**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington
      D.C. 20549**


**____________**


**FORM
      10-KSB**


**(Mark
      One)**




**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




**For
      The Fiscal Year Ended:** **December
      31, 2006**




**o**
            **TRANSITION
                REPORT UNDER 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
                or other Jurisdiction of Incorporation or Organization)
            (I.R.S.
                Employer
              Identification
                No.)**Suite
                1503, Sino Plaza**
              **255-257
                Gloucester Road**
              **Causeway
                Bay, Hong Kong**
              (Address
                of principal executive offices)
            **N/A**
              (Zip
                Code)Issuer’s
                telephone number, Including Area Code:**(852)
                2975 9809**
              
              Securities
                registered under to Section 12(b) of the Act:**None**
              
              Securities
                registered under to Section 12(g) of the Act:
              
              **Common
                Stock, par value $0.001 per share**
              (Title
                of Class)




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




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




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and 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




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




Issuer’s
      revenues for the fiscal year ended December 31, 2006 were
      $61,889,649.




As
      of
      March 31, 2007, the aggregate market value of the common stock held by
      non-affiliates of the Registrant was approximately $46,469,895.




As
      of
      April 2, 2007, there were 59,013,215 shares of Common Stock, $0.001 par
      value per share, outstanding.




Transitional
      Small Business Disclosure Format (check one): Yes o No x




Documents
      incorporated by reference: None.













TABLE
      OF
      CONTENTS


**Page**PART
                I.
            
            
            1Item
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            15Item
                3.
            Legal
                Proceedings
            16Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            16PART
                II.
            
            
            16Item
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchasers of Equity Securities
            16Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            17Item
                7.
            Financial
                Statements
            20Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            20Item
                8A.
            Controls
                and Procedures
            20Item
                8B.
            Other
                Information
            20PART
                III.
            
            
            21Item
                9.
            Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16 of the Exchange Act.
            21Item
                10.
            Executive
                Compensation
            22Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholders Matters
            23Item
                12.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            24Item
                13.
            Exhibits
            25Item
                14.
            Principal
                Accountant Fees and Services
            26INDEX
                TO FINANCIAL STATEMENTS
            F-1











i




**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. On October 27, 2006, GCI consummated an exchange of shares
      (the
“Magical Share Exchange”) pursuant to a Share Exchange Agreement dated as of
      September 6, 2006 (the “Magical Share Exchange Agreement”)with Magical Insight
      Investments Ltd. (“Magical Insight”), which resulted in the acquisition by GCI
      of the assets and operations of Magical Insight. Pursuant to the Magical Share
      Exchange Agreement, GCI issued an aggregate of 17,986,721 shares of its common
      stock and warrants to purchase an additional 28,013,279 shares of its common
      stock in exchange for the sole outstanding share of Magical Insight.




Before
      acquiring Magical Insight, GCI disposed of certain of its assets through the
      sale in November 2006 of its Voice Over Internet Protocol business to ZGS
      Corporation pursuant to an Asset Purchase Agreement dated as of September 8,
      2006. In addition, on December 22, 2006, GCI sold all outstanding shares of
      its
      wholly-owned subsidiary, General Components, Inc., a company formed under the
      laws of the Cayman Islands (“ GCI Cayman”) pursuant to a Stock Purchase
      Agreement with General Components International Ltd., a company formed under
      the
      laws of the British Virgin Islands (“GCIL”). GCI sold all outstanding shares of
      GCI Cayman to GCIL for nominal consideration, in exchange for GCIL agreeing
      to
      purchase such shares without limited representations or warranties and without
      recourse to the Company. The business of GCI Cayman, following the suspension
      of
      the Company’s plastic optical fiber operations in 2005 and the sale of the
      Company’s VOIP business in November 2006, consisted of the OEM manufacture and
      distribution of a full line of structured cabling systems and three-level
      router-switch equipment for multi-family residential and commercial buildings.




GCI’s
      subsidiary, Magical Insight, through its primary operating company, Beihai
      Hi-Tech Wealth Technology Development Company Limited (“HTW”), is a leading
      Chinese integrated multi-channel sales and marketing company that develops
      and
      sells proprietary branded digital mobile devices.  At the time of the
      Magical Share Exchange, HTW was 90% owned by Magical Insight. As a result of
      a
      subsequent capital contributions and a purchase of outstanding capital, HTW
      is
      currently 100% owned.




HTW
      markets and sells its products through a TV-based direct response platform
      and
      an off-line distribution network.   HTW concentrates on marketing,
      sales and product innovation while outsourcing product design and manufacturing.
      HTW does not engage in traditional research and development associated with
      developing new products and does not manufacture any products.  HTW
      operates a flexible and scalable business model that management believes can
      handle rapid growth.




**Recent
      Events** ****




On
      February 13, 2007, the Company effected a 1 for 10 reverse split of its Common
      Stock. All numbers relating to the Company’s common stock in this Annual Report
      on Form 10-KSB take into effect the reverse split.




On
      February 8, 2007, the Company completed a $13,250,000 financing through the
      issuance of 265 shares of its Series B preferred stock to both new investors
      and
      holders of $6,000,000 in aggregate principal amount of its outstanding
      convertible notes, plus 5.6 shares of Series B preferred stock issued in respect
      of accrued interest on such convertible notes.




The
      Company has agreed to file a registration statement providing for the resale
      of
      the shares of common stock issuable upon conversion of the Series B preferred
      stock not later than April 16, 2007 and to use its best efforts to cause the
      registration statement to be declared effective not later than June 14, 2007
      (or
      August 13, 2007, in the event such registration statement receives a “full
      review” by the Securities and Exchange Commission).


1









On
      February 8, 2007, the Company, Magical Insight and Beijing Hi-Tech Wealth
      Investment and Development Company Limited (“BJ HID”) entered into an Asset
      Purchase Agreement (the “APA”) pursuant to which Magical Insight agreed to
      purchase the remaining interest (approximately 8%) in the registered capital
      of
      HTW, its primary operating subsidiary in the PRC, for 3,000,000 shares of common
      stock of GCI (after giving effect to the 1 for 10 reverse split of GCI’s common
      stock), which shares were contributed by GCI to its subsidiary, Magical Insight.
      The transaction contemplated by the APA was consummated on March 27,
      2007.




In
      addition, on February 8, 2007, Magical Insight and BJ HID entered into a binding
      term sheet (the “Binding Term Sheet”) whereby BJ HID agreed to sell, and Magical
      insight agreed to purchase, the technology, patents and all intellectual
      property rights related to solar powered mobile phones owned by BJ HID for
      $10,000,000.




On
      March
      2, 2007, the former shareholders of Magical Insight exercised all warrants
      issued to them under the share exchange transaction with the Company on October
      27, 2006. The Company received a total of $280 upon the exercise of warrants
      to
      purchase 28,013,279 shares of common stock.




**Our
      Strategy**





Our
      strategy to successfully compete in the mobile phone industry is to capture
      the
      rapid growth of smart phone sales in China. We intend to adopt differentiation
      strategies in terms of targeted consumer groups, consumer needs, products,
      sales
      channels and brand name building:





**Differentiation
      in the targeted consumer groups**





In
      China,
      about 10% of mobile phone users are government officials (public servants),
      private business owners or state-owned enterprises managers, most of whom use
      smart phones. Since this group of customers is insensitive to the selling price,
      providing tailor-made products to them should generate high profit margins.





**Differentiation
      in the consumer needs**





Our
      target group of mobile phone users has a special need for information security,
      privacy protection and social contact management (restriction). HTW first
      identified this need and invested in developing special software to provide
      a
      satisfactory solution to this group of customers. HTW has successfully created
      a
      market segment for information safety and has become the leader and pioneer
      in
      this market segment.





**Differentiation
      in the products**





Information
      security phones focus on three key features. 1) Information Security - The
      mobile phone will never be accessed by unauthorized third party. 2) Invisibility
      - The user will never be disturbed by unknown phone calls as the mobile phone
      is
      able to filter out unknown and identified calls. 3) Remote Access and Control
      -
      If the mobile phone is lost, the information and data on the lost phone can
      be
      retrieved by using a different mobile phone. Furthermore, the lost mobile phone
      can be locked remotely and restricted so that the holder is not able to make
      any
      calls from the lost mobile phone.




**Our
      Products**




Magical
      Insight, through HTW, is an integrated multi-channel sales and marketing company
      in China that develops and sells proprietary branded digital mobile
      devices.  HTW’s product strategy is predicated on identifying “high end”
customer needs and supplying products with differentiated features specifically
      tailored to meet those needs.  For example, the Company’s current F8
“Information Secure” smart phone is targeted at business owners and government
      officials who are concerned about information security and privacy. HTW has
      sold
      over 150,000 Information Secure phones since they were launched in February
      2006.  HTW’s other current products include the F88, an upgraded version of
      the original Information Secure phone, and the U8, a new smart phone targeted
      towards women, which includes many of the F8’s features along with digital music
      and MP3 capability.  HTW anticipates continued innovation within the smart
      phone market and also expects that its product offering in the future will
      expand beyond smart phones.


2















**Product
      Distribution in China**





In
      1999,
      the management team of HTW launched a Personal Digital Assistant (“PDA”) product
      in the PRC under the “Shang Wu Tong” brand.  HTW’s current products are
      branded under this name and HTW plans to leverage this unique premium brand
      through brand extensions and co-branding.




HTW’s
      use
      of direct response TV creates brand and product awareness while enabling
      consumers to directly purchase its products throughout China.  HTW’s
      current ad campaign broadcasts 15 and 30 second commercials to build general
      awareness and 1, 4 and 5 minute infomercials to educate consumers on the
      features of its products.  These commercials and infomercials are
      broadcasted on 3 nationwide CCTV channels, 19 national satellite TV channels,
      5
      international satellite channels operating in China and 10 local channels for
      a
      total of approximately 2,000 minutes per month.




HTW’s
      off-line distribution network consists of over 1,000 exclusive distributors
      in
      over 300 cities and covers all provinces of China. This distribution network
      supplies over 4,000 retail stores.  HTW manages the network to eliminate
      conflicts among distributors and facilitate the sale of products with uniform
      pricing across China.  Each distributor is responsible for local
      advertising while benefiting from the national advertising and sponsorship
      provided by HTW.





The
      effectiveness of TV direct sales is driven by the nationwide reach of television
      networks and the high level of TV viewership in China coupled with a growing
      demand for convenience. The distribution network sells large volumes of product
      quickly and efficiently and HTW’s relationship with TV networks accelerates both
      retail and direct-to-consumer sales. As shown in the graph below, HTW’s unit
      sales growth was fueled by the implementation of a direct response TV sales
      platform.


