  discretion  by agencies of the
Chinese  government,  and forces  unrelated  to the legal merits of a particular
matter or dispute may influence their  determination.  Any rights we may have to
specific  performance,  or to seek an injunction under Chinese law, in either of
these cases, are severely limited,  and without a means of recourse by virtue of
the Chinese legal  system,  we may be unable to prevent  these  situations  from
occurring.  The  occurrence  of any such  events  could have a material  adverse
effect on our business, financial condition and results of operations.

         Compliance  with the  Foreign  Corrupt  Practices  Act could  adversely
impact our competitive position; failure to comply could subject us to penalties
and other  adverse  consequences.  We are subject to the United  States  Foreign
Corrupt  Practices Act, which generally  prohibits  United States companies from
engaging in bribery or other  prohibited  payments to foreign  officials for the
purpose of obtaining or retaining  business.  Foreign companies,  including some
that may  compete  with us, are not subject to these  prohibitions.  Corruption,
extortion,  bribery,  pay-offs,  theft and other fraudulent practices occur from
time-to-time  in mainland  China. We can make no assurance that our employees or
other  agents  will  not  engage  in such  conduct  for  which  we might be held
responsible.  If our employees or other agents are found to have engaged in such
practices, we could suffer severe penalties and other consequences that may have
a material  adverse effect on our business,  financial  condition and results of
operations.



                                       12
<PAGE>

Item 2.  Description of Property

         We maintain  our primary  executive  offices at Suite 2021,  20/F,  Two
Pacific  Place,  88 Queensway,  Hong Kong pursuant to an agreement  with Simplex
Capital  Asia  Limited.  We pay Simplex  Capital  Asia  Limited a monthly fee of
$2,564 which is for general and administrative  services including office space,
utilities  and  secretarial  support.  The following  sets forth the  additional
properties  which  are  used  by us in  connection  with  the  operation  of our
business:

<TABLE>
<CAPTION>
                                                                                      Area in Sq.
                                            Address                 Expiry Date         Meters         Rental US$

<S>                            <C>                                <C>                   <C>             <C>
Registered Office              Suite 2108, 21/F., Block C,        12/31/2005             151.53           $940
                               ZhongGuanCun Technology
                               Development Building, No. 34
                               ZhongGuanCun South Avenue,
                               HaiDian District, Beijing, P.R.
                               China

Beijing Representative Office  Suite 1802, Grand Pacific          10/13/2005             434.57         $5,776
                               Building, Phase C, No. 8A
                               Guanghua Road, Chao Yang
                               District, Beijing, P.R. China,
                               100026

Shanghai Representative        Suite 4B, Apollo Building, No.     4/7/2005                77.88         $1,051
Office                         1440 Middle Yanan Road, Jing An
                               District, Shanghai, P.R. China,
                               200040

ChengDu Representative Office  Suite B9,  10th Floor, Digital     6/30/2005               87.28           $578
                               Age Building, No. 1 South Renmin
                               Road, Chengdu, P. R. China,
                               610041

Guangzhou Representative       Suite 32I, Guangzhou               11/6/2004               74.69           $765
Office (upto December 2004)    International Trade Center, No.
                               1 West Linhe Road, Tian He
                               District, Guangzhou, P.R. China,
                               510620

Beijing Warehouse              Lot. West, No. 3 Warehouse,No.     7/31/2006              500.00         $1,386
                               10 Bai Zi Wan Road, Chao Yang
                               District, Beijing, P.R.China,
                               100022

Beijing Warehouse              Lot. East, No. 9 Warehouse, No.    7/31/2006              120.00           $333
                               10 Bai Zi Wan Road, Chao Yang
                               District, Beijing, P.R.China,
                               100022
</TABLE>

         Based on our projections in this annual report,  we believe that we may
need to secure additional space in the future.



                                       13
<PAGE>

Item 3.  Legal Proceedings

         We have been named as a defendant in patent  infringement suit filed by
Panduit  Corp. in connection  with the its patent  entitled  "Angled Patch Panel
With Cable Support Bar For Network Cable Racks".  Panduit filed the complaint in
the United States District Court for the Northern District of Illinois,  Eastern
Division on March 15, 2005.  Panduit also names Leviton  Manufacturing  Company,
Inc., The Siemon Company,  Tyco Electronics  Corporation,  Molex, Inc. and AESP,
Inc. as defendants in the case.  Panduit seeks an injunction  against use of the
patent and damages to be determined by a jury.  Panduit's claim is without merit
and we do not expect it to adversely affect our business.

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

         No matter was submitted to a vote of security holders during the fourth
quarter ended December 31, 2004.

PART II.

Item 5.  Market for Common Equity and Related Stockholder Matters

Market Information

      There had been a very limited and sporadic  public  trading market for our
shares of common  stock until  October 26, 2004 so it is  difficult to ascertain
when our common  stock  qualified  for listing on The Over the Counter  Bulletin
Board.  Our common stock is currently  listed under the symbol "GCPO".  Prior to
that time we were  quoted on the Pink  Sheets  L.L.C.  under the symbol  "PAVS".
During that time,  no public  market  existed for our common stock or any of our
other  securities and therefore no pricing  information for our prior two fiscal
years is  available.  The table  below sets  forth,  for the  calendar  quarters
indicated,  the high and low prices of our common  stock as  reported on the OTC
Bulletin Board. The OTC market  quotations  reported below reflect  inter-dealer
prices,  without markup,  markdown or commissions  and may not represent  actual
transactions.

                                                     OTC Bulletin Board
                                                ----------------------------
                                                  High                Low
                                                --------            --------

               2003 First Quarter*                 -0-                -0-
               2003 Second Quarter*                -0-                -0-
               2003 Third Quarter*                 -0-                -0-
               2003 Fourth Quarter*                -0-                -0-

               2004 First Quarter*                 -0-                -0-
               2004 Second Quarter*                -0-                -0-
               2004 Third Quarter*                 -0-                -0-
               2004 Fourth Quarter                $2.25              $1.85

*For the year 2003 and the  first,  second  and  third  quarters  of 2004, price
ranges are not listed  because  the  earliest  date our  securities  qualifi for
listing was October 26, 2004.

Holders

         As of March 31,  2005,  there were 189  holders of record of our common
stock and 30 holders of record of our preferred stock.



                                       14
<PAGE>

Dividends

      We have not  paid any  dividends  on our  common  stock to date and do not
intend  to pay  dividends.  The  payment  of  dividends  in the  future  will be
contingent  upon our revenues and earnings,  if any,  capital  requirements  and
general  financial  condition.  The payment of any dividends  will be within the
discretion  of our then Board of Directors.  It is the present  intention of our
Board of  Directors  to retain all  earnings,  if any,  for use in our  business
operations  and,  accordingly,  our  Board  does not  anticipate  declaring  any
dividends in the foreseeable future.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered
Securities

         In September 2004, we sold the following shares of common stock without
registration under the Securities Act of 1933, as amended:

Stockholders                                    Number of Shares
------------------------------------            ----------------
Jocelyn Encabo                                       900,000
Michelle Pulling                                     850,000
Gloriosa Ariza                                       800,000
Marcos Aquino                                        850,000
Angela C. Guerrero                                   800,000
Celia Lianza                                         870,000
Francesca Pabilona                                   900,000
Gertrudes Tam                                        880,000
Dragon Enterprises Ltd.                              750,000
Glenealy International Ltd.                          800,000
Oriental Holdings Ltd.                               850,000
Honory Trading Limited                               750,000

         Such  shares  were  issued in  September  2004 in  connection  with the
transactions   contemplated  by  the  Exchange   Agreement  and  Stock  Purchase
Agreement.  The  Investors  received  10,000,000  shares of common  stock of the
Company  for  consideration  of  $2,000,000   pursuant  to  the  exemption  from
registration  contained in Section 4(2) of the  Securities Act as they were sold
to  sophisticated,  wealthy  individuals.  The shares issued to the  individuals
above were sold at an average purchase price of  approximately  $0.50 per share.
In October 2004,  we  authorized a two-for-one  stock split of our common stock,
effectively lowering the purchase price to approximately $0.25 per share.

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

         The  following  discussion  should  be read  in  conjunction  with  our
Financial  Statements and footnotes thereto  contained  elsewhere in this annual
report.

Forward Looking Statements

         The statements  discussed in this annual report include forward looking
statements that involve risks and  uncertainties,  including the timely delivery
and acceptance of our products and the other risks detailed from time to time in
our reports filed with the Securities and Exchange Commission.

Critical Accounting Policies

         The critical accounting policies are as follows:



                                       15
<PAGE>

         Revenue  recognition  - Sales of goods are  recognized  when  goods are
delivered  and title of goods sold has  passed to the  purchaser.  Revenue  from
license to technology right is generally recognized as deliveries are made or at
the completion of contractual billing milestones.

         Income  taxes-  Income  taxes are  provided  on an asset and  liability
approach for financial  accounting and reporting of income taxes. Current tax is
based on the profit or loss from ordinary activities adjusted for items that are
non-assessable  or disallowable  for income tax purpose and is calculated  using
tax rates that have been enacted or  substantively  enabled at the balance sheet
date.  Deferred income tax liabilities or assets are recorded to reflect the tax
consequences in future years of differences  between the tax basis of assets and
liabilities  and the financial  reporting  amounts at each year end. A valuation
allowance is recognized if it is more likely than not that some portion, or all,
of a deferred tax asset will not be realized.

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

         Management  does not  believe  that any  recently  issued,  but not yet
effective,  accounting  standards  if  currently  adopted  would have a material
effect on the accompanying financial statements.