3










We
      have
      entered into an exclusive arrangement with Shanghai Xiang Guo Wang Lu Technology
      Development Limited Co. and Shanghai Xiang Guo Advertising Limited for the
      marketing and distribution of HTW’s information secure phone under the Acorn
      International brand. In exchange for their commitment to advertise the product
      every day for at least three hours every day for two months, we have agreed
      to
      provide a commercial subsidy of $50 for each phone sold by Acorn through the
      TV
      advertising. The agreement expired on April 10, 2007; however, we are in
      negotiations regarding an extension of our commercial arrangement and at the
      same time are also seeking other appropriate partners to continue our strategy
      on TV marketing to maintain our market share.




HTW’s
      management believes its flexible supply chain positions it to efficiently handle
      a growing and dynamic market. HTW leverages outsourced manufacturing and design
      and believes this model will improve time to market and help preempt
      competition.




**Brief
      History**




This
      history of HTW since inception and its management team upon entering the PDA
      market is briefly described below:









**1998,**Beijing Hi-Tech Wealth Electronic Products Company Limited (“BJ HEP”)
                founded
              **2000**,
                Started JV with Siemens to develop an integrated PDA &
                phone
              **June
                2000**,
                BJ HEP cooperated with Microsoft to enter high end PDA market
              **2001**,
                BJ HEP was one of 10 non-state owned companies awarded the “Most
                Influential Enterprise”
              **April
                2001**,
                Windows CE based “Shang Wu Tong” PDA launched and over 2 million units
                sold
              **1999-2002**,
                BJ HEP was the No. 1 PDA provider in China 4 years in a row with
                a peak
                market share of 70%
            **2002**,
                BJ HEP awarded Microsoft’s “Year 2002 Best Co-operative
                Partner”
              **2002**,
                Launched integrated PDA & phone developed by JV with
                Siemens
              **2002**,
                Started development of light energy phone
              **2003**,
                HTW founded; HTW cooperated with ZTE and launched first color PDA
                and
                pen-based smart phone
              **December
                2004**, F6 was launched by HTW
            **February
                2006**, HTW spin-off of software design business to Warburg Pincus
                to focus on core competencies
              **April
                2006**, TV shopping network relationship established by
                HTW
              **October
                2006**, GCPO completes acquisition of Magical Insight and its
                subsidiaries, including HTW
              **2006**,
                Over 160k units sold in 2006 through September by
                HTW






4




**Our** **Industry**




The
      increasing purchasing power of the Chinese consumer is a trend that should
      greatly benefit HTW.  China’s GDP growth, as illustrated in the chart
      below, shows a strong and developing potential market for our products as
      increases in disposable income typically encourage Chinese consumers to purchase
      branded products.













The
      retail market for consumer products reached $834.5 billion in 2005 according
      to
      China’s National Bureau of Statistics, while growing at a compound annual growth
      rate (“CAGR”) of 12.7% from 1998 to 2005.  According to industry reports,
      China’s smart phone market grew over 100% from 2004 to 2005. In 2005, 5.2
      million smart phones were sold by the industry in China, which represents 5.9%
      of the total mobile phone market. HTW believes it is well positioned to directly
      sell to consumers looking to buy smart phones through direct response TV and
      its
      off-line distribution network.





Mobile
      subscriber penetration and growth is a good indicator of demand for HTW
      products. Although China’s handset penetration rate is low compared to that of
      developed countries, growth in the penetration rate of handset subscribers
      combined with the sheer size of China’s population (1.3 billion) will continue
      to drive substantial unit growth.




**Competition**





According
      to CCID Consulting Co., Ltd. (“CCID”), a Chinese marketing research consulting
      company, 5.2 million units of smart phones were sold in China during 2005,
      representing growth of 100% from the previous year. During the same time period,
      total mobile phone sales in China only increased by 12.8%, highlighting the
      greater demand for smart phones as compared to ordinary mobile phones. CCID
      projects that smart phone sales will exceed 20 million units in 2008, and the
      percentage of smart phones sales will increase from 6% in 2005 to over 20%
      in
      2008.


5








**2002-2008
      Proportion of Smart Phone Sales (Source: CCID)**


**(units
      in millions, except percentages)**





2002
            2003
            2004
            2005
            2006E
            2007E
            2008ESmart
                Phone Sales
            0.6
            1.3
            2.6
            5.2
            9.1
            14.5
            23Total
                Sales
            62
            74
            79
            88
            94.3
            100.7
            110Proportion
                of Smart Phone Sales
            1.0
                %
            1.8%
            3.3%
            5.9%
            9.7%
            14.4%
            20.9%




6


Companies
      operating in the smart phone business can be grouped in three tiers. According
      to Pday, a third party research firm in China, Nokia and Motorola (the first
      tier companies) accounted for 54% and 25% market share, respectively, in 2005.
      In the second tier, there are approximately 5 companies with market share
      between 2-6 %. The remaining companies are in the third tier and account for
      approximately 5% market share. Domestic producers currently have a small
      percentage of market shares. For example, Lenovo, the biggest of the domestic
      producers, has only 6% of market share.





**2005
      Smart Phone Producers Comparison (Source: Pday)**





Sales
                Unit (Units in thousands)
            
            Revenue,
                (RMB in millions)
            
            Average
                Unit
              Price
                (RMB)
            
            Market
                ShareNokia
            
            
            2,716.5
            
            
            7,641
            
            
            2,813
            
            
            54%Motorola
            
            
            1,290.0
            
            
            4,760
            
            
            3,690
            
            
            25%Lenovo
            
            
            303.0
            
            
            894
            
            
            2,950
            
            
            6%Bird
            
            
            214.0
            
            
            423
            
            
            1,977
            
            
            4%Dopod
            
            
            141.9
            
            
            690
            
            
            4,863
            
            
            3%Eastcom
            
            
            140.0
            
            
            N/A
            
            
            N/A
            
            
            3%SonyEricsson
            
            
            77.4
            
            
            497
            
            
            6,421
            
            
            2%TCL
            
            
            103.6
            
            
            270
            
            
            2,606
            
            
            1%Other
            
            
            213.6
            
            
            N/A
            
            
            N/A
            
            
            3%




**Intellectual
      Property**





Under
      the
      name of HTW, the Company possesses over 100 patents, trademarks and copyrights
      registered in China, including approximately 90 registered trademarks and 1
      trademark currently under registration, 7 registered patent application and
      outlook designs, 7 registered software copyrights and 38 registered websites
      for
      internet, mobile and SMS networks.




**Research
      and Development**





Although
      HTW does not engage in traditional research and development activities, in
      order
      to develop products and marketing strategies that meet with strong market
      acceptance, the Company maintains an Innovation Team and a Product Specification
      Team that seek to identify concepts, trends and features to incorporate into
      new
      product offerings.




**Employees**





As
      of
      December 31, 2006, we employed approximately 113 people on a full-time basis
      in
      China. Of the total, 10 were in product research and development, 19 in sales
      and marketing, 22 in quality assurance and distribution, and 62 in general
      and
      administration.





Our
      success is highly dependent on our ability to attract and retain qualified
      employees. We plan to hire additional employees for marketing and sales,
      customer service and manufacturing and assembly as we grow our business. None
      of
      our employees are represented by a labor union and subject to collective
      bargaining agreements.




**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.*


7





**Risks
      Related to Our Business**




***Our
      operating results fluctuate from quarter to quarter.*** **




Our
      quarterly revenue, income and other operating results have fluctuated in the
      past and may fluctuate significantly in the future due to a number of factors,
      including the following:





-
            The
                ability of our suppliers to meet our supply
                requirements;


-
            Competitive
                pressures;


-
            The
                time required for research and
                development;


-
            Changing
                design requirements resulting from rapid technology shifts;
                and


-
            Industry
                trends impacting the overall end user
                market.




As
      a
      result of these and other factors, our results of operations may vary on a
      quarterly basis and net revenue may be adversely affected from period to period.
      Our results of operations for a particular quarter may not be indicative of
      our
      future performance. If our operating results in a quarter fall below our
      expectations or the expectations of market analysts or investors, the price
      of
      our common stock is likely to decrease.




***Our
      operating results are substantially dependent on the development of new
      products.*** **




We
      may be
      unable to develop new products in a timely or cost-efficient manner, and these
      new products may fail to meet the requirements of our customers’ end-markets. If
      we fail to develop new products that will meet our targeted customers’ needs,
      our results of operations will be materially and adversely affected.




***If
      our customers do not purchase our newly-launched products, our net revenue
      will
      be adversely affected.*** **




While
      most of our new products have been attractive to our customers, there is no
      guarantee that our new products will receive positive market response. We
      dedicate personnel, management and financial resources into developing new
      products. If a new product is not sold over a certain amount, we will fail
      to
      capitalize on the invested resources, time and effort that we expended on the
      product.




***Reliance
      on our suppliers makes us vulnerable to the loss of one or more key suppliers
      or
      the delivery capabilities of our suppliers.*** **




We
      typically rely on a limited number of key suppliers. Although we have developed
      good long-term relationships with our suppliers and EMS (Electronics
      Manufacturing Services) OEM third party alliance, there can be no assurance
      that
      we will always be able to obtain components and have our products completed
      and
      delivered to the market in a timely base. Such delay could make our products
      become obsolete or unattractive with our customers and consequently, our results
      of operations will be materially and adversely affected.





***If
      we fail to attract and retain key personnel, particularly our chief executive
      officer, our business will be materially impaired and our financial condition
      and results of operations will suffer.*** **




Our
      business greatly relies on the continued services of Dr. Zhang Zhengyu, our
      principal shareholder and chief executive officer and our senior management
      team. Many new product concepts and technology innovation are generated by
      Dr.
      Zhang and our senior management team. Our future success will depend to a
      significant degree upon the performance and contribution of Dr. Zhang and
      other members of our senior management team in areas including sales, new
      product specification, finance and customer services. Therefore, our business
      and results of operations may be materially and adversely affected if
      Dr. Zhang or another member of our senior management team leaves us. In
      addition, we will incur additional expenses to recruit and develop senior
      management members if one or more of our key employees are unwilling or unable
      to continue their employment with us. We do not maintain key man life insurance
      covering our senior management or any of our key employees.