Business Overview

         We were  incorporated  under the laws of the State of Nevada on January
14,  2000 under the name of  Pro-Active  Solutions,  Inc.  On July 7,  2004,  we
changed our name to General  Components,  Inc.  Our  predecessor  was founded in
1998. We are engaged in the development,  manufacture and marketing of broadband
networking  products  and  systems for the "last  mile"  broadband  connectivity
market.  We  currently  offer  a  wide  range  of  basic  to  high-end  modular,
upgradeable  systems that enable  end-users to send and receive  high-speed data
communications  through the Internet  Backbone  Network.  Our  products  include
cables, patch cords, panels, adapters, converters, switches and wireless devices
that are produced by OEM manufacturers  and sold under the "General  Components"
and  "Reachhome"  brands.  We also  create  POF  cable  technology  and  related
networking equipment. We have filed patents in the United States and Asia on our
proprietary POF technology.  We believe we will need to raise  additional  funds
through  a  private  offering  during  the next 24  months  in order to meet the
expenditures required for operating our business.

Business Outlook

         Structured Cable and POF

         We have two areas of  product  development:  structured  cables and POF
cables.  We have an applied OEM business model to service customers in China and
in other parts of the world.  We anticipate that POF products will be one of the
next generation  networking mediums because of its higher bandwidth,  lower cost
and lack of magnetic interference,  which may replace the copper wire cables. We
are  developing  a  manufacturing   technology  to  engage  in  continuous  mass
production of POF cables,  which are widely used in automotive  industry (Europe
and Japan),  home  electronics and  potentially  LANs. We have completed Phase 1
trial production of POF batch manufacturing.  We anticipate continuing our Phase
2 development in 2005.

         VOIP

         In late  2004,  we decided to enter the  fast-growing  enterprise  VOIP
market in China.  In early 2005, we signed a reseller  agreement with VocalData,
Inc., a subsidiary  of Tekelec,  to become their only  software  distributor  of
enterprise VOIP products in China. With respect to hardware,  we established OEM
relationships  with  a  number  of  Chinese  VOIP  equipment  manufacturers.  We
anticipate that our involvement in the connectivity market and with distributors
will help the  future  sales of VOIP  products  to  enterprise  users and system
integrators.  We expect that a  reasonable  portion of our 2005  revenue will be
derived from VOIP product sales.



                                       16
<PAGE>

Results of Operations for the Years ended December 31, 2004 and 2003.

Revenues.  Revenues  were  $1,714,457  for the year ended  December 31, 2004, as
compared  to  $8,029,472  for the same  period  in 2003.  There  was an  unusual
increase in revenue in 2003 attributable to sales of computer processors, memory
chips and network  components.  We took  advantage of the supply  shortage in IT
infrastructures  and components in China,  which created revenue growth in 2002.
In 2004, our  management  focused on improving the gross margin by ceasing these
sales, which had depressed cash flow.

Gross Margin.  We improved our gross margin from 21% (2003) to 27% (2004).  This
increase is  attributable  to our OEM business in China and higher copper prices
in 2004 which allowed us to sell old inventory to gain the extra margin.

Also, we established  favorable  relationships  with  distributors in South East
Asia,  Middle East and  Eastern  Europe.  We  anticipate  steady  growth for our
structured  cable  products  in these  markets in 2005.  With the growth of home
networking and office networking in North America,  we are planning to enter the
North American market in 2005.

Gross  profit was $465,106 in the year ended  December 31, 2004,  as compared to
$1,651,663 for the same period in 2003, due to a decrease in revenue.

For the  year  ended  December  31,  2004,  operating  loss was  $1,495,534  and
operating expenses were $1,960,640.

Net loss.  Net loss was  $1,907,601  for the year ended  December 31,  2004,  as
compared  to $26,172 for the same  period in 2003.  The  increase in net loss is
partly   attributable  to  the  continuing  R&D  expenses  in  installation  and
maintenance  of POF production  lines and the cost of public  listing  including
legal fees, audit fees and D&O insurance.

For the year ended December 31, 2004, the net loss per share was $0.319.

Selling,   general   and   administrative   expenses.   Selling,   general   and
administrative expenses were $1,590,640 for the year ended December 31, 2004, as
compared to  $1,073,197  for the same period in 2003.  The  increase in selling,
general and administrative  expenses is attributable to professional fees on and
after the share exchange, such as legal fees, audit fees, D&O insurance,  salary
of the our President,  consulting fees and write-off of pre-merger shell company
balance  sheet items.  In 2005,  we  anticipate  that our  selling,  general and
administrative  expenses will  increase as we increase our marketing  efforts in
China, Middle East, Russia and potentially North America.

Other  expenses.  Other  expenses were $412,067 for the year ended  December 31,
2004, as compared to $31,813 for the same period in 2003.  The increase in other
expenses is attributable to the reduction in collaborative  arrangements  during
the year.

Research & development costs. Research & development costs were $370,000 for the
year ended  December  31,  2004,  as compared to $572,825 for the same period in
2003.  The  decrease  in research &  development  costs is  attributable  to the
installation  of the Phase 1 POF  production  line in China at the  beginning of
2004.  In 2005,  we  anticipate  that R&D costs  will  increase  because of VOIP
enterprise product development and Phase 2 POF production line development.

Income Taxes

No provisions for taxes have been recorded for the year ended December 31, 2004,
as we had no assessable taxes for the year.

Liquidity and Capital Resources

As of December 31, 2004,  we had  $1,037,292  of cash and cash  equivalents  and
$1,327,333 of working capital as compared to $773,431 and $4,693,  respectively,
at December 31, 2003. The account  receivables have been reduced from $1,622,330
in 2003 to $266,279 in 2004.



                                       17
<PAGE>

      We believe that we may not have sufficient  cash and cash  equivalents for
the next twelve months of operations. We intend to raise additional funds in the
form of equity  and/or debt  financing  to fund  expansion  of our  business and
further development of our POF technology.  In the event that we are not able to
raise additional  financing,  we may face liquidity  problems that may result in
the reduction of our operations.

      Closing  balance  of cash  and cash  equivalents  increased  by 33%,  from
$773,431 in 2003 to $1,037,292  in 2004.  Cash flows from  operating  activities
decreased  slightly,  with a net outflow of $1,362,949 in 2004 compared to a net
outflow of  $1,418,658  in 2003.  With  respect  to cash  flows  from  investing
activities, we have a net cash inflow of  $1,594,316  in  2004  compared to cash
inflow of $384,464 in 2003.  This  represents the net result of an advance to an
associate of $400,000 and cash  receipts  from  investors of $2,000,000 in 2004.
Cash flows from financing  activities  improved from a net outflow of $10,807 in
2003 to a net cash  inflow of $32,494 in 2004 as a result of  repayment  of bank
loans and retirement of restricted cash in 2004.

Off-Balance Sheet Arrangements

         We do not have any off-balance sheet arrangements.

Item 7.  Financial Statements

         Please see the  financial  statements  beginning on page F-1 located at
the end of this annual report.

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.

         The Company's Chief Executive  Officer and Chief Financial Officer have
evaluated the effectiveness of the Company's  disclosure controls and procedures
(as defined in Exchange Act Rules  13a-15(f) and 15d-15(f)) as of the end of the
period  covered by this report.  Based on this  evaluation,  such  officers have
concluded that, as of December 31, 2004, the Company's  disclosure  controls and
procedures are effective.

         (b) Changes in internal control over financial reporting.

         During the year ended  December 31, 2004,  there were no changes in our
internal  control over financial  reporting  that  materially  affected,  or are
reasonably likely to affect, our internal control over financial reporting.

         While we believe our internal  controls are adequate and that there are
no material  weaknesses,  it should be noted that our  disclosure  controls  and
procedures and our internal  controls will not necessarily  prevent all error or
fraud,  and can thus not provide  absolute  assurance that all control issues or
fraud can be detected.

Item 8B. Other Information

         None.



                                       18
<PAGE>

                                   PART III.

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

Our current directors and executive officers are as follows:

Name                   Age        Title

Simon Mu               47         Chairman  and Chief  Executive  Officer of the
                                  Company

Bruce A. Cole          57         Vice Chairman,  Secretary and President of the
                                  Company

James K. Walker        69         Chief Scientist and Director of the Company

Junichi Goto           51         Director of the Company

Regis Kwong            42         Director of the Company

Peter Wang             50         Director of the Company

Jonathan Chan          33         Treasurer and Chief  Financial  Officer of the
                                  Company

Dr. Simon Mu, Chairman and CEO - Dr. Mu is a founder of the Company and has been
Chairman of the Board of  Directors  and CEO since its  inception  in  September
1998. Dr. Mu is also the CEO of China Mineral  Acquisition  Corporation,  a U.S.
publicly listed company . He is a Managing Director of Capital Bridge Investment
Ltd., a Chinese  company  specializing in mergers,  acquisitions  and distressed
debt  financing in China,  since August 2003.  Since 1996,  Dr. Mu has served as
Chairman of the Board of Beijing  Marrison  World Business  Information  Systems
Company,  a  computer  systems  integrator  in China,  in which Dr. Mu is also a
majority shareholder. He was Vice-Chairman of Jinpan International Ltd., an AMEX
listed  company,  between  August 1997 to December  1999.  From February 1995 to
August 1998, Dr. Mu was President of Patron  America Inc., a financial  advisory
company.  From  September  1993 to January 1995, he served as Vice  President of
Investment  Banking for Salomon Brothers in Hong Kong. Prior to joining Salomon,
he was an Assistant  Professor at the Lyndon Johnson  School,  the University of
Texas at Austin, from 1991 to 1993. Dr. Mu holds a Masters in Econometrics and a
Ph.D. in Planning and  Development  Finance,  both from the  University of North
Carolina at Chapel Hill.  He has a B.S.  degree in Urban  Planning  from Nanjing
University.