Our
      future success also depends on our ability to identify, attract, hire, train,
      retain and motivate highly-skilled personnel. If we cannot attract and retain
      the personnel we require at a reasonable cost, our cost of revenue will increase
      and the profitability of our business could be negatively affected. Our business
      is especially dependent on sales, marketing and new product specification
      personnel. Competition in China for executive-level and skilled technical and
      sales and marketing personnel is strong, and recruiting, training, and retaining
      qualified key personnel are important factors affecting our ability to meet
      our
      growth objectives. Should key employees leave our company, we may lose both
      an
      important internal asset and net revenue from customer projects in which those
      employees were involved.


8







***Loss
      of the current TV direct sales strategic alliance may adversely impact our
      net
      revenue.*** **




On
      April
      24, 2006, we entered into a strategic alliance agreement with Acorn
      International Shopping Network (“Acorn”). Our current ad campaign broadcasts 15
      and 30 second commercials to build general awareness and 1, 4 and 5 minute
      infomercials to educate consumers on the features of our products. These
      commercials and infomercials are currently broadcasted on 3 nationwide CCTV
      channels, 19 national satellite TV channels, 5 international satellite channels
      operating in China and 10 local channels. Our ads are broadcasted no more than
      500 minutes per day, and the total airtime currently aggregates approximately
      9,000 minutes per month.




In
      2006,
      this TV direct sales platform generated about 30% of our total sales. The
      agreement with Acorn expired on April 10, 2007; however, we are in negotiations
      regarding an extension of our commercial arrangement and at the same time are
      also seeking other appropriate partners to continue our strategy on TV marketing
      to maintain our market share. If we do not renegotiate such contract on mutually
      acceptable terms, it may have an adverse impact on our financial
      results.





***The
      end-markets in which we operate are highly competitive and fragmented. We expect
      competition to intensify in the future, and if we fail to compete effectively,
      our business will be harmed.*** **




Pressures
      from current or future competitors could cause our products to lose market
      acceptance or require us to reduce our sales prices to keep and attract
      customers. Our competitors often have longer operating histories, stronger
      customer and supplier relationships, larger technical staffs and sales forces,
      and/or greater financial, technical and marketing resources than we do. Although
      we believe that there are no direct competitors of any meaningful size who
      operate using the same business model as ours, we may still face the risk of
      fierce competition.




***We
      may be unable to manage rapid growth and a changing operating environment,
      which
      could adversely affect our ability to serve our customers and harm our
      business.*** **






We
      experienced significant growth in our revenues and net income in 2006, and
      although we predict this growth to continue in the future, we have limited
      operational, administrative and financial resources, which may be inadequate
      to
      sustain our current growth rate. If we are unable to manage our growth
      effectively, the quality of our products could deteriorate and our business
      may
      suffer. As our targeted customers increase and we introduce different lines
      of
      new products, we will need to:




-
            Increase
                our investments in personnel, research and development capabilities,
                facilities and other operational
                areas;


-
            Continue
                training, motivating and retaining our existing employees, and attract
                and
                integrate new qualified employees;


-
            Develop
                and improve our operational, financial, accounting and other internal
                systems and controls; and


-
            Take
                enhanced measures to protect any proprietary technology or technological
                capability we develop.




Any
      failure to manage our growth successfully could distract management’s attention
      and result in our failure to serve our customers and harm our business.





***We
      may not have sufficient funds to pay our accounts payable when due, which could
      adversely affect our operations and net revenue.*** **




We
      experience a time lag in our accounts payable and accounts receivable cycles.
      Consequently, we may experience periods during which our cash from operations
      is
      insufficient to fund our working capital requirements. We have historically
      funded our working capital requirements through cash on hand, operating cash
      flows, as well as short-term credit facilities. As we grow and our working
      capital requirements increase, these facilities may not be sufficient to meet
      our needs. We may be unable to maintain these liquidity sources or obtain
      additional liquidity sources on commercially reasonable terms to meet our
      increased funding requirements.


9


***The
      unauthorized use of our software or other innovative technology, and new product
      ideas could have a material adverse impact on our net
      revenue.*** **




Although
      we typically will apply for patent or intellectual property protection for
      our
      software and technology, before the patent or protection come into effect,
      we
      may have significant risks with respect to the unauthorized use of our
      technology. We typically do not have non-disclosure or confidentiality
      agreements with most of the design houses or other technology partners to keep
      our new specifications and ideas confidential. Design houses may attempt to
      circumvent us by providing our new product ideas directly to our competitors.





***We
      became a public company through a share exchange with a non-operating public
      shell company, where we were the accounting acquirer and assumed all known
      and
      unknown potential liabilities of our predecessor
      entity.*** **




Our
      September 2006 share exchange was accounted for as a reverse merger in which
      Magical Insight was deemed the accounting acquirer and General Components,
      Inc.
      was deemed the legal acquirer. Although by December 2006, we disposed of our
      previous businesses and operations (other than those operated by Magical
      Insight), we may still be responsible for any unknown liabilities relating
      to
      those prior businesses.





**Risks
      Related to Our Industry**





***Our
      inability to respond quickly and effectively to rapid technological advances
      and
      market demands would adversely impact our competitive position and our results
      of operations.*** **





The
      mobile handset market is characterized by rapid technological advances, intense
      competition, frequent introduction of new products and services and consumer
      demand for greater functionality, lower costs, smaller products and better
      performance. We must constantly seek out new products and develop new products
      to maintain in our portfolio. We expect our customers’ demands for improvements
      in product performance to increase, which means that we must continue to improve
      our products and develop new products to remain competitive and grow our
      business. Our failure to compete successfully for customers will result in
      price
      reductions, reduced margins or loss of market share, any of which would harm
      our
      business, results of operations and financial condition.




***Substantially
      all of our net revenue currently comes from sales from mobile handsets, and
      cyclical downturns could harm our operating results.*** **




The
      mobile handset market is highly cyclical and has experienced severe and
      prolonged downturns, often in connection with maturing product cycles and
      declines in general economic conditions. These downturns have been characterized
      by diminished product demand, production overcapacity, high inventory levels
      and
      accelerated erosion of average selling prices. The impact of slowing
      end-customer demand was compounded by higher than normal levels of inventories
      among our distributors and our distributors’ adjustments in their order levels,
      resulting in increased pricing pressure.




***The
      mobile handset end-market is characterized by a short product lifecycle, making
      time-to-market and sensitivity to customer needs critical to our success and
      our
      failure to respond will harm our business.*** **




Mobile
      handsets typically have a lifecycle of approximately six months before the
      technology becomes obsolete. Time-to-market, both with respect to our ability
      to
      supply consumers with timely and marketable products and provide our customers
      with a wide array of latest generation customized module design solutions,
      is
      critical to our success. As design cycles in the industry shorten, we face
      logistical challenges in providing our solutions in an increasingly shorter
      timeframe. If we are unable to respond to the shortened lifecycles and
      time-to-market, our business will suffer.




**Risks
      Related to Doing Business in China**




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




10





***Our
      operations may be adversely affected by China’s economic, political and social
      conditions.*** **




Substantially
      all of our operations and assets are located in China and substantially all
      of
      our net revenues are derived from our operations in China. Accordingly, our
      results of operations and future prospects are subject to economic, political
      and social developments in China. In particular, our results of operations
      may
      be adversely affected by:




-
            changes
                in China’s political, economic and social
                conditions;


-
            changes
                in policies of the government or changes in laws and regulations,
                or the
                interpretation of laws and
                regulations;


-
            changes
                in foreign exchange regulations;


-
            measures
                that may be introduced to control inflation, such as interest rate
                increases; and


-
            changes
                in the rate or method of taxation.




The
      economy of the People’s Republic of China (“PRC”) has historically been a
      planned economy. The majority of productive assets in China are still owned
      by
      various levels of the PRC government. In recent years the government has
      implemented economic reform measures emphasizing decentralization, utilization
      of market forces in the development of the economy and a high level of
      management autonomy. Such economic reform measures may be inconsistent or
      ineffectual, and we may not benefit from all such reforms. Furthermore, these
      measures may be adjusted or modified, possibly resulting in such economic
      liberalization measures being applied inconsistently from industry to industry,
      or across different regions of the country.




In
      the
      past twenty years, China has been one of the world’s fastest growing economies
      in terms of gross domestic product, or GDP. This growth may not be sustainable.
      Moreover, a slowdown in the economies of the United States, the European Union
      and certain Asian countries may adversely affect economic growth in China which
      depends on exports to those countries. Our financial condition and results
      of
      operations, as well as our future prospects, would be materially and adversely
      affected by an economic downturn in China.




***Our
      financial results benefit from tax concessions granted by the PRC government,
      the change to or expiration of which would materially change our results of
      operations.*** **




Our
      results of operation may be adversely affected by changes to or expiration
      of
      preferential tax concessions that some of our PRC operating companies currently
      enjoy or expect to enjoy in the future. The statutory tax rate generally
      applicable to Chinese companies is 33%. As a result of preferential tax rate
      incentives, our operations have been subject to relatively low tax
      liabilities.





On
      March
      16, 2007, the National People’s Congress of the PRC passed the Enterprise Income
      Tax Law of the People’s Republic of China, which law will take effect as of
      January 1, 2008. In accordance with the new law, a unified enterprise income
      tax
      rate of 25% and unified tax deduction standards will be applied equally to
      both
      domestic-invested enterprises and foreign-invested enterprises such as HTW.
      Enterprises established prior to March 16, 2007, eligible for preferential
      tax
      treatment in accordance with the currently prevailing tax laws and
      administrative regulations shall, under the regulations of the State Council,
      gradually become subject to the new tax rate over a five-year transition period
      starting from the date of effectiveness of the new law. We expect details of
      the
      transitional arrangement for the five-year period from January 1, 2008 to
      December 31, 2012 applicable to enterprises approved for establishment prior
      to
      March 16, 2007, such as HTW, to be set out in more detailed implementing rules
      to be adopted in the future. In addition, certain qualifying “High Technology
      Enterprises” may still benefit from a preferential tax rate of 15% under the new
      tax law if they meet the definition of “Qualifying High Technology Enterprise”
to be set forth in the more detailed implementing rules when they are adopted.
      As a result, if HTW qualifies as a “Qualifying High Technology Enterprise”, it
      will continue to benefit from a preferential tax rate of 15%, subject to any
      transitional period rules implemented starting from January 1, 2008. Otherwise,
      HTW’s applicable tax rate may gradually increase from its existing rate of 15%
      to the unified tax rate of 25% by January 1, 2013 under the new tax law and
      in
      accordance with more detailed implementing rules to be adopted in the future.
      Any increase in our effective tax rate as a result of the above may adversely
      affect our operating results. However, details regarding implementation of
      this
      new law are expected to be provided in the form of one or more implementing
      regulations to be promulgated by the PRC government and the timing of the
      issuance of such implementing regulations is currently unclear.