Mr. Bruce A. Cole, Vice Chairman and President - Mr. Cole has been involved with
the  Company  since its  inception,  and has served as a director of the Company
since  January  1999 and became  Vice  Chairman  in  December  2001.  He is Vice
Chairman of Morgan Stern Merchant Bank,  with offices in Beijing,  Hong Kong and
the U.S. He is a managing  member of Morgan Stern Realty  Holdings,  LLC,  which
owns  commercial  property in Texas.  Mr. Cole is also Vice  Chairman of Ramwell
Industrial  Limited,  an engineering  and equipment  manufacturing  company with
offices in China and the U.S. From 1996 to 1999,  Mr. Cole was the President and
a member of the Board of  Directors of National  Information  Group and its five
subsidiaries,  a publicly traded company in the U.S. with over 1,000  employees.
In May 1999,  National merged with First American Financial Corp., a NYSE listed
company.  From 1994 to 1996,  Mr. Cole served as Executive  Vice  President  and
General  Counsel  at J.B.  Oxford  Holdings.  He served as  Special  Counsel  at
Rubenstein  & Perry  from  1991-1994  where  he  managed  assets  of  distressed
companies and completed numerous corporate restructurings transactions involving
the $2 billion conservation proceedings of Executive Life Insurance Company. Mr.
Cole was the founding  member and  President of a San  Francisco  based law firm
from 1981-1990.  Mr. Cole has been active in business in China since 1985, first
as a lawyer  and then as a  businessman.  Mr.  Cole has  served  on a number  of
corporate  boards,  both public and private.  Mr. Cole earned a Bachelor of Arts
degree from UCLA and a Juris Doctor degree from the University of San Francisco.



                                       19
<PAGE>

Dr.  James K.  Walker,  Director  - Dr.  Walker  was  appointed  to the board of
directors in January 2005. Dr. Walker is the chairman of the boards of directors
of Nanoptics,  Inc.  ("Nanoptics"),  Maxxvision,  LLC ("Maxxvision") and Digital
Optronics Corporation ("Digital"). Nanoptics, which is controlled by Dr. Walker,
is a high technology  research and development  company founded by Dr. Walker in
1987.  Maxxvision  and Digital  were  founded in 2000 and 2001 to  commercialize
specific products developed at Nanoptics.  Dr. Walker was a Professor of Physics
at the  University of Florida from 1984 to 2000.  From 1969 to 1984,  Dr. Walker
was a Department  and Division  Head at the world's  largest atom  smasher,  the
Fermi  National  Laboratory  in Chicago,  Illinois.  Dr. Walker was an Associate
Professor at Harvard University, Cambridge,  Massachusetts from 1962 to 1969. He
has also held visiting positions for periods of six months to two years at CERN,
Geneva, Switzerland, The Rutherford laboratory, England, The Weizmann Institute,
Israel and the Ecole Normale Superieure,  Paris,  France. He served on the Nobel
Nominating  Group for physics from 1991 to 1995 and was a John Simon  Guggenheim
Fellow  for the year 1969.  He has also  served on Review  Committees  and Study
Groups at the National  Institutes of Health. Dr. Walker has published more than
100  professional  articles  on  high  energy  physics,  plastic  fiber  optical
communications,  medical sensors and radiology and is the author of more than 20
patents.  Dr.  Walker  received  his Ph.D.  in physics  from the  University  of
Glasgow, Scotland.

Mr.  Junichi  Goto,  Director  - Mr.  Goto  has been a  member  of the  Board of
Directors  since  October  2004.  He has been the chairman  and chief  executive
officer of Go-To-Asia  Investment Limited.  Mr. Goto served as the president and
chief executive officer of Softbank China Venture  Investments Limited from July
1999 to June 2001.  Prior to that, he worked in the finance industry for over 20
years,  including  serving as managing  director and chief executive  officer of
Nomura  China  Venture  Investments  Limited  from  April  1996 to July 1999 and
serving as managing  director of China Investment  Banking  Department of Nomura
International (Hong Kong) Limited from 1992 to 1996. Mr. Goto holds a Bachelor's
degree in economics from the University of Tokyo.

Mr.  Regis  Kwong,  Director  - Mr.  Kwong  has  been a member  of the  Board of
Directors since October 2004. He has worked for several major U.S.-based  global
telecom services providers for over 18 years. During 1995 to 1997, he worked for
GTE (now Verizon) China as head of  operations.  From 1997 to 1999, he served as
Vice President and General Manager for its China operations.  After leaving GTS,
Mr. Kwong  founded  Terremark  Asia to provide  internet  messaging and Internet
Exchange services in China.  Terremark was later listed on the AMEX. Since 2000,
he has been the Managing  Director for China  Consolidated  Investment Firm. Mr.
Kwong  holds a  Bachelor  and  Master's  degree  in  Computer  Engineering  from
California Polytechnic University as well as an MBA from Rutgers University.

Mr. Peter Wang,  Director - Mr. Wang has been a member of the Board of Directors
since  October 2004.  He was  Executive  Vice  President and Director of Unitech
Telecom  (now  named   UTStarcom,   NASDAQ:   UTSI)  and   co-founded  US  World
Communications  Group,  Inc., United Medical Group, and World PCS, Inc. Mr. Wang
also  worked at AT&T Bell Labs and  Racal-Milgo  Information  System on  Network
Evolution  Planning.  He was  elected  Deputy  Chairman  of the  Association  of
Privately  Owned High-tech  Enterprises in China.  Mr. Wang has a BS in Computer
Science and a MS in Electrical  Engineering  from University of Illinois as well
as an MBA in Marketing from Southeast-Nova University.

Mr. Jonathan Chan,  Treasurer and Chief Financial  Officer - Mr. Chan has served
as Treasurer and Chief Financial  Officer of the Company since November 2004. He
is  currently  an  Associate  Director  of  Go-To-Asia  Investment  Limited.  At
Go-To-Asia, Mr. Chan is responsible for venture capital investment activities in
the  Greater  China  Region.  Previously,  he served  as a manager  in charge of
venture capital investment for Softbank China Venture Investments  Limited.  Mr.
Chan also has over 6 years of experience in accounting and corporate finance, he
worked for Ernst & Young in Hong Kong where he was responsible for auditing, due
diligence  review,  corporate  valuations,  corporate  restructuring and initial
public  offerings  of PRC  enterprises.  Mr.  Chan holds a Bachelor  of Commerce
degree in Accounting and Computer  Information System from the University of New
South Wales, Australia. He is an associated member of the Hong Kong Institute of
Certified  Public  Accountants  (formerly  known as the  Hong  Kong  Society  of
Accountants) and a member of CPA Australia.



                                       20
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the  Securities  Exchange Act requires our  directors,
executive officers and persons who own more than 10% of our common stock to file
reports of  ownership  and  changes in  ownership  of our common  stock with the
Securities and Exchange  Commission.  Directors,  executive officers and persons
who own more  than 10% of our  common  stock  are  required  by  Securities  and
Exchange  Commission  regulations  to furnish to us copies of all Section  16(a)
forms they file.

         To our  knowledge,  based  solely  upon  review  of the  copies of such
reports  received or written  representations  from the  reporting  persons,  we
believe that during our 2004 fiscal year our directors,  executive  officers and
persons  who own more than 10% of our common  stock  complied  with all  Section
16(a) filing requirements.

Code of Ethics

         In March  2005,  we adopted a Code of Ethics and  Business  Conduct and
Insider Trading Policy ("Code") that applies to our principal executive officer,
principal  financial  officer,  principal  accounting  officer or  controller or
persons performing similar functions. A copy of such Code is attached as Exhibit
14.1 to this annual  report.  A copy of the Code will be made  available  to any
stockholder, free of charge, upon written request to us at Suite 2021, 20/F, Two
Pacific Place, 88 Queensway, Hong Kong.

Board Committees and Designated Directors

         We have an Audit Committee  comprised of three  independent  directors:
Junichi Goto,  Peter Wang and Regis Kwong.  The board of directors will take all
reasonable actions to ensure that one of the members of the Audit Committee will
be an "audit committee  financial  expert," as such term is defined in the rules
of the Securities and Exchange  Commission.  We are currently  listed on the OTC
Bulletin Board and are therefore not required to have a nominating  committee or
a compensation  committee.  We will evaluate establishing such committees in the
future.

Item 10. Executive Compensation

         Certain executive officers have received cash compensation for services
rendered  on  behalf  of  the  Company.  Compensation,   including  finders  and
consulting fees, paid by us to any of our existing  stockholders,  including our
directors, or any of their respective affiliates,  for services rendered for the
year ended December 31, 2004 are listed below:

<TABLE>
<CAPTION>

                                       Annual compensation
                       -----------------------------------------------------
   Name/Principal      Fiscal                                                   All other
      Position          Year      Salary ($)         Bonus ($)     Other ($)    Comp. ($)
------------------     ------     ----------         ---------     ---------    ---------

<S>                     <C>       <C>                 <C>           <C>           <C>
Simon Mu,               2004      $120,000             --             --            --
   Chairman and         2003       120,000             --             --            --
   CEO                  2002       120,000             --             --            --

Bruce Cole,             2004       $70,000             --            --             --
   Vice                 2003            -0-            --            --             --
   Chairman,            2002            -0-            --            --             --
   President
   and Secretary
</TABLE>


         Additionally, our executive officers and/or their respective affiliates
will be reimbursed by us for any  out-of-pocket  expenses incurred in connection
with  activities  conducted  on our  behalf.  There is no limit on the amount of
these  out-of-pocket  expenses and there will be no review of the reasonableness
of such  expenses by anyone other than our Board of  Directors,  which  includes
persons who may seek reimbursement, or a court of competent jurisdiction if such
reimbursement is challenged. During each of the last three fiscal years, none of
our officers  other than those  listed  above had salary and bonus  greater than
$100,000.


                                       21
<PAGE>

         Since our  formation,  we have not granted  any stock  options or stock
appreciation  rights or any awards under  long-term  incentive  plans.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following  table sets forth  information  regarding the  beneficial
ownership of our common stock as of March 31, 2005 by:

      o     each person known by us to be the  beneficial  owner of more than 5%
            of our outstanding shares of common stock;

      o     each of our officers and directors; and

      o     all our officers and directors as a group.

Unless otherwise indicated,  we believe that all persons named in the table have
sole  voting and  investment  power with  respect to all shares of common  stock
beneficially owned by them.

<TABLE>
<CAPTION>
Names and Addresses                                            Amount and Nature
of Beneficial Owners                                     of Beneficial Ownership(1)(2)           Percent of Class
----------------------------------------------------     -----------------------------           ----------------
<S>                                                            <C>                                <C>
Simon Mu(3)                                                        21,599,272                         21.60%

Lotus Liberator Fund                                               10,579,240                         10.58%
Room 2703, 27/F, The Centrium
60 Wyndham Street
Central, Hong Kong

Dan Zheng Lee                                                       9,256,832                          9.26%
2 Hudson Court
Franklin Park, New Jersey 08823

Bruce Cole(3)                                                       6,171,216                          6.17%

China Enterprise Investments No. 12 Limited                         5,701,696                          5.70%
P.O. Box 309GT, Ugland House
South Church Street
Georgetown, Grand Cayman
Cayman Islands

Junichi Goto(3)                                                       617,120                          *

Jonathan Chan(3)                                                      493,696                          *

Regis Kwong(3)                                                        308,560                          *

Peter Wang(3)                                                         308,560                          *

James Walker(3)                                                        30,000                          *

All directors and executive officers as a group                    29,528,424                         29.5%
(7 persons)
</TABLE>


                                       22
<PAGE>

-----------------------------------
* Less than one percent.

(1) Unless  otherwise  noted, the Company believes that all persons named in the
table have sole voting and  investment  power with  respect to all shares of the
Common Stock beneficially owned by them. A person is deemed to be the beneficial
owner of securities which may be acquired by such person within 60 days from the
date  indicated  above upon the  exercise  of options,  warrants or  convertible
securities.  Each  beneficial  owner's  percentage of ownership is determined by
assuming that options,  warrants or convertible securities that are held by such
person (not those held by any other person) and which are exercisable  within 60
days of the date indicated above, have been exercised.

(2)  Represents  shares of Common Stock  issuable  upon  conversion of shares of
Series A Preferred Stock held by such holders.  Each share of Series A Preferred
Stock is  convertible  into eight (8) shares of Common  Stock and the  Preferred
Stock votes on an as-converted basis.

(3) Indicates a director and/or executive officer of the Company. The address of
each such  individuals is c/o General  Components,  Inc.,  Suite 2021, 20/F, Two
Pacific  Place,  88 Queensway,  Hong Kong.

Item 12. Certain Relationships and Related Transactions

         During  the year ended  December  31,  2003 and 2004,  we sold goods to
Beijing  Marrison World Business  Information  Company Limited for US$61,554 and
US$217,136 respectively. Dr. Simon Mu, our Chairman and Chief Executive Officer,
has a  controlling  interest  in Beijing  Marrison  World  Business  Information
Company Limited.

         During the year ended  December  31,  2002,  we  purchased  certain POF
production  equipment from Ramwell Industrial Limited at a price of US$5,000,000
for trading  purposes,  and a balance of  US$2,450,000  remained  outstanding at
December 31, 2002. The production  equipment  valued at US$2,350,000 was sold to
Nottingham  International  Limited  ("NIL")  for  US$2,500,000.  NIL holds a 40%
equity interest in Nottingham.  The remaining  equipment  valued at US$2,650,000
was sold to Nottingham for  US$2,750,000.  With respect to the equipment sold to
Nottingham,  20% of the unrealized gain, amounting to US$20,000,  was eliminated
upon consolidation.

         The amount of US$500,000 due from NIL represents  sales of machinery by
us in 2002,  which amount remained  outstanding at December 31, 2003. The amount
is  interest-free,  unsecured  and without  fixed terms of  repayment.  Prior to
August 2003, Dr. Mu was a director of NIL.

         We  paid  consultancy   service  fees  to  Ramwell  Industrial  Limited
beginning in September 2001 at a monthly rate of US$10,000 until April 2002, and
US$20,000 was paid in May 2002 for the installation and engineering  services of
the POF  production  lines for  Nottingham.  The  service  contract  period  was
extended and additional  amounts of US$48,000 and US$70,000 were paid during the
year ended 2002 and 2003,  respectively.  In  addition,  US$450,000  was paid in
December  2003 and  US$370,000  was paid in the year ended  December 31, 2004 as
compensation for services  rendered in accordance with a contract signed in 2001
for future maintenance and engineering consulting services,  including improving
the POF production,  reviewing the quality system and quality  assurance system.
Mr. Bruce Cole, a our Vice Chairman,  President and Secretary,  is a director of
Ramwell Industrial Limited.



                                       23
<PAGE>

Item 13. Exhibits

         The following Exhibits are filed as part of this report.

<TABLE>
<CAPTION>
         Exhibit No.           Description
<S>                            <C>
         2.1                   Share Exchange Agreement by and between General Components, Inc., a Nevada
                               corporation and General Components, Inc., a Cayman Islands corporation dated
                               September 24, 2004.(1)

         2.2                   Stock Purchase Agreement by and among General Components, Inc. and certain
                               Investors listed on Exhibit A thereto dated September 24, 2004.(1)
         2.3                   Agreement and Plan of Merger dated as of July 7, 2004 between Pro-Active
                               Solutions, Inc., a Nevada corporation ("Parent"), and General Components,
                               Inc., a Nevada corporation and a direct wholly-owned subsidiary of Parent.(2)
         3.1                   Certificate of Incorporation.(3)
         3.2                   Certificate of Designation of General Components, Inc.(1)
         3.3                   By-laws.(3)
         4.1                   Form of Common Stock Certificate.(3)
         10.1*+                Dr. Simon Mu Employment Letter
         14.1*                 Code of Ethics and Insider Trading Policy.
         16.1                  Letter from Kyle L. Tingle, CPA, LLC dated November 17, 2004 regarding
                               change in certifying accountant.(4)
         31.1*                 Certification of Chief Executive Officer pursuant to Section 302 of the
                               Sarbanes-Oxley Act of 2002.
         31.2*                 Certification of Chief Financial Officer pursuant to Section 302 of the
                               Sarbanes-Oxley Act of 2002.
         32.1*                 Certification of Chief Executive Officer pursuant to Section 906 of the
                               Sarbanes-Oxley Act of 2002.
         32.2*                 Certification of Chief Executive Officer pursuant to Section 906 of the
                               Sarbanes-Oxley Act of 2002.
</TABLE>

------------------------------
*  Filed herewith.

+ Indicates management contract or compensatory plan or arrangement.

(1)   Incorporated  herein by  reference  to the  Periodic  Report filed on Form
      8-K/A on January 20, 2005.

(2)   Incorporated  herein by reference to the Periodic Report filed on Form 8-K
      on July 8, 2004.

(3)   Incorporated  herein by reference to the General Form for  Registration of
      Securities of Small Business Issuers filed on Form 10-SB January 9, 2002.

(4)   Incorporated  by  reference  herein to the  Periodic  Report filed on Form
      8-K/A on  November  22,  2004.

Item 14. Principal Accountant Fees and Services

         The firm of BDO McCabe Lo & Company acts as our  principal  accountant.
The following is a summary of fees paid to our principal accountant for services
rendered.



                                       24
<PAGE>

AUDIT FEES

         During the fiscal years ended  December 31, 2003 and 2004, we have paid
our  principal  accountant  $34,282 and $138,846 for the services our  principal
accountant performed in connection with audit of financial statements.

AUDIT RELATED FEES

         During the fiscal years ended December 31, 2003 and 2004, our principal
accountant did not render assurance and related services  reasonably  related to
the performance of the audit or review of financial statements.

TAX FEES

         During the fiscal years ended December 31, 2003 and 2004, our principal
accountant did not render services to us for tax compliance,  tax advice and tax
planning.

ALL OTHER FEES

         During the fiscal years ended December 31, 2003 and 2004, there were no
fees billed for products and services provided by the principal accountant other
than those set forth above.

AUDIT COMMITTEE APPROVAL

         Our  audit  committee  together  with the  entire  board  of  directors
evaluates and approves in advance the scope and the cost of the engagement of an
auditor before the auditor renders audit and non-audit services.  We do not rely
on pre-approval policies and procedures.


                                       25
<PAGE>

                            GENERAL COMPONENTS, INC.

                       Consolidated Financial Statements
                 For the years ended December 31, 2003 and 2004

<PAGE>

                            GENERAL COMPONENTS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                           Page
                                                                           ----

Report of Independent Registered Public Accounting Firm                     F1

Consolidated Balance Sheets                                                 F2

Consolidated Statements of Operations                                       F3

Consolidated Statements of Stockholders' Equity                             F4

Consolidated Statements of Cash Flows                                       F5

Notes to Consolidated Financial Statements                                F6-F14


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
GENERAL COMPONENTS, INC.