11







***PRC
      government control of currency conversion may affect our ability to meet foreign
      currency obligations.*** **




Because
      the majority of our net revenue is denominated in Renminbi, any restrictions
      on
      currency exchange may limit our ability to use revenue generated in Renminbi
      to
      meet our foreign currency obligations, primarily denominated in U.S. dollars.
      The principal regulation governing foreign currency exchange in China is the
      Foreign Currency Administration Rules (1996), or the Rules, as amended. Under
      the Rules, once certain procedural requirements are met, Renminbi is convertible
      for current account transactions, including trade and service-related foreign
      exchange transactions and dividend payments, but not for capital account
      transactions, including direct investment, loans or investments in securities
      outside China, without prior approval of the State Administration of Foreign
      Exchange of PRC, or its local counter-parts. Since a significant amount of
      our
      future revenues will continue to be denominated in Renminbi, any existing and
      future restrictions on currency exchange may limit our ability to utilize
      revenue generated in China to fund our business activities outside of China,
      if
      any, or expenditures denominated in foreign currencies, or our ability to meet
      our foreign currency obligations, which could have a material adverse effect
      on
      our business, financial condition and results of operations. We cannot be
      certain that the PRC regulatory authorities will not impose more stringent
      restrictions on the convertibility of Renminbi with respect to foreign exchange
      transactions.




***Our
      acquisition strategy depends on government regulatory approvals in
      China.*** **




Regulations
      have been promulgated by the State Development and Reform Commission (“SDRC”)
      and the State Administration of Foreign Exchange (“SAFE”) that require
      registration with, and approval from, PRC government authorities in connection
      with direct or indirect offshore investment activities by individuals who are
      PRC residents and PRC corporate entities. These regulations may apply to
      our equity interests in offshore companies held by our PRC shareholders who
      are
      considered PRC residents. We intend to make all required applications and
      filings, and will require the shareholders of the offshore entities in our
      corporate group who are considered PRC residents to make the applications and
      filings, as required under these regulations and under any implementing rules
      or
      approval practices that may be established under these regulations. However,
      because these regulations lack implementing rules or reconciliation with other
      approval requirements, it remains uncertain how these regulations, and any
      future legislation concerning offshore or cross-border transactions, will be
      interpreted and implemented by the relevant government authorities. The approval
      criteria by SDRC agencies for outbound investment by PRC residents are not
      provided under the relevant SDRC regulations. Also, the criteria for
      registration with SAFE agencies, and whether such registration procedure is
      discretionary, are still uncertain as the criteria, if any, are not provided
      for
      under relevant SDRC regulations. Furthermore, there is a lack of relevant
      registration precedents for us to determine the registration criteria in
      practice. Accordingly, we cannot provide any assurances that we will be able
      to
      comply with, qualify under or obtain any registration or approval as required
      by
      these regulations or other related legislations. Further, we cannot assure
      you
      that our shareholders would not be considered PRC residents, given uncertainties
      as to what constitutes a PRC resident for the purposes of the regulation, or
      that if they are deemed PRC residents, they would or would be able to comply
      with the requirements. Our failure or the failure of our PRC resident
      shareholders to obtain these approvals or registrations may restrict our ability
      to acquire a company outside of China or use our entities outside of China
      to
      acquire or establish companies inside of China, which could negatively affect
      our business and future prospects.





***PRC
      laws and our corporate structure may restrict our ability to receive dividends
      and payments from, and transfer funds to, our PRC operating companies, which
      may
      negatively affect our results of operations and restrict our ability to act
      in
      response to changing market conditions.*** **




Substantially
      all of our operations are conducted through our PRC operating companies. The
      ability of our PRC operating companies to make dividend and other payments
      to us
      may be restricted by factors such as changes in applicable foreign exchange
      and
      other laws and regulations. For example, under the SAFE regulations discussed
      in
      the previous risk factor, the foreign exchange activities of our present or
      prospective PRC subsidiaries are conditioned upon the compliance with the SAFE
      registration requirements by the shareholders of our offshore entities who
      are
      PRC residents. Failure to comply with these SAFE registration requirements
      may
      substantially restrict or prohibit the foreign exchange inflow to and outflow
      from our PRC subsidiaries, namely Beihai Hi-Tech Wealth Technology Development
      Co. Ltd. and Beijing Hi-Tech Wealth Software Technology Ltd., including,
      remittance of dividends and foreign-currency- denominated borrowings by these
      PRC subsidiaries. In addition, our PRC operating companies are required, where
      applicable, to allocate a portion of their net profit to certain funds before
      distributing dividends, including at least 10% of their net profit to certain
      reserve funds until the balance of such fund has reached 50% of their registered
      capital. These reserves can only be used for specific purposes, including
      making-up cumulative losses of previous years, conversion to equity capital,
      and
      application to business expansion, and are not distributable as dividends.
      Our
      PRC operating companies are also required, where applicable, to allocate an
      additional 5% to 10% of their net profits to a statutory common welfare fund.
      The net profit available for distribution from our PRC operating companies
      is
      determined in accordance with generally accepted accounting principles in China,
      which may materially differ from a determination performed in accordance with
      U.S. Generally Accepted Accounting Principles (“GAAP”). As a result, we may not
      receive sufficient distributions or other payments from these entities to enable
      us to make dividend distributions to our shareholders in the future, even if
      our
      U.S. GAAP financial statements indicate that our operations have been
      profitable.


12








Apart
      from the dividend distribution from our PRC subsidiaries to us, the transfer
      of
      funds from our company to our PRC operating companies, either as a shareholder
      loan or as an increase in registered capital or otherwise, is subject to
      registration or approval with or by PRC governmental authorities, including
      the
      relevant administration of foreign exchange and/or other relevant examining
      and
      approval authorities. These limitations on the free flow of funds between us
      and
      our PRC operating companies may restrict our ability to act in response to
      changing market conditions.




***Fluctuations
      in the value of the Renminbi relative to foreign currencies could affect our
      financial condition, results of operations and the price of our common
      stock.*** **




The
      majority of our net revenue is denominated in Renminbi. Since 1994, the official
      exchange rate of Renminbi to U.S. dollars has been based on rates set by the
      People’s Bank of China and generally has been stable. However, in July 2005, the
      PRC government decoupled the Renminbi from the U.S. dollar, and the PRC
      government relinquished the U.S. dollar peg and increased the current trading
      range. Future movements in the exchange rate of Renminbi and other currencies
      may have an adverse effect on our financial condition and results of operations.
      For example, a depreciation of the Renminbi relative to the U.S. dollar would
      have the effect of reducing our U.S. dollar-translated net revenue and
      increasing the debt servicing requirements for our U.S. dollar-denominated
      debt.
      On the other hand, the appreciation of the Renminbi would make our products
      more
      expensive if our customers are involved in the export of mobile phones outside
      China, which could adversely affect their sales, thereby eroding our customer
      base and adversely affecting our results of operations.





***The
      legal system in China has inherent uncertainties that may limit the legal
      protections available to you as an investor or to us in the event of any claims
      or disputes with third parties.*** **




The
      legal
      system in China is based on written statutes. Prior court decisions may be
      cited
      for reference but have limited precedential value. Since 1979, the central
      government has promulgated laws and regulations dealing with economic matters
      such as foreign investment, corporate organization and governance, commerce,
      taxation and trade. As China’s foreign investment laws and regulations are
      relatively new and the legal system is still evolving, the interpretation of
      many laws, regulations and rules is not always uniform and enforcement of these
      laws, regulations and rules involve uncertainties, which may limit the remedies
      available to you as an investor and to us in the event of any claims or disputes
      with third parties. In addition, any litigation in China may be protracted
      and
      result in substantial costs and diversion of resources and management attention.





***You
      may experience difficulties in effecting service of legal process and enforcing
      judgments against us and our management.*** **




Substantially
      all of our operations and assets are located in China. In addition, most of
      our
      directors, executive officers and some of the experts named in this document
      reside within China, and many of the assets of these persons are also located
      within China. As a result, it may not be possible to effect service of process
      within the United States or elsewhere outside China upon these directors or
      executive officers or some of the experts named in this document, including
      with
      respect to matters arising under U.S. federal securities laws or applicable
      state securities laws. Moreover, China does not have treaties with the United
      States or many other countries providing for the reciprocal recognition and
      enforcement of court judgments. As a result, recognition and enforcement in
      China of judgments of a court of the United States or any other jurisdiction,
      including judgments against us or our directors, executive officers, or the
      named experts, may be difficult or impossible.




13





**Risks
      Related to Our Common Stock**




***Our
      principal shareholder and chief executive officer beneficially owns a
      substantial majority of our common stock. As a result, the trading price for
      our
      shares may be depressed due to market perception, and our principal shareholder
      and chief executive officer will be able to take actions that may be adverse
      to
      your interests.*** **




Dr.
      Zhang
      Zhengyu, our principal shareholder and chief executive officer, directly and
      through entities he controls, currently beneficially owns approximately 37.8%
      of
      our issued and outstanding common stock. This significant concentration of
      share
      ownership may adversely affect the trading price of our common stock because
      investors often perceive a disadvantage in owning shares in a company with
      only
      one or very few controlling shareholders. Furthermore, Dr. Zhang has the ability
      to control the outcome of all matters requiring shareholder approval, including
      the election of directors and approval of significant corporate transactions,
      such as mergers, consolidations or the sale of substantially all of our assets.
      This concentration of ownership may have the effect of delaying or preventing
      a
      change of control, including a merger, consolidation or other business
      combination involving us, or discouraging a potential acquirer from making
      a
      tender offer or otherwise attempting to obtain control, even if such a change
      of
      control would benefit you.




***Efforts
      to comply with recently enacted changes in securities laws and regulations
      will
      increase our costs and require additional management resources. Our failure
      to
      comply could adversely affect our stock price.*** **




As
      a
      closely-held company with no prior public reporting obligations prior to our
      share exchange with General Components in September 2006, we had committed
      limited personnel and resources to the necessary development of our internal
      controls and systems. In connection with our fiscal year 2006 financial
      statement audit, our independent auditors identified various internal control
      deficiencies and provided us with comments and recommendations for improvement
      in a number of areas with respect to our internal accounting systems and
      disclosure controls. These areas included, among other things: segregating
      duties in some sales and administrative functions; the creation of formal
      internal controls; policies and procedures in some administrative and accounting
      areas; an increase in accounting department resources; finalizing documentation
      to our existing internal controls and systems; and improving system controls
      related to information and technology systems matters. While we do not believe
      that any of the identified internal control deficiencies will materially
      adversely affect our financial statements, we cannot assure you that this will
      be the case.




As
      directed by Section 404 of the Sarbanes-Oxley Act of 2002, public companies
      are required to include a report of management on the company’s internal
      controls over financial reporting in their annual reports on Form 10-K or 10-KSB
      and the public accounting firm auditing a 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-K for our fiscal year ending
      December 31, 2007. We have only recently begun to evaluate our internal
      controls over financial reporting. Given the status of our efforts, coupled
      with
      the fact that guidance from regulatory authorities in the area of internal
      controls continues to evolve, substantial uncertainty exists regarding our
      ability to comply by applicable deadlines. 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, 2007 and future year ends, as required by Section 404 of
      the Sarbanes-Oxley Act, we could experience delays or inaccuracies in our
      reporting of financial information, or non-compliance with SEC reporting and
      other regulatory requirements. This could subject us to regulatory scrutiny
      and
      result in a loss of public confidence in our management, which could, among
      other things, adversely affect our stock price.




***There
      has not been significant trading in our common stock, and our stock price may
      fluctuate dramatically in the future.*** **




Our
      common stock is quoted on the Over-The-Counter Market, or on the Electronic
      Bulletin Board of the Over-The-Counter Market, or OTCBB. To date, there has
      been
      a limited trading market for our common stock. There is a significant risk
      that
      our stock price may fluctuate dramatically in the future in response to any
      of
      the following factors, some of which are beyond our control:




-
            variations
                in our quarterly operating
                results;


14









-
            announcements
                that our net revenue or income are below research analysts’
                expectations;




-
            general
                economic slowdowns;




-
            changes
                in market valuations of similar
                companies;




-
            sales
                of large blocks of our common
                stock;




-
            announcements
                by us or our competitors of significant contracts, acquisitions,
                strategic
                partnerships, joint ventures or capital commitments;
                and




-
            fluctuations
                in stock market prices and volumes, which are particularly common
                among
                highly volatile securities of China-based
                companies.




***Future
      sales of shares could have an adverse effect on the market price of our common
      stock.*** **




A
      significant portion of our shares are held by a small number of shareholders.
      Historically, trading volume of our shares has been relatively low. Sales by
      our
      current shareholders of a substantial number of shares could significantly
      reduce the market price of our common stock. These sales could also impede
      our
      ability to raise future capital.




**Item
                2.**
            **Description
                of Property**




The
      Company has a manufacturing factory and facilities located in Beihai, China
      on
      339,112.10 square meters of land. According to Chinese law, the government
      owns
      all of the land in China and companies or individuals are authorized to use
      the
      land only through land use rights granted by the Chinese government. The Company
      has long term leases with the Chinese government affording them the use of
      this
      land through April 2053. We own a manufacturing plant and buildings located
      on
      this land for manufacturing, office, warehouse and staff
      facilities.






We
      maintain our primary executive offices at Suite 1503, Sino Plaza, 255-257
      Gloucester Road **,** Causeway
      Bay, Hong Kong 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:




**Address**
            
            **Expiration Date**
            
            **Area
                in Sq. Meters**
            
            **Monthly
                Rental US$**Beijing
                Office
            
            
            Room
                507, 5thFloor, Building C, Intelligence International Plaza, No 18 Zhongguancun
                East Road, Haidian District, Beijing, China 100083
            
            
            February
                22, 2008
            
            
            86.36
            
            $
            1,020Beijing
                Office
            
            
            Room
                1502, 15thFloor, Building C, Intelligence International Plaza, No 18 Zhongguancun
                East Road, Haidian District, Beijing, China 100083
            
            
            June
                9, 2007
            
            
            108.59
            
            $
            2,358Beijing
                Office
            
            
            Room
                506, 5thFloor, Building C, Intelligence International Plaza, No 18 Zhongguancun
                East Road, Haidian District, Beijing, China 100083
            
            
            August
                27, 2007
            
            
            69.59
            
            $
            778Beijing
                Office
            
            
            10thFloor, Building C, Intelligence International Plaza, No 18 Zhongguancun
                East Road, Haidian District, Beijing, China 100083
            
            
            December
                10, 2007
            
            
            863.18
            
            $
            10,689




15




**Item
                3.**
            **Legal
                Proceedings******





We
      were
      named as a defendant in patent infringement suit filed by Panduit Corp.
      (“Panduit”) in connection with its patent entitled "Angled Patch Panel With
      Cable Support Bar For Network Cable Racks". On March 15, 2005, Panduit filed
      a
      complaint in the United States District Court for the Northern District of
      Illinois, Eastern Division on March 15, 2005. Panduit also named Leviton
      Manufacturing Company, Inc., The Siemon Company, Tyco Electronics Corporation,
      Molex, Inc. and AESP, Inc. as defendants in the case. The suit was dismissed
      without prejudice in June 2005 and, to our knowledge, a new suit has not been
      initiated.







**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, 2006.




**PART
      II.**




**Item
                5.**
            **Market
                for Common Equity, Related Stockholder Matters****and Small Business Issuer Purchasers of Equity
                Securities**




**Market
      Information**





Our
      common stock is currently listed on the Over the Counter Bulletin Board under
      the symbol “GCPN” after the reverse split on February 13, 2007. For the period
      from October 26, 2004 to that day, our common stock qualified for listing on
      The
      Over the Counter Bulletin Board and was listed under the symbol "GCPO". Prior
      to
      that period of time the Company was quoted on the Pink Sheets L.L.C. under
      the
      symbol “PAVS”. 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****2006
                First Quarter**
            
            $
            17.80
            
            $
            7.50**2006
                Second Quarter**
            
            $
            7.50
            
            $
            0.70**2006
                Third Quarter**
            
            $
            1.60
            
            $
            0.50**2006
                Fourth Quarter**
            
            $
            2.30
            
            $
            0.60







16







**OTC
                Bulletin Board****High**
            
            **Low****2005
                First Quarter**
            
            $
            27.50
            
            $
            16.00**2005
                Second Quarter**
            
            $
            30.00
            
            $
            20.00**2005
                Third Quarter**
            
            $
            29.00
            
            $
            22.50**2005
                Fourth Quarter**
            
            $
            23.80
            
            $
            12.40




**Holders**




As
      of
      March 31, 2007, there were 813 **** holders
      of record of our common stock.




**Dividends**




We
      have
      not paid any dividends on our common stock to date and do not currently intend
      to pay dividends in the future. The payment of dividends in the future will
      be
      contingent upon our revenues and earnings, if any, capital requirements and
      general financial condition. 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**




All
      recent sales of unregistered securities of GCI have been previously reported
      on
      Current Reports on Form 8-K.




**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 under
      the heading “Risk Factors” in Item 1 above.




**Critical
      Accounting Policies**




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**





After
      only its first year of operation in 2006, HTW, as a newly-licensed mobile phone
      producer, has not only successfully earned a position in the second tier of
      the
      smart phone production industry, it has also become the leader in the
      information security sector for production of Information Security Mobile phones
      (“ISM”).





In
      part
      through the formation of a strategic alliance with Acorn in April 2006, the
      Company has explored a new market through TV channels in China. As a result
      of
      this strategic alliance, our sales volume has increased and our brand name
      awareness has improved.


17





In
      2006,
      a total of 223,489 units of ISM were sold in China, including sales of F8
“Information Secure” smart phones exceeding 157,000 units, sales of U8 smart
      phones exceeding 20,000 units and sales of F88, a metallic and slide design
      ISM,
      exceeding 45,000 units.




**Business
      O** **utlook**





In
      2007,
      the Company plans to launch several different ISMs with additional features,
      including a durable power phone and solar power phone. In addition, in order
      to
      respond the market demand, the Company plans to introduce a English-learning
      phone to assist the user in learning a second language.





For
      advertising and promotion, to our knowledge, we were the first mobile phone
      marketer selling mobile phones through a TV marketing channel in China. Most
      of
      our competitors have followed our strategy and commenced sales through TV
      marketing. The agreement with Acorn expired on April 10, 2007; however, we
      are
      in negotiations regarding an extension of our commercial arrangement and at
      the
      same time are also seeking other appropriate partners to continue our strategy
      on TV marketing to maintain our market share.




**Results
      of Operations for the Years ended December 31, 2006 and
      2005.**




**Revenues.** Revenues
      were $61,889,649 for the year ended December 31, 2006, as compared to $6,315,154
      for the same period in 2005 **.** This
      significant increase is attributable to the launching of new smart phones by
      the
      end of 2005 and increased sales during 2006 through TV marketing channels in
      China resulting from our strategic alliance under the Acorn brand.




**Gross
      margin.** Our
      gross margin increased from 19.9% in 2005 to 36.7% in 2006. This significant
      increase is attributable to our ability to sustain higher selling prices on
      our
      products.




**Gross
      profit** .
      Gross
      profit was $22,737,056 in the year ended December 31, 2006, as compared to
      $1,255,922 for the same period in 2005. This increase was attributable to an
      increase in sales volume and the improvement in gross margins on our
      products.




**Operating
      income (loss).** For
      the
      year ended December 31, 2006, operating income was $4,992,854 as compared to
      an
      operating loss of $471,011 for the same period in 2005. This increase in
      operating income was due to the launching of a new security smart phone and
      a strategic alliance under the Acorn brand for TV shopping, which led to an
      increase in product sales.




In
      addition, the Company acquired a software company during last quarter of 2006,
      which also contributed $1,652,986 to operating income due to the lower level
      of
      expenses recognized following such acquisition.




**Selling
      and distribution.** Selling
      and distribution expenses were $356,940 for the year ended December 31, 2006,
      as
      compared to $830,243 for the same period in 2005. This decrease was primarily
      attributable to a decrease in transportation expenses, caused by the change
      in
      our products from raw materials and components in 2005 to mobile phones in
      2006.




**Advertising
      expenses.** Advertising expenses were $13,677,979 for the year ended December 31, 2006,
      as
      compared to $507,208 for the same period in 2005. This major increase was due
      to
      advertising fees paid in connection with the Acorn arrangement of $8,194,266
      since April 2006. Furthermore, the compensation to distributors was $4,508,029 for
      the
      year ended December 31, 2006,as compared to $505,228 for the same period in
      2005, which increase was attributable to a growth in product sales.