We  have  audited  the  accompanying  consolidated  balance  sheets  of  GENERAL
COMPONENTS,  INC. and  subsidiaries  (the "Company") as of December 31, 2003 and
2004,  and the related  consolidated  statements  of  operations,  stockholders'
equity and cash flows for each of the two years in the period ended December 31,
2004.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audits include  consideration of internal control over
financial   reporting  as  a  basis  for  designed  audit  procedures  that  are
circumstances,  but  not  for  the  purpose  of  expressing  an  opinion  on the
effectiveness  of the  Company's  internal  control  over  financial  reporting,
Accordingly,  we express no such opinion. An audit also includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of GENERAL COMPONENTS,
INC.  as of  December  31, 2003 and 2004,  and the  consolidated  results of its
operations  and its cash  flows  for each of the two years in the  period  ended
December 31, 2004, in conformity with accounting  principles  generally accepted
in the United States of America.

                                                         BDO McCabe Lo & Company

Hong Kong, March 8, 2005


                                      F-1
<PAGE>

                            GENERAL COMPONENTS, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                2003          2004
                                                             ----------    ----------
                                                                 US$           US$
                                     ASSETS
<S>                                                          <C>           <C>
Current assets:
  Cash and cash equivalents                                     773,431     1,037,292
  Restricted cash                                               659,000            --
  Bills receivable                                               37,087            --
  Accounts receivable, net of provision
     for doubtful debts  (nil, US$896)                        1,622,330       266,279
  Inventories (note 3)                                          501,502       581,874
  Prepaid expenses and other current assets                      68,363       103,663
                                                             ----------    ----------
               Total current assets                           3,661,713     1,989,108
Property, plant and equipment-net (note 4)                      203,000       123,136
Investment in and advances to equity  investee (note 5)       1,452,578     1,497,518
Amounts due from an affiliate (note 11)                         500,000       500,000
Intangible assets (note 6)                                       40,271        26,771
                                                             ----------    ----------
               Total assets                                   5,857,562     4,136,533
                                                             ==========    ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

  Short-term bank loans (note 7)                                626,506            --
  Accounts payable                                            1,565,087       191,709
  Accrued payroll and employee benefits                           8,971           472
  Customer deposits                                              17,857        13,590
  Other accrued liabilities (note 8)                            403,740       445,555
  Amount due to a director (note 11)                             24,410            --
  Convertible loans (note 10)                                 1,000,000            --
  Income taxes payable                                           10,449        10,449
                                                             ----------    ----------
               Total current liabilities                      3,657,020       661,775

Commitments and contingencies (note 12)

Stockholders' equity:
  Common stock, par value $0.001 per share;
    authorized 25,000,000 shares, shares issued and
    outstanding December 31, 2003 - 18,954,463 shares;
    December 31, 2004 - 20,000,000 shares                        18,954        20,000
  Series A preferred stock, par value $0.001 per share;
    authorized 10,000,000 shares, shares issued and
    outstanding December 31, 2003 - nil;
    December 31, 2004 - 10,000,000 shares                            --        10,000
Additional paid in capital                                    4,564,593     7,735,364
Accumulated losses                                           (2,383,005)   (4,290,606)
                                                             ----------    ----------
               Total stockholders' equity                     2,200,542     3,474,758
                                                             ----------    ----------
               Total liabilities and stockholders' equity     5,857,562     4,136,533
                                                             ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

                            GENERAL COMPONENTS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                         2003           2004
                                                      ----------     ----------
                                                          US$           US$

Net sales                                              8,029,472      1,714,457

Cost of sales                                         (6,377,809)    (1,249,351)

                                                      ----------     ----------
Gross profit                                           1,651,663        465,106

Selling, general and administrative expenses          (1,073,197)    (1,590,640)
Research and development costs                          (572,825)      (370,000)

                                                      ----------     ----------
Operating losses                                           5,641     (1,495,534)

Other income (expenses)

    Sales of machineries                                  90,738             --
    Cost of sales of machineries                         (74,730)            --
    Interest expenses                                   (103,727)       (43,743)
    Interest income                                       12,384          4,510
    Share of gains (losses) of equity investee            39,108       (355,060)
    Others, net                                            4,414        (17,774)

                                                      ----------     ----------
Total other income (expenses), net                       (31,813)      (412,067)
                                                      ----------     ----------
Loss before income taxes                                 (26,172)    (1,907,601)

Income taxes (note 9)                                         --             --

                                                      ----------     ----------
Net loss                                                 (26,172)    (1,907,601)
                                                      ==========     ==========

Net loss per share
- basic and diluted                                       (0.007)        (0.319)
                                                      ==========     ==========

Weighted average common stock outstanding
- basic and diluted                                    3,954,463      5,988,607
                                                      ==========     ==========

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                                                    GENERAL COMPONENTS, INC.

                                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                         Common stock        Series A preferred stock
                                -------------------------------------------------------  Additional                       Stock-
                                  Shares                         Shares                    paid-in       Accumulated      holders'
                                outstanding      Amount       outstanding     Amount       capital         losses          equity
                                ---------------------------------------------------------------------------------------------------
                                                   US$                          US$          US$             US$            US$
<S>                              <C>                <C>        <C>               <C>        <C>           <C>             <C>
Balance at December 31, 2002     18,954,463         18,954             --            --     4,564,593     (2,356,833)     2,226,714

Net loss                                 --             --             --            --            --        (26,172)       (26,172)

                                ---------------------------------------------------------------------------------------------------
Balance at December 31, 2003     18,954,463         18,954             --            --     4,564,593     (2,383,005)     2,200,542

Conversion of convertible loans
   and accrued interests in
   connection with reverse
   merger                         1,045,537          1,046             --            --     1,184,905             --      1,185,951

Shares created in reverse
   merger                         5,000,000          5,000             --            --        (9,134)            --         (4,134)

Conversion of common stock to
   series A preferred stock     (20,000,000)       (20,000)    10,000,000        10,000        10,000             --             --

Issuance of shares for a 2 for
   1 stock dividend               5,000,000          5,000             --            --        (5,000)            --             --

Issuance of shares               10,000,000         10,000             --            --     1,990,000             --      2,000,000

Net loss                                 --             --             --            --            --     (1,907,601)    (1,907,601)

                                ---------------------------------------------------------------------------------------------------
Balance at December 31, 2004     20,000,000         20,000     10,000,000        10,000     7,735,364     (4,290,606)     3,474,758
                                ===================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

                            GENERAL COMPONENTS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     2003          2004
                                                                 ----------    ----------
                                                                     US$           US$
<S>                                                              <C>           <C>
Cash flows from operating activities
  Net loss                                                          (26,172)   (1,907,601)
  Adjustment to reconcile net loss to net cash used
     in operating activities:
  Depreciation and amortization                                      80,866        76,518
  Loss on disposal of property, plant and equipment                     386        22,530
  Unrealized gain from sales of machineries to equity investee        4,000            --
  Adjustment to reverse effect of write-up
   of technology rights                                            (154,940)     (154,940)
  Share of loss of an equity investee                               115,832       510,000
  Changes in operating assets and liabilities:
     Accounts receivable                                           (205,629)    1,356,051
     Bills receivable                                               (37,087)       37,087
     Inventories                                                     56,174       (80,372)
     Prepaid expenses and other current assets                      108,679       (35,301)
     Accounts payable                                             1,013,509    (1,373,377)
     Accrued payroll and employee benefits                              323        (8,499)
     Customer deposits                                              (27,394)       (4,266)
     Other accrued liabilities                                      110,168       223,631
     Amounts due to a director                                           --       (24,410)
     Amounts due to an affiliate                                 (2,457,373)           --
                                                                 ----------    ----------
Net cash used in operating activities                            (1,418,658)   (1,362,949)
                                                                 ----------    ----------

Cash flows from investing activities
  Purchase of property, plant and equipment                          (6,254)       (5,744)
  Proceeds from sale of property, plant and equipment                   718            60

  Additional contribution in capital                                     --     2,000,000
  Cash advance to an equity investee                                     --      (400,000)
  Payment to an equity investee                                          --      (614,458)
  Loan from an equity investee                                      390,000       614,458
                                                                 ----------    ----------
Net cash from investing activities                                  384,464     1,594,316
                                                                 ----------    ----------

Cash flows from financing activities
  Proceeds from bank loans                                          530,120            --
  Repayment of bank loans                                          (481,927)     (626,506)

   (Increase) decrease in restricted cash                           (59,000)      659,000
                                                                 ----------    ----------
Net cash from (used in) financing activities                        (10,807)       32,494
                                                                 ----------    ----------

Net increase (decrease) in cash and cash equivalents             (1,045,001)      263,861
Cash and cash equivalents, beginning of period                    1,818,432       773,431
                                                                 ----------    ----------
Cash and cash equivalents, end of period                            773,431     1,037,292
                                                                 ==========    ==========

Supplementary  disclosures of cash flow  information:
  Cash paid during the year for:
    Interest                                                        103,727        43,743
    Income taxes                                                         --            --
                                                                 ==========    ==========

Supplementary disclosures of significant non-cash transaction:

    Conversion of convertible loans and accrued loan interest
      in connection with reverse merger                                  --     1,185,951
    Shares created in reverse merger                                     --        (4,134)
    Conversion of common stock to series A preferred stock in
      connection with reverse merger                                     --        10,000
    Issuance of shares for a 2 for 1 stock dividend                      --         5,000
                                                                 ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

1. Organization and Basis of Financial Statements

         General Components,  Inc. (the "Company" or "GCI"). was organized under
the laws of the State of Nevada  corporation on January 14, 2000, under the name
of  Pro-Active  Solutions,  Inc.  ("Pro-Active").  On July 7,  2004,  Pro-Active
changed its name to General Components,  Inc., which had only limited operations
and had been a development stage company.