**Research
      and development costs.** Research
      and development costs of $92,862 were incurred for the year ended December
      31,
      2006, as compared to none for the same period in 2005.




**General
      and administrative expenses.** General
      and administrative expenses were $3,036,666 for the year ended December 31,
      2006, as compared to $1,304,526 for the same period in 2005. This increase
      was
      primarily attributable to an increase in technical consultants’ fees, auditors’
fees, legal fees, salary expenses and office fees for new companies,
      depreciation expenses, and D&O insurance.


18









**Increase/**
            
            **%****2006**
            
            **2005**
            
            **(Decrease)**
            
            **Change****General
                and administrative expenses**Legal
                and Professional fees
            
            $
            1,036,574
            
            $
            27,460
            
            $
            1,009,114
            
            
            3674.85
            %Entertainment
                & travelling expenses
            
            
            203,460
            
            
            157,000
            
            
            46,460
            
            
            29.59
            %Depreciation
                expenses
            
            
            457,293
            
            
            420,383
            
            
            36,911
            
            
            8.78
            %Salary
            
            
            271,606
            
            
            144,107
            
            
            127,498
            
            
            88.47
            %Other
            
            
            1,067,733
            
            
            555,576
            
            
            512,157
            
            
            92.18
            %Total
            
            $
            3,036,666
            
            $
            1,304,526
            
            $
            1,732,140
            
            
            132.78
            %


Legal
      and
      Professional fees - These fees include audit fees, legal fees, consultancy fees,
      testing and technical service fees for mobile phones. During 2006, the
      significant increase was caused by the expenses related to the launch of a
      new
      model of mobile phones and the legal and professional fees paid in connection
      with the reverse merger.





Entertainment
      & traveling expenses - These expenses were incurred for the development of
      distribution networks over the country.





Depreciation
      expenses - Increase in depreciation expenses was mainly caused by the additional
      of building by transferring from construction in progress of $2,218,612 during
      2006.





Salary
      -
      Increase in salary was due to the increase of headcount by acquisition of
      Beijing Hi-Tech Wealth Software Co., Limited (“BJ HTS”) on October 27,
      2006.




**Other
      expenses/income, net.** Other
      expenses, net were $579,755 for the year ended December 31, 2006, as compared
      to
      other income, net of $915,044 for the same period in 2005. This increase was
      attributable to an increase in interest expenses of $135,738 on $6,000,000
      aggregate principal amount of convertible notes, amortization of the discount
      on
      the convertible notes of $293,858 and an interest rate increase on outstanding
      bank loans. In addition, a decrease in government grants and subsidies, from
      $1,558,273 of 2005 to $517,917 of 2006 caused a significant reduction in other
      income.




**Discontinued
      operations.** Net gain
      from discontinued operations was $182,962 for the year ended December 31, 2006.
      It consisted of the disposal of old business operations, including VOIP and
      structured cable business, and an investment in an unrelated business.




On
      December 22, 2006, the Company disposed the old business operations and
      generated the net gain from discontinued operation of $306,971, which consisted
      of the gain from disposition of discontinued operations of $374,505 and loss
      from discontinued operations of $67,534.




On
      December 28, 2006, HTW entered into an agreement to sell its 50% interest in
      Beijing Mobile Communication Technology Co., Ltd (“BMCT”) to another owner of
      BMCT at the consideration of $60,400 and the transaction was approved by the
      PRC
      Government and consummated on March 28, 2007. During the year ended December
      31,
      2006, the operation loss for this discontinued operation was
      $124,009.




**Net
      income(loss).** Net
      income was $4,459,642 for the year ended December 31, 2006, as compared to
      net
      loss of $459,261 for the same period in 2005. This change was attributable
      to
      the factors discussed above.




In
      addition, the Company acquired a software company, BJ HTS, during last quarter
      of 2006, which also has a significant contribution to net income of $1,704,845.
      Assuming the Company acquired BJ HTS at January 1, 2006, the unaudited pro
      forma
      net income $7,529,404.


19









For
      the
      year ended December 31, 2006, the basic and diluted earning per share was $0.23
      and $0.18, respectively.




**Income
      Taxes**




Income
      taxes were $287,018 for the year ended December 31, 2006, as compared to $30,932
      for the same period in 2005. The increase was due to the increase pre-tax income
      of HTW and the contribution from BJ HTS. The Company’s effective tax rate were
      15% and 24 % for the years ended December 31, 2006 and 2005, respectively,
      on
      the pre-tax income of HTW and BJ HTS under the China Tax Law.




**Liquidity
      and Capital Resources**




As
      of
      December 31, 2006, we had $220,909 of cash and cash equivalents and $548,526
      of
      working capital as compared to $79,703 of cash and cash equivalents and $502,903
      of working capital, respectively, at December 31, 2005. The account receivables
      decrease from $7,184,953 in 2005 to $3,874,442 in 2006.




Overall,
      cash increased in 2006 by 77%, from $79,703 in 2005 to $220,929 in 2006. There
      was a net inflow of cash from operations of $1,897,773 in 2006 in comparison
      to
      a net inflow of $2,453,122 in 2005. With respect to cash flow from investing,
      we
      have a net cash outflow of $5,680,871 in 2006 from $937,646 in 2005, which
      was
      mainly attributable to the net increase in notes receivable of $4,053,577.
      The
      cash provided by financing activities was increased to $3,425,591 in 2006 versus
      a net cash used in financing activities of $1,718,237 in 2005, which was mainly
      attributable to the issuance of $6,000,000 in aggregate principal amount of
      convertible notes in 2006.




**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, 2006, the Company’s disclosure controls and procedures
      are effective in alerting them on a timely basis to material information
      relating to the Company required to be included in the Company’s periodic
      filings under the Exchange Act.




(b)  Changes
      in internal control over financial reporting.




During
      the year ended December 31, 2006, 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.




**Item
      8B.**  **Other
      Information**




None.


20









**PART
      III.**




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




Our
      current directors and executive officers are as follows:




**Name**
            **Age**
            **Title**Zhang
                Zhengyu
            49
            Chairman
                and Chief Executive Officer of the Company and DirectorMa
                Qing
            44
            Chief
                Financial Officer, Treasurer and DirectorLi
                Ming
            42
            Secretary,
                President and DirectorSimon
                Mu
            48
            Director




**Dr.
      Zhang Zhengyu** ,
      49, has
      served as Chairman and Chief Executive Officer of the Company since November
      2006. Dr. Zhang is founder, Chairman and Chief Executive Officer of the HTW.
      Prior to the incorporation of HTW-HK in 1997, Dr. Zhang was general manager
      of
      Beijing Star Technology Development Center, a technical service firm in various
      businesses, ranging from software design, dealer for Dell, to the design of
      marble cutting machines. That firm became the sole dealer in the PRC for a
      Hong
      Kong electronic dictionary manufacturer in March 1992 and became dealer for
      other electronic organizers in January 1995. Dr Zhang has also actively
      participated the public and social services. Dr. Zhang is committee member
      of
      National Committee of the Chinese People's Political Consultative Conference
      and
      the Chinese People's Political Consultative Conference Beijing Committee, and
      Vice President of Beijing Municipal Chamber of Commerce and China Youth
      Entrepreneurs Association. In 1993, Dr. Zhang has been awarded for China
      National Outstanding Contributions Young Professional, China Central Bureau
      Top
      10 Outstanding Youth, and Central China Outstanding Youth Entrepreneur. Dr.
      Zhang obtained a Bachelor of Science (Space Science) degree from the Beijing
      Institute of Technology and a Ph.D. degree in artificial intelligence from
      Beijing University of Aeronautics & Astronautics.





**Ma
      Qing** ,
      44, has
      served as Chief Financial Officer and Treasurer of the Company since November
      2006. Mr. Ma is Chief Financial Officer and a Vice President of HTW. He founded
      Euro Asia Arbitrage Investment Limited, a company incorporated in Hong Kong
      in
      January 1998, which was subsequently acquired by the holding company of HTW
      in
      August 2000. Prior to 1999, Mr. Ma held various management positions at the
      Hong
      Kong, Paris and Chicago offices of Dresdner Kleinwort Benson. He has many years'
      experience in the banking industry. Mr. Ma obtained a Bachelor of Science degree
      from Beijing University, a DEA (Equivalent to Master of Science) degree in
      Artificial Intelligence from the University of Paris and a Diplome en
      (Equivalent to Master of Finance) degree from Ecole Superieur de Commerce de
      Paris.





**Li
      Ming** ,
      42, has
      served as Secretary and President of the Company since November 2006. Ms. Li
      is
      a founder, Chief Operating Officer, Director and President of HTW. Prior to
      joining HTW in October 1998, Ms. Li was General Manageress of Hong Kong
      Representative Office of Beijing Star Technology Development Center. Ms. Li
      has
      also worked as an instructor of Communication for Officer of the People's
      Liberation Army during 1977 to 1993. Ms. Li has also actively participated
      the
      public and social services. Ms. Li is committee member of the Beihai Committee
      of Chinese People's Political Consultative Conference and All-China Federation
      of Youth, and also a Standing Committee member of Guangxi Municipal Chamber
      of
      Commerce and Central Bureau Federation of Youth. Ms. Li holds an MBA degree
      from
      Murdoch University of Australia.




**Dr.
      Simon Mu, 48,** is
      a
      founder of the Company and has been on the Board of Directors since 2004. Dr.
      Mu
      was 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, from 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.


21


**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 incorporated by reference
      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 1503,
      Sino Plaza, 255-257 Gloucester Road, Causeway Bay, Hong Kong.




**Board
      Committees and Designated Directors**




We
      are
      currently traded on the OTC Bulletin Board and are therefore not required to
      have an audit or 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, 2006 are listed below:


Annual
                compensationName/Principal
                Position
            
            Fiscal
                Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Other
                ($)
            
            All
                other
              Comp.
                ($)Zhang
                Zhengyu,
              Chairman
                and CEO
            
            
            2006
            
            $
            10,076
            
            
            -
            
            
            -
            
            
            -Simon
                Mu, Former Chairman and CEO
            
            
            2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Ma
                Qing, CFO and Treasurer
            
            
            2006
            
            
            -
            
            
            -
            
            
            -
            
            
            -Li
                Ming, President and Secretary
            
            
            2006
            
            $
            17,633
            
            
            -
            
            
            -
            
            
            -




During
      each of the last three fiscal years, none of our other officers had salary
      and
      bonus greater than $100,000. 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 **.**




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


22









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




The
      following table sets forth information regarding the beneficial ownership of
      our
      common stock as of March 31, 2007 by:




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




·
            each
                of our officers and directors; and




·
            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.