         On  September  24,  2004,  General  GCI and the  Shareholders  group of
General  Components,   Inc.,  ("GCI-Cayman"),   a  Cayman  Islands  corporation,
(collectively, "Shareholders") closed the transactions contemplated by the share
exchange  agreement  (the "Share  Exchange  Agreement")  of September  24, 2004.
Pursuant to the Share Exchange  Agreement,  Shareholders have agreed to transfer
to GCI and GCI has agreed to acquire  from the  Shareholders  all of the shares,
which shares constitute 100% of the outstanding capital stock of GCI-Cayman,  in
exchange for 20 million shares of GCI's common stock to be issued on the closing
date, which shares shall constitute 80% of the issued and outstanding  shares of
GCI's common stock immediately after the closing of the transactions. This share
exchange transaction resulted in those Shareholders  obtaining a majority voting
interest in GCI.  Generally  accepted  accounting  principles  require  that the
company whose  shareholders  retain the majority interest in a combined business
be treated as the  acquirer  for  accounting  purposes,  resulting  in a reverse
acquisition.  Accordingly, the share exchange transaction has been accounted for
as a  recapitalization  of GCI.  The  financial  year  end  date of GCI has been
changed  from May 31 to  December 31  effective  from the  financial  year ended
December 31, 2004.

         In September  2004, a stock  purchase  agreement  (the "Stock  Purchase
Agreement") was signed between GCI and a purchaser (the  "Purchaser").  Pursuant
to the Stock Purchase Agreement,  the Purchaser agreed to purchase 20% shares of
the  outstanding  common stock of GCI,  subsequent to any shares changes arising
from the Share Exchange Agreement as well as the Stock Purchase  Agreement,  for
consideration of US$2 million.

         The  principal  activity  of the  Company  and its  subsidiaries  is to
provide broadband  technology for the "Last Mile" market. The Company's products
are produced by OEM  manufacturers  and sold under the "General  Components" and
"Reachhome" brands. The Company has also developed plastic optical fiber ("POF")
cable technology and related networking equipment. The Company has filed patents
in the USA and Asia on its  proprietary POF  technology,  related  manufacturing
process and production  machinery.  The Company currently offers a wide range of
entry-level to high-end modular,  upgradeable systems in the last mile broadband
connectivity  market.  It also  licenses its POF  technology  and  manufacturing
process to and procures the production machinery for selected partner customers.

2. Summary of Significant Accounting Policies

         Principles  of  consolidation-The  consolidated  financial  statements,
prepared in accordance  with  generally  accepted  accounting  principles in the
United States of America, include the assets,  liabilities,  revenues,  expenses
and cash flows of all subsidiaries. Intercompany balances, transactions and cash
flows are eliminated on consolidation.

         Intangible assets- Patents are measured initially at cost and amortized
in a straight-line  basis over their estimated useful lives, which is on average
five years.

         Cash and cash  equivalents-Cash  and cash  equivalents  include cash on
hand, cash accounts,  interest bearing savings accounts and time certificates of
deposit with a maturity of three months or less when purchased.

         Inventories-Inventories  are  stated  at the  lower of cost or  market.
Cost,  which  comprises  direct  materials and other direct costs that have been
incurred in bringing the inventories to their present location and condition, is
calculated using the weighted average method.


                                      F-6
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

2. Summary of Significant Accounting Policies - Continued

         Property, plant and equipment-Property,  plant and equipment are stated
at cost including the cost of improvements.  Maintenance and repairs are charged
to expense as  incurred.  Depreciation  and  amortization  are  provided  on the
straight  line  method  based on the  estimated  useful  lives of the  assets as
follows:

Furniture, fixtures and equipment                            5 - 7 years
Motor vehicles                                               5 years
Leasehold improvements                                       Over the lease term

         Valuation of long-lived  assets-The Company periodically  evaluates the
carrying value of long-lived  assets to be held and used,  including  intangible
assets subject to  amortization,  when events and  circumstances  warrant such a
review. The carrying value of a long-lived asset is considered impaired when the
anticipated  undiscounted  cash flow from such asset is separately  identifiable
and is less than its carrying value.  In that event, a loss is recognized  based
on the amount by which the carrying  value  exceeds the fair market value of the
long-lived  asset.   Fair  market  value  is  determined   primarily  using  the
anticipated cash flows discounted at a rate commensurate with the risk involved.
Losses  on  long-lived  assets to be  disposed  of are  determined  in a similar
manner, except that fair market values are reduced for the cost to dispose.

         Revenue  recognition-Sales  of goods  are  recognized  when  goods  are
delivered  and title of goods sold has  passed to the  purchaser.  Revenue  from
license to technology right is generally recognized as deliveries are made or at
the completion of contractual billing milestones.

         Comprehensive  income-The  comprehensive  income of The Company for the
years ended December 31, 2003 and 2004 was  represented by the net income of the
respective periods.

         Income  taxes-Income  taxes  are  provided  on an asset  and  liability
approach for financial  accounting and reporting of income taxes. Current tax is
based on the profit or loss from ordinary activities adjusted for items that are
non-assessable  or disallowable  for income tax purpose and is calculated  using
tax rates that have been enacted or  substantively  enabled at the balance sheet
date.  Deferred income tax liabilities or assets are recorded to reflect the tax
consequences in future years of differences  between the tax basis of assets and
liabilities  and the financial  reporting  amounts at each year end. A valuation
allowance is recognized if it is more likely than not that some portion, or all,
of a deferred tax asset will not be realized.

         Foreign currency  translation-The  Company's  financial  statements and
underlying records are prepared and maintained in United States Dollars ("US$").
Transactions  in foreign  currencies  during the year are translated into US$ at
the exchange rates  prevailing at the  transaction  dates.  Monetary  assets and
liabilities  denominated  in foreign  currencies  at the balance  sheet date are
translated into US$ at the exchange rates prevailing at that date.  Non-monetary
assets and liabilities are stated at historical rates. All exchange  differences
are dealt with in the income statement.

         On  consolidation,   the  financial   statements  of  subsidiaries  are
translated from Hong Kong dollars and Renminbi,  being the functional currencies
of all of the Company's  subsidiaries,  into US$ in accordance with SFAS No. 52,
"Foreign  Currency  Translation".  Accordingly  all assets and  liabilities  are
translated at the exchange  rates  prevailing at the balance sheet dates and all
income and expenditure items are translated at the average rates for each of the
years.  The exchange rate between the Hong Kong dollar/ Renminbi and the US$ and
used for the years ended  December 31, 2003 and 2004 were HK$7.80 to US$1.00 and
RMB8.3 to US$1.00, respectively.

         Post-retirement  and  post-employment   benefits-The  Company  and  its
subsidiaries  contribute  to a  state  pension  scheme  in  respect  of its  PRC
employees  and a  mandatory  provident  fund  scheme in respect of its Hong Kong
employees.  Other than the  above,  neither  the  Company  nor its  subsidiaries
provide any other post-retirement or post-employment benefits.

         Net loss per share- Basic net loss per share  calculated  in accordance
with SFAS No. 128, "Earnings Per Share". Basic net loss per share is computed by
dividing  net loss to common  stockholders  by the  weighted  average  number of
common shares outstanding during the period.  Diluted net income per share gives
effect to all dilutive  potential common shares  outstanding  during the period.
The weighted average number of common shares  outstanding is adjusted to include
the number of additional  common shares that would have been  outstanding if the
dilutive  potential common shares had been issued. In computing the dilutive net
income per share,  the average share price for the period is used in determining
the number of shares  assumed to be reacquired  under the treasury  stock method
from the exercise of stock.

         The Company  has not  included  the Series A preferred  stock as common
stock  equivalents  because  the effect  would be  anti-dilutive.  The number of
dilutive common stocks that would be added to the weighted  average common stock
outstanding  if their effect was not  anti-dilutive  is 80,000,000  for the year
ended December 31, 2004.

         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 disclosures 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.

         Recent  changes in accounting  standards - In December  2004,  the FASB
issued SFAS No. 123R, "Share-Based Payment." SFAS No. 123R revises SFAS No. 123,
"Accounting  for  Stock-Based  Compensation"  and  generally  requires  the cost
associated  with employee  services  received in exchange for an award of equity
instruments  be  measured  based on the  grant-date  fair value of the award and
recognized in the financial  statements  over the period during which  employees
are required to provide  services in exchange for the award.  SFAS No. 123R also
provides  guidance on how to determine the  grant-date  fair value for awards of
equity instruments as well as alternative  methods of adopting its requirements.
SFAS No. 123R is effective  from the  beginning  of the first  interim or annual
reporting  period after June 15, 2005 (the quarter ended  September 30, 2005 for
the Company) and applies to all  outstanding  and unvested  share-based  payment
awards at a company's  adoption  date.  The Company is currently  assessing  the
impact of this statement on the Company's consolidated financial statements.


                                      F-7
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

2. Summary of Significant Accounting Policies - Continued

         In November  2004,  the Financial  Accounting  Statements  Board (FASB)
issued SFAS Statement No. 151, "Inventory Costs," an amendment of the Accounting
Research  Bulletin  (ARB) No. 43,  Chapter 4. Under FASB  Statement No. 151, all
abnormal amounts of idle facility expense,  freight,  handling costs, and wasted
materials (spoilage) should be recognized as current-period charges by requiring
the allocation of fixed  production  overheads to inventory  based on the normal
capacity of the production facilities. The adoption of this pronouncement is not
expected  to have a material  impact on the  Company's  consolidation  financial
statements, results of operations, or cash flows.

         In October 2004,  the FASB issued FASB Staff  Position (FSP) No. 109-1,
Application of FASB Statement No. 109, "Accounting for Income Taxes," to the Tax
Deduction  on  Qualified  Production  Activities  Provided by the  American  Job
Creation Act of 2004, which provides a tax deduction of up to nine percent (when
fully phased in) of the lesser of (a) "qualified  production  activities income"
or taxable income (after the deduction for the  utilization of any net operating
loss carry forwards). The adoption of this pronouncement is not expected to have
a material impact on the Company's consolidation  financial statements,  results
of operations, or cash flows.

         In  November  2003,  the  EITF  issued  EITF  No.  03-6  "Participating
Securities  and the  Two-Class  Method  under FASB  Statement  No.  128,"  which
provides for a two-class method of calculating  earnings per share  computations
that relate to certain  securities that would be considered to be  participating
in  conjunction  with  certain  common  stock  rights.   The  adoption  of  this
pronouncement  is not  expected  to  have a  material  impact  on the  Company's
consolidation financial statements, results of operations, or cash flows.

3. Inventories

Inventories by major categories are summarized as follows:

                                                            2003          2004
                                                            US$           US$

Merchandises                                               501,502      581,874
                                                        ==========   ==========

4. Property, Plant and Equipment

         Property, plant and equipment consist of the following:

                                                            2003          2004
                                                            US$           US$
At cost:

Furniture, fixtures and equipment                          265,445      265,367
Motor vehicles                                              93,860       54,959
Leasehold improvements                                      18,776       18,776
                                                        ----------   ----------
Total                                                      378,081      339,102

Less: accumulated depreciation                             175,081      215,966
                                                        ----------   ----------
Net book value                                             203,000      123,136
                                                        ==========   ==========

5. Investment In and Advances To Equity Investee

                                                            2003          2004
                                                            US$           US$
Investment cost                                                 --           --
Amount due from an equity investee                       1,360,000    1,760,000
Elimination of profits and share of profit (losses)         92,578     (262,482)
                                                        ----------   ----------
                                                         1,452,578    1,497,518
                                                        ==========   ==========


                                      F-8
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

5. Investment In and Advances To Equity Investee -Continued

         The  Company  holds  a  20%  equity  interest  in  Nottingham   Optical
Technology Limited  ("Nottingham"),  a Sino-foreign joint venture established in
the PRC for the purpose of production of POF products. The consideration for the
equity  interest was  satisfied by means of a transfer of license to  technology
right - at a recognized capital  contribution  value of US$1,549,398.  Since the
technology  right  represents  self-generated  development  costs,  it has  been
expensed as incurred in the Company's  financial  statements.  Accordingly,  the
investment cost of the Company for the  establishment of Nottingham was assigned
with a zero value.  The joint venture  agreement  specifies  that the Company is
responsible for  establishing  the POF production line. The Company has employed
Ramwell  Industrial  Limited to set up the production  line.  Refer to note 11 -
Related Party Transactions for details.

         Nottingham has not recorded any sales as of December 31, 2004.

         The amount due from an equity investee is unsecured,  interest free and
with no fixed repayment terms.

6. Intangible Assets

                                                            2003          2004
Patents:                                                    US$           US$

At cost                                                      67,373       67,373
Less: accumulated amortization                               27,102       40,602
                                                         ----------   ----------
Net book value                                               40,271       26,771
                                                         ==========   ==========


7.  Short-Term Bank Loans

                                                            2003          2004
                                                            US$           US$

Bank loans repayable within one year                        626,506           --
                                                         ==========   ==========

Fixed deposit placed with bank                              659,000           --
                                                         ==========   ==========

         The average per annum  interest  rates paid for the year ended December
31, 2003 was 5.21%.

8. Other Accrued Liabilities

         Other accrued liabilities consist of the following:

                                                            2003          2004
                                                            US$           US$

Value added tax payable                                    171,548       218,563
Accrued expenses                                           232,192       153,638
Overpayment from trade debtors                                  --        54,820
Others                                                          --        18,534
                                                        ----------    ----------
                                                           403,740       445,555
                                                        ==========    ==========

9. Income Taxes

         United States

         General Components,  Inc. and General Components,  Inc. (New Jersey), a
wholly owned subsidiary of the Company, are incorporated in the United States of
America and are subject to United  States of America tax law. No  provision  for
income  taxes has been made as they have no  taxable  income  for the year.  The
applicable federal income tax rate for both of the years ended December 31, 2003
and 2004 is 34%.


                                      F-9
<PAGE>
                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

9. Income Taxes - Continued

         Cayman Islands

         GCI-Cayman,  a wholly owned subsidiary of the Company,  is incorporated
in the Cayman Islands and, under the current laws of the Cayman Islands,  is not
subject to income taxes.


         People's Republic of China

         General Components,  Inc.  (Beijing),  a wholly owned subsidiary of the
Company, is incorporated in the People's Republic of China ("PRC"). According to
relevant PRC tax  regulations,  High and New  Technology  Enterprises  operating
within a New Technology  Development  Zone are entitled to a reduced  Enterprise
Income Tax ("EIT") rate of 15%. The  subsidiary  is recognised as a High and New
Technology  Enterprise and  accordingly is subject to EIT of 15%. Under the same
incentive  scheme,  the  subsidiary is entitled to a full exemption from EIT for
each of the years ended  December 31, 2000,  2001 and 2002.  The  subsidiary  is
further  entitled to 50%  reduction  for EIT for 3 years from January 1, 2003 to
December 31,  2005.  No provision  for EIT has been made as the  subsidiary  has
incurred a loss for the years ended December 31, 2003 and 2004.

         Hong Kong

         General  Components  Limited, a wholly owned subsidiary of the Company,
is  incorporated  in Hong Kong and is subject to Hong Kong  profits tax law. The
Company is subject to Hong Kong  taxation on its  activities  conducted  in Hong
Kong and income  arising in or derived from Hong Kong.  No provision for profits
tax has been made as the  subsidiary  has no taxable  income for the years ended
December 31, 2003 and 2004.  The  applicable  statutory  tax rate both years are
17.5%.

         As a result,  for the years ended December 31, 2003 and 2004,  there is
no provision for income taxes for the Company on a consolidated basis.

         A  reconciliation  between the provision  for income taxes  computed by
applying the  statutory tax rate in the PRC, the tax  jurisdiction  in which the
principal  subsidiary  of the Company is located,  to income before income taxes
and the actual provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                    2003         2004
                                                                    US$          US$
<S>                                                               <C>          <C>
Tax calculated at PRC subsidiary domestic statutory rate of 33%     (8,637)   (629,508)
Effect of different tax rates in various jurisdictions            (158,559)    306,204
Tax holidays and concessions                                       101,151      60,971
Tax effect of expenses not deductible for tax purpose                  146         599
Tax effect of revenue not subject to tax                           (52,234)    (52,238)
Increase/(decrease) in valuation allowances                         78,588     138,523
Tax effect of share of unused tax losses of an equity investee      38,225     168,300
Others                                                               1,320       7,149
                                                                  --------    --------
                                                                        --           --
                                                                  ========    ========
</TABLE>


         The amount of unrecognized deferred tax assets is as follows:
<TABLE>
<CAPTION>

                                                                     2003         2004
                                                                     US$          US$
<S>                                                               <C>          <C>
Future benefit of tax losses                                       294,056     443,886
Depreciation on property, plant and equipment
   in excess of related tax allowances                               4,295       4,192
Temporary differences in recognition of sales                      (75,641)    (90,370)
Temporary differences in recognition of cost of sales               14,490      24,159
Temporary  differences  in  treatment  of  development              29,136      24,559
costs
Change in tax rate of a subsidiary                                   1,632          --
Others                                                              (8,051)     (7,986)
                                                                  --------    --------
Net deferred tax assets                                            259,917     398,440
Valuation allowance for net deferred tax assets                   (259,917)   (398,440)
                                                                  --------    --------
Net deferred tax assets                                                 --          --
                                                                  ========    ========
</TABLE>


                                      F-10
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

10. Convertible Loans

         As at December 31, 2003 and 2004, convertible loans outstanding in the
accounts of GCI-Cayman are as follows:

<TABLE>
<CAPTION>
                                               December 31, 2003          December 31, 2004
                                           -------------------------- ---------------------------
                                                     Annual                      Annual
                                                     Interest                    Interest

                                            Due Date  Rate   Balance   Due Date   Rate   Balance
                                                               US$                       US$
<S> <C>                                    <C>         <C> <C>           <C>     <C>     <C>
China Enterprise Investments
   No. 12  Limited (formerly known as
   Softbank China Venture  Investments     Apr 27,
   (No.12) Limited ) ("China                 2004      8%    500,000     --      --      --
   Enterprise")

Japan-China Investment No. 2 Limited       Oct 9,
    ("Japan-China")                           2004     8%    500,000     --      --      --
                                                           ---------

                                                           1,000,000
                                                           =========
</TABLE>

         Under the  agreements  of above  loans,  the lenders  have the right to
convert the outstanding balance prior to the due date into Preferred A shares of
GCI-Cayman  as and when  there are other  investors  subscribing  for  shares in
GCI-Cayman for an aggregate amount of at least US$3,000,000 and US$1,000,000 for
the loan due to China  Enterprise and Japan-China,  respectively.  The number of
shares to be converted by the lenders shall be based on the lowest  valuation of
shares  subscribed by other  investors on or before the conversion  date. In the
event that no other investor  subscribes  for shares in GCI-Cayman  prior to the
due date,  China Enterprise shall have the right to elect to subscribe for fully
paid shares on the basis of a valuation of  $19,500,000  on the due date. As for
Japan-China,  in all other cases,  the number of shares to be converted shall be
subscribed for on the basis of US$1.75 per share.

         During the year ended December 31, 2004,  supplementary agreements have
been signed between  GCI-Cayman and the lenders.  According to the supplementary
agreements,  in the  event of  listing  of the  borrower,  the loan and  accrued
interest  would be converted  into common  shares of  GCI-Cayman on the basis of
US$1.75 per common share.  Both China  Enterprise and Japan-China have exercised
their rights in accordance with the  supplementary  agreements.  All convertible
loans together with the accrued loan interest of US$185,951  have been converted
into common shares at US$1.75 per share.