**Names
                and Addresses**
              **of
                Beneficial Owners**
            
            **Amount
                and Nature**
              **of
                Beneficial Ownership(1)**
            
            **Percent
                of Class**Full
                Talent Limited
            
            
            17,450,000
            
            
            31.1
            %Smooth
                Wealth Group Limited
            
            
            9,500,000
            
            
            17.0
            %Marvel
                Sight Limited
            
            
            5,500,000
            
            
            9.8
            %Full
                Wisdom International Limited
            
            
            3,750,000
            
            
            6.7
            %Zhang
                Zhengyu (2) (3)
            
            
            21,200,000
            
            
            37.8
            %Li
                Ming (2) (4)
            
            
            9,500,000
            
            
            17.0
            %Ma
                Qing (2) (5)
            
            
            5,500,000
            
            
            9.8
            %Simon
                Mu(2)
            
            
            2,159,928
            
            
            3.9
            %**All
                directors and executive officers as a group (4
                persons)**
            
            
            **38,359,928**
            
            
            **68.5**
            **%**




___________________________________




(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)  Indicates
      a director and/or executive officer of the Company. The address of each such
      individuals is c/o
      General Components, Inc., Suite
      1503, Sino Plaza, 255-257 Gloucester Road, Causeway Bay, Hong Kong .




(3)  Includes
      17,450,000 shares owned by Full Talent Limited and 3,750,000 shares owned by
      Full Wisdom International Limited. In his capacity as sole owner of Full Talent
      Limited and Full Wisdom International Limited, Mr. Zhang has voting and
      investment power over the securities beneficially owned by Full Talent Limited
      and Full Wisdom International Limited. All of such shares have been pledged
      to
      support obligations of such individual under a non-compete
      agreement.




(4)  Includes
      9,500,000 shares owned by Smooth Wealth Group Limited. In her capacity as sole
      owner of Smooth Wealth Group Limited, Ms. Li has voting and investment power
      over the securities beneficially owned by Smooth Wealth Group Limited. All
      of
      such shares have been pledged to support obligations of such individual under
      a
      non-compete agreement.


23









(5)  Includes
      5,500,000 shares owned by Marvel Sight Limited. In his capacity as sole owner
      of
      Marvel Sight Limited, Mr. Ma has voting and investment power over the securities
      beneficially owned by Marvel Sight Limited. All
      of
      such shares have been pledged to support obligations of such individual under
      a
      non-compete agreement.




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




During
      the year ended December 31, 2005, we sold goods to Beijing Marrison World
      Business Information Company Limited for $6,267. Dr. Simon Mu, our director,
      has
      a controlling interest in Beijing Marrison World Business Information Company
      Limited.




During
      year ended December 31, 2006, HTW purchased raw materials and goods from Beijing
      Hi-Tech Wealth Electronic Product Co. Ltd (“BJ HEP”) in the amount of
      $30,256,399 and $2,980,607, respectively. In addition, in 2006, BJ HEP paid
      subcontracting fees on behalf of HTW in the amount of $434,274. In 2005, BJ
      HEP
      paid advertising, transportation and subcontracting fees on behalf of HTW in
      the
      amount of $518,747, $741,048 and $107,666, respectively. Dr. Zhang Zhengyu,
      Ms.
      Li Ming and Mr. Ma Qing, our directors, have also acted as directors of BJ
      HEP.




During
      2006, HTW acquired software from Beijing Hi-Tech Wealth Software Co. Ltd. (“BJ
      HTS”), which Ms. Li Ming, our director, is also the director of BJ HTS, in the
      amount of $3,644,357. On October 27, 2006, Euro Asia, the holding company of
      BJ
      HTS, was acquired by Magical Insight and the inter-company transactions have
      been eliminated in consolidation following such transaction.




During
      the year ended December 31, 2006, HTW sold goods to Nanjing Hengzhi
      Communication Equipment Co. Ltd. (“NHC”) in the amount of $3,353,655. NHC is
      controlled by a relative of the Company’s Chief Executive Officer and Chairman
      of the Board, Dr. Zhang Zhengyu.




During
      the year ended December 31, 2006 and 2005, HTW sold goods to Beijing Mobil
      XP
      Technology Co., Ltd (“BMT”) in the amount of $1,226,663 and $2,128,784,
      respectively. BMT is a company controlled by our director, Ms. Li
      Ming.




During
      the year ended December 31, 2006, HTW advanced $949,177 to Hong Kong Hi-Tech
      Wealth Electronic Products Co., Ltd. (“HK HEP”). The remaining balance is
      interest free, unsecured and has no fixed repayment term. Dr. Zhang Zhengyu,
      Ms.
      Li Ming and Mr. Ma Qing, directors of GCI, have also acted as directors of
      HK
      HEP.




During
      the year ended December 31, 2006, Hi-Tech Wealth Group Limited (“HT-WG”)
      advanced $498,381 to HTW. The remaining balance is interest free, unsecured
      and
      has no fixed repayment term. Dr. Zhang Zhengyu, Ms. Li Ming and Mr. Ma Qing,
      directors of GCI, have also acted as directors of HT-WG.




During
      the year ended December 31, 2006, BJ HID loaned $256,125 to HTW. The remaining
      balance is interest free, unsecured and has no fixed repayment term. Dr. Zhang
      Zhengyu and Ms. Li Ming, directors of GCI, have also acted as directors of
      BJ
      HID.


24









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




The
      following Exhibits are filed as part of this report.




Exhibit
                No.
            Description2.1
            Share
                Exchange Agreement by and between General Components, Inc., a Nevada
                corporation and Magical Insight Investments Limited., a British Virgin
                Islands corporation dated September 6, 2006.(1)2.2
            Asset
                Purchase Agreement by and between General Components, Inc. and ZGS
                Corporation dated September 6, 2006 (2)2.3
            Stock
                Purchase Agreement by and between General Components, Inc. and General
                Components International Ltd. (3)2.4
            Share
                Exchange Agreement by and between General Components, Inc., a Nevada
                corporation and General Components, Inc., a Cayman Islands corporation
                dated September 24, 2004.(4)2.5
            Stock
                Purchase Agreement by and among General Components, Inc. and certain
                Investors listed on Exhibit A thereto dated September 24,
                2004.(4)2.6
            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.(5)2.7
            Asset
                Purchase Agreement dated as of February 8, 2007 (7)2.8
            Amendment
                to Asset Purchase Agreement dated February 15, 2007 (9)2.9
            Amendment
                to the Share Exchange Agreement, dated as of September 6, 2006 by
                and
                among General Components, Inc., Magical Insight Investments Ltd.
                and each
                of the persons listed as a shareholder thereon (7)3.1
            Certificate
                of Incorporation.(6)3.2
            Certificate
                of Designation of General Components, Inc.(4)3.3
            Certificate
                of Designation of General Components, Inc relating to Series B Preferred
                Stock (7)3.4*
            Amended
                  and Restated By-laws4.1
            Form
                of Common Stock Certificate (6)4.2
            Convertible
                Promissory Note dated November 1, 2006 (2)4.3
            Common
                Stock Purchase Warrant dated November 1, 2006 (2)4.4
            Form
                of Convertible Note dated December 11, 2006(8)4.5
            Form
                of Warrant dated December 11, 2006 (8)4.6
            Common
                Stock Purchase Warrant dated as of February 8, 2007 issued to Broadband
                Capital Management LLC (7)4.7
            Common
                Stock Purchase Warrant dated as of February 8, 2007 issued to Comtech
                Global Investments, Inc. (7)10.1
            Form
                of Subscription Agreement dated as of February 8, 2007 by and among
                General Components, Inc. and the investors listed on the signature
                pages
                thereto (7)10.2
            Registration
                Rights Agreement dated February 8, 2007 by and among General Components,
                Inc. and the Holders named therein (7)10.3*
            Cooperative
                Agreement dated as of as of April 10, 2006 between Beihai Hi-Tech
                Weiye
                Limited Co., Shanghai Xiang Guo Wang Lu Technology Development Limited
                Co.
                and Shanghai Xiang Guo Advertising Limited Co.10.4*
            Form
                of Working Capital Loan Agreement14.1
            Code
                of Ethics and Insider Trading Policy. (10)31.1*
            Certification
                of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





25





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 2002.99.1
            Binding
                Term Sheet between Magical Insight Investments Ltd. and Beijing Hi-Tech
                Wealth Investment and Development Company Limited dated as of February
                8,
                2007 (7)




______________________________




*
      Filed
      herewith.




†
      Indicates management contract or compensatory plan or arrangement.




(1)  Incorporated
      by reference herein to the Report on Form 8-K filed on November 2,
      2006.




(2)  Incorporated
      by reference herein to the Report on Form 8-K filed on November 17,
      2006.




(3)  Incorporated
      by reference herein to the Report on Form 8-K filed on December 29,
      2006.




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




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




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




(7)  Incorporated
      by reference herein to Report on Form 8-K filed on February 13,
      2007.




(8)  Incorporated
      by reference herein to the Report on Form 8-K filed on December 20,
      2006.




(9)  Incorporated
      by reference herein to the Report on Form 8-K filed on April 9,
      2007.




(10)
      Incorporated by reference herein to the Report
      on Form 10-KSB filed on April 14, 2005.




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




The
      firm
      of BDO McCabe Lo Limited, formerly known as BDO McCabe Lo & Company acted as
      our principal accountant through December 28, 2006. The Company has now engaged
      Weinberg & Company, P.A. (“Weinberg”) as its principal independent
      accountants, which engagement became effective as of December 28, 2006. The
      following is a summary of fees paid to our principal accountants for services
      rendered.




AUDIT
      FEES




We
      have
      paid $163,687 for the services our principal accountant performed in connection
      with our share exchange, including the financial statements included in the
      Quarterly Report on Form 10-QSB filed with the Securities and Exchange
      Commission on November 20, 2006 and the Current Report on Form 8-K/A filed
      with
      the Securities and Exchange Commission on January 17, 2007.




During
      the year ended December 31, 2005, the audit fee incurred by BDO McCabe Lo
      Limited, was $117,732 and during the year ended December 31, 2006, the audit
      fee
      incurred by Weinberg was $223,973.


26









TAX
      FEES




During
      the years ended December 31, 2005 and 2006, our principal accountant did not
      render services to us for tax compliance, tax advice and tax
      planning **.**




ALL
      OTHER FEES




During
      the years ended December 31, 2005 and 2006, 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 have any pre-approval
      policies and procedures.