11.  Related Party Transactions

         During the year ended  December  31, 2003 and 2004,  The  Company  sold
goods to  Beijing  Marrison  World  Business  Information  Company  Limited  for
US$61,554 and US$217,136  respectively.  Mr. Simon Mu,  director of the Company,
has a  controlling  interest  in Beijing  Marrison  World  Business  Information
Company Limited.

         During the year ended December 31, 2002, the Company  purchased certain
POF  production  equipment  from  Ramwell  Industrial  Limited  at  a  price  of
US$5,000,000  for  trading  purpose,  which was partly  settled and an amount of
US$2,450,000  remained  outstanding at December 31, 2002. Part of the production
equipment  with  cost of  US$2,350,000  were  sold to  Nottingham  International
Limited ("NIL") for US$2,500,000. NIL holds a 40% equity interest in Nottingham.
The remaining  equipment  with cost of  US$2,650,000  were sold to Nottingham at
US$2,750,000.  For the equipment  sold to  Nottingham,  20% of  unrealized  gain
amounting to US$20,000 has been eliminated on consolidation.

         The amount of US$500,000 due from NIL  represents  sales of machineries
by the Company in 2002 which amount remains outstanding at December 31, 2003 and
2004.  The  amount  is  interest-free,  unsecured  and  without  fixed  terms of
repayment. Prior to August 2003, Mr. Simon Mu was a director of NIL.

         In  November  2002,  the  Company  licensed  the  rights to use the POF
technology  to  Nottingham  in exchange for a 20% equity  interest in Nottingham
with an ascribed capital amount of US$1,549,398. No value for this investment is
recorded in the balance sheet.


                                      F-11
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

11. Related Party Transactions - Continued

         During the year ended  December  31,  2003,  the Company  sold a set of
plant and equipment to Nottingham at a consideration of US$94,738. An unrealized
gain of US$4,000  from the sale of plant and  equipment  has been  eliminated on
consolidation.

         The Company paid consultancy service fees to Ramwell Industrial Limited
starting from September 2001 at a monthly  payment of US$10,000 till April 2002,
and a sum of US$20,000  was paid in May 2002 for the  provision of  installation
and engineering services of the POF production lines for Nottingham. The service
contract  period was extended and additional  amounts of US$48,000 and US$70,000
were  paid  during  the year  ended  2002 and 2003,  respectively,  owing to the
extension of  installation  and  engineering  work of the POF production  lines,
including  utilizing the best design and manufacturing  process,  setting up the
quality system and quality assurance system,  recruiting and training up the key
technical  personnel,  preparing  full set of technical  documents and operating
manuals,  and so on. In addition,  a sum of US$450,000 was paid in December 2003
and a sum of  US$370,000  was  paid  in the  year  ended  December  31,  2004 as
compensation  for services in  accordance  with the contract  signed in 2001 for
future maintenance and engineering consulting services,  including improving the
POF production, reviewing the quality system and quality assurance system and so
on.  Mr.  Bruce  Cole,  a director  of the  Company,  is a  director  of Ramwell
Industrial Limited.

         The amount due to a director is  unsecured,  interest  free and with no
fixed repayment terms.

12. Commitments and Contingencies

         The Company leases premises under various operating leases,  certain of
which  contain  escalation  clauses.  Rental  expenses  under  operating  leases
included in the statement of income were US$115,202 and US$122,189 for the years
ended December 31, 2003 and 2004, respectively.

         The Company was obligated  under  operating  leases  requiring  minimum
rentals as follows:

                                                                           2004
Years ending December 31                                                     US$
2005                                                                      99,596
2006                                                                      12,060
                                                                         -------
Total minimum lease payments                                             111,656
                                                                         =======

         There  are  no  other  material  commitments  and  contingencies  as of
December 31, 2004.

13. Stockholders' Equity

         Common stock

         In September 2004, in connection  with the reverse merger,  the Company
converted  the  convertible  loans and  accrued  interests  of  GCI-Cayman  into
1,045,537 common stock of the Company.

         In September 2004,  there were 5,000,000 shares of common stock created
in reverse merger.

         In November 2004,  the Company  converted  20,000,000  shares of common
stock into 10,000,000 shares of series A preferred stock.

         In November 2004, the Company issued  5,000,000  shares of common stock
for completion of a 2 for 1 stock dividend.

         In November 2004, the Company issued  10,000,000 shares of common stock
in a consideration of US$2,000,000.

         Series A preferred stock

         As mentioned in common stock, the Company  converted  20,000,000 shares
of common stocks into 10,000,000  shares of series A preferred stock in November
2004.


                                      F-12
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

14. Employee Benefits

         The Company  contributes  to a state pension  scheme run by the Chinese
government  in respect of its  employees in China.  The expense  related to this
plan, which is calculated at a range of 12%-22.5% of the average monthly salary,
was  US$9,321  and  US$18,195  for the years ended  December  31, 2003 and 2004,
respectively.

         According to the Mandatory Provident Fund ("MPF") legislation regulated
by the Mandatory Provident Fund Schemes Authority in Hong Kong, with effect from
December  1,  2000,  The  Company is  required  to  participate  in a MPF scheme
operated by approved  trustees  in Hong Kong and to make  contributions  for its
eligible employees.  The contributions borne by The Company are calculated at 5%
of the salaries and wages  (monthly  contribution  is limited to 5% of HK$20,000
for each eligible employee) as calculated under the MPF legislation. The expense
related to the MPF in the years ended  December  31,  2003 and 2004  amounted to
US$2,410 and US$2,578, respectively.

15. Operating Risk

         Interest  rate risk- The interest  rates and terms of repayment of bank
and other  borrowings are disclosed in Note 7 and 10. Other financial assets and
liabilities do not have material interest rate risk.

         Credit  risk- The  Company is  exposed to credit  risk from its cash at
bank and fixed  deposits and bills and accounts  receivable.  The credit risk on
cash at bank and fixed  deposits  is  limited  because  the  counterparties  are
recognized financial  institutions.  Bills and accounts receivable are subjected
to credit  evaluations.  An allowance has been made for estimated  irrecoverable
amounts which has been  determined by reference to past default  experience  and
the current economic environment.

         The Company is not exposed to any significant  concentration  of credit
risk because its exposure is spread over several  financial  institutions  and a
number of  customers.  The  maximum  amount of  credit  risk  which the Group is
exposed to at the balance sheet date is represented  by the carrying  amounts of
the Company's financial assets.

         Foreign  currency  risk- Most of the  transactions  of the Company were
settled in  Renminbi  and U.S.  dollars.  In the opinion of the  directors,  the
Company would not have significant foreign currency risk exposure.

         Fair value risk -The carrying amounts of the following financial assets
and  financial  liabilities  approximate  to  their  fair  value,  cash and bank
balances, fixed deposits, interest in associate,  accounts and bills receivable,
prepayment,  deposits  and  other  receivables,  accounts  payable,  borrowings,
accrued  liabilities  and customer  advances.  Information  on the interest rate
exposure of the borrowings is included in Note 7 and 10.

         Country risk- The Company has  significant  investments  in China.  The
operating  results of the  Company may be  adversely  affected by changes in the
political and social  conditions in China, and by changes in Chinese  government
policies  with  respect  to laws and  regulations,  anti-inflationary  measures,
currency  conversion and remittance  abroad,  and rates and methods of taxation,
among  other  things.  There can be no  assurance,  however,  those  changes  in
political and other conditions will not result in any adverse impact.

16.  Fair Value of Financial Instruments

         The carrying  amounts of cash and cash  equivalents,  restricted  cash,
accounts receivable and accounts payable are reasonable  estimates of their fair
values. All the financial instruments are for trade purposes.


                                      F-13
<PAGE>

                            GENERAL COMPONENTS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

17. Segment Information

         The Company's sales by geographic destination are as follows:

                                                         2003            2004
                                                         US$             US$

PRC, other than Hong Kong                              878,567         1,564,765
Hong Kong                                            7,046,000                --
Others                                                 104,905           149,692
                                                     ---------         ---------
Total net sales                                      8,029,472         1,714,457
                                                     =========         =========

         The location of the Company's identifiable assets are as follows:

                                                         2003            2004
                                                         US$             US$

PRC, other than Hong Kong                            3,207,915         2,704,385
Hong Kong                                            2,580,212         1,350,600
USA                                                     29,164            54,777
Intangible assets                                       40,271            26,771
                                                     ---------         ---------
Total identifiable assets                            5,857,562         4,136,533
                                                     =========         =========


                                      F-14
<PAGE>

                                   SIGNATURES

         Pursuant  to the  requirements  of the Section 13 or 15 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 on the
14th day of April, 2005.

                                        GENERAL COMPONENTS, INC.

                                        By:/s/ Bruce Cole
                                        ----------------------------------------
                                        Bruce Cole
                                        President  (Principal Executive Officer)

      In accordance  with 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.

<TABLE>
<CAPTION>

      Signature                                         Title                              Date

<S>                                     <C>                                            <C>
/s/ Simon Mu                            Chairman of the Board of Directors and Chief   April 14, 2005
----------------------                  Executive Officer
Simon Mu

/s/ Bruce Cole                          Vice Chairman of the Board of Directors,       April 14, 2005
----------------------                  President and Secretary
Bruce Cole

 /s/ Jonathan Chan                      Chief Financial Officer                        April 14, 2005
----------------------
Jonathan Chan

/s/ James Walker                        Chief Scientist and Director                   April 14, 2005
----------------------
James Walker

/s/ Junichi Goto                        Director                                       April 14, 2005
----------------------
Junichi Goto

/s/ Regis Kwong                         Director                                       April 14, 2005
----------------------
Regis Kwong

/s/ Peter Wang                          Director                                       April 14, 2005
----------------------
Peter Wang

</TABLE>