27


**SIGNATURES**




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







**GENERAL
                COMPONENTS, INC.**Principal
                Executive Officer:Date:
                April 17, 2007
            By:
            /s/
                Zhang
                ZhengyuName:
                Zhang ZhengyuTitle:
                Chief Executive OfficerDate:
                April 17, 2007
            Principal
                Financial and Accounting Officer:By:
            /s/
                Ma
                QingName:
                Ma QingTitle:
                Chief Financial Officer









In
      accordance with Section 13 or 15(d) of the Exchange Act, this report has been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the dates indicated.







Date:
                April 17, 2007
            By:
            /s/
                Zhang
                ZhengyuZhang
                ZhengyuChief
                Executive Officer and Chairman of the BoardDate:
                April 17, 2007
            By:
            /s/
                Ma
                QingMa
                QingChief
                Financial Officer, Treasurer andDate:
                April 17, 2007
            By:
            /s/
                Li
                MingLi
                MingDirectorDate:
                April 17, 2007
            By:
            /s/
                Simon
                MuSimon
                MuDirector











**GENERAL
        COMPONENTS, INC.**
 **AND
        SUBSIDIARIES**
 **CONSOLIDATED
        FINANCIAL STATEMENTS**
 **FOR
        THE YEARS ENDED**
 **DECEMBER
        31, 2006 AND 2005**














**GENERAL
      COMPONENTS, INC.**


**AND
      SUBSIDIARIES**




**CONTENTS**




PAGE
            F-1
            REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPAGE
            F-2
            CONSOLIDATED
                BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005PAGE
            F-3
                - F-4
            CONSOLIDATED
                STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE
                YEARS
                ENDED DECEMBER 31, 2006 AND 2005PAGE
            F-5
            CONSOLIDATED
                STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER
                31, 2006 AND 2005PAGES
            F-6
                - F-7
            CONSOLIDATED
                STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2006 AND
                2005PAGES
            F-8
                - F-40
            NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2006 AND
                2005



















**Report
      of Independent Registered Public Accounting Firm**








To
      the
      Board of Directors and Shareholders of:


General
      Components, Inc. and Subsidiaries








We
      have
      audited the accompanying consolidated balance sheets of General Components,
      Inc.
      and Subsidiaries (the "Company") as of December 31, 2006 and 2005 and the
      related consolidated statements of income (loss) and comprehensive income
      (loss), changes in shareholders’ equity and cash flows for the years then ended.
      These consolidated financial statements are the responsibility of the Company’s
      management. Our responsibility is to express an opinion on these consolidated
      financial statements based on our audits.





We
      conducted our audits in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      consolidated financial statements are free of material misstatement. An audit
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements. An audit also includes
      assessing the accounting principles used and significant estimates made by
      management, as well as evaluating the overall 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 consolidated financial position of General
      Components, Inc. and Subsidiaries as of December 31, 2006 and 2005, and the
      consolidated results of their operations and their cash flows for the years
      then
      ended, in conformity with accounting policies generally accepted in the United
      States of America.








WEINBERG
      & COMPANY, P.A.




/s/
        Weinberg & Company, P.A.  Boca
        Raton, Florida


March
      30,
      2007











F-1


**GENERAL
      COMPONENTS, INC.**


**AND
      SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEETS**


******ASSETS**December
                31,
              2006
            
            December
                31,
              2005**CURRENT
                ASSETS**Cash
                and cash equivalents
            
            $
            220,909
            
            $
            79,703Accounts
                receivable
            
            
            3,874,442
            
            
            7,184,953Notes
                receivable, including current portion of long-term notes receivable
                of
                $2,652,961
            
            
            4,849,920
            
            
            2,076,967Inventories
            
            
            13,455,461
            
            
            3,788,975Due
                from related parties
            
            
            2,783,518
            
            
            7,545,438Deferred
                tax assets
            
            
            1,436,624
            
            
            470,538Prepayments
                for goods
            
            
            2,142,720
            
            
            61,290Other
                receivables, prepaid expenses, and other assets
            
            
            492,108
            
            
            5,700Assets
                of discontinued operations
            
            
            20
            
            
            -Due
                from employees
            
            
            76,330
            
            
            59,334Total
                current assets
            
            
            29,332,052
            
            
            21,272,898****Plant
                and equipment, net
            
            
            15,281,647
            
            
            12,907,324Land
                use right, net
            
            
            2,336,328
            
            
            2,386,752Construction
                in progress
            
            
            -
            
            
            2,218,612Long
                term investment
            
            
            4,000
            
            
            4,000Other
                intangible assets
            
            
            33,198
            
            
            4,535Long
                term assets of discontinued operations
            
            
            2,277
            
            
            -Long-term
                portion of notes receivable
            
            
            1,280,623
            
            
            -Deferred
                tax assets
            
            
            53,443
            
            
            18,199Total
                long-term assets
            
            
            18,991,516
            
            
            17,539,422******TOTAL
                ASSETS**
            
            $
            48,323,568
            
            $
            38,812,320**LIABILITIES
                AND SHAREHOLDERS’ EQUITY****CURRENT
                LIABILITIES**Accounts
                payable
            
            $
            959,459
            
            $
            292,816Other
                payables and accrued liabilities
            
            
            5,664,215
            
            
            434,931Short-term
                bank loans
            
            
            1,152,561
            
            
            2,478,254Current
                portion of long term loans
            
            
            8,106,343
            
            
            2,230,428Convertible
                notes, net of discount of $2,279,313
            
            
            3,885,687
            
            
            -Notes
                payable
            
            
            1,267,817
            
            
            65,674Customer
                deposits
            
            
            5,402,047
            
            
            4,223,330Due
                to related parties
            
            
            1,337,238
            
            
            10,837,527Taxes
                payable
            
            
            600,635
            
            
            127,505Due
                to employees
            
            
            -
            
            
            17,544Liabilities
                of discontinued operations
            
            
            322
            
            
            -Deferred
                taxes
            
            
            407,202
            
            
            62,796Total
                current liabilities
            
            
            28,783,526
            
            
            20,770,805**LONG-TERM
                LIABILITIES**Long-term
                bank loans
            
            
            -
            
            
            5,885,851Minority
                interests
            
            
            1,605,934
            
            
            1,277,372Total
                long-term liabilities
            
            
            1,605,934
            
            
            7,163,223**TOTAL
                LIABILITIES**
            
            
            30,389,460
            
            
            27,934,028**COMMITMENTS****SHAREHOLDERS’
                EQUITY**Common
                stock, par value $0.001 per share; authorized 280,000,000 shares,
                27,999,935 and 17,986,935 shares issued and outstanding at December
                31,
                2006 and 2005, respectively
            
            
            28,000
            
            
            17,986Additional
                paid-in capital
            
            
            12,624,622
            
            
            10,533,437Retained
                earnings (the restricted portion is $1,202,599 and $349,153 at December
                31, 2006 and 2005, respectively)
            
            
            4,590,761
            
            
            41,119Accumulated
                other comprehensive income
            
            
            690,725
            
            
            285,750**TOTAL
                SHAREHOLDERS’ EQUITY**
            
            
            17,934,108
            
            
            10,878,292**TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY**
            
            $
            48,323,568
            
            $
            38,812,320





See
      accompanying notes to the consolidated financial statements.


F-2


**GENERAL
      COMPONENTS, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF INCOME (LOSS)**


**AND
      COMPREHENSIVE INCOME (LOSS)**


**FOR
      THE YEARS ENDED DECEMBER 31, 2006 AND 2005**





**2006**
            
            **2005****REVENUES,
                NET**
            
            $
            61,889,649
            
            $
            6,315,154**COST
                OF GOODS SOLD**
            
            
            39,152,593
            
            
            5,059,232**GROSS
                PROFIT**
            
            
            22,737,056
            
            
            1,255,922Selling
                and distribution
            
            
            356,940
            
            
            830,243Advertising
            
            
            13,677,979
            
            
            507,208Research
                and development
            
            
            92,862
            
            
            -General
                and administrative
            
            
            3,036,666
            
            
            1,304,526**INCOME
                (LOSS) FROM OPERATIONS**
            
            
            5,572,609
            
            
            (1,386,055
            )**OTHER
                INCOME (EXPENSES)**Interest
                expense, net
            
            
            (1,252,715
            )
            
            (629,605
            )Government
                grants
            
            
            517,917
            
            
            1,558,273Investment
                loss
            
            
            -
            
            
            (26,884
            )Other
                income, net
            
            
            155,043
            
            
            13,260**INCOME
                (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY
                INTERESTS**
            
            
            4,992,854
            
            
            (471,011
            )**INCOME
                TAXES**
            
            
            (287,018
            )
            
            (30,932
            )**INCOME
                (LOSS) FROM CONTINUING OPERATIONS BEFORE MINORITY
                INTERESTS**
            
            
            4,705,836
            
            
            (501,943
            )**MINORITY
                INTERESTS SHARE OF (INCOME) LOSS**
            
            
            (339,156
            )
            
            42,682**INCOME
                (LOSS) FROM CONTINUING OPERATIONS**
            
            
            4,366,680
            
            
            (459,261
            )**DISCONTINUED
                OPERATIONS**Gain
                from disposition of discontinued operations
            
            
            374,505
            
            
            -Loss
                from discontinued operations
            
            
            (191,543
            )
            
            -**GAIN
                FROM DISCONTINUED OPERATIONS**
            
            
            182,962
            
            
            -**NET
                INCOME (LOSS)**
            
            
            4,549,642
            
            
            (459,261
            )**OTHER
                COMPREHENSIVE INCOME**Foreign
                currency translation gain
            
            
            404,975
            
            
            314,178**OTHER
                COMPREHENSIVE INCOME BEFORE INCOME TAXES**
            
            
            404,975
            
            
            314,178**INCOME
                TAXES RELATED TO OTHER COMPREHENSIVE INCOME**
            
            
            (60,746
            )
            
            (75,403
            )**OTHER
                COMPREHENSIVE INCOME, NET OF INCOME TAXES**
            
            
            344,229
            
            
            238,775**COMPREHENSIVE
                INCOME (LOSS)**
            
            $
            4,893,871
            
            $
            (220,486
            )





See
      accompanying notes to the consolidated financial statements.


F-3





**2006**
            
            **2005****Weighted
                average shares outstanding****-
                Basic**
            
            
            19,797,505
            
            
            17,986,335**-
                Diluted**
            
            
            25,406,362
            
            
            17,986,335**Income
                (loss) per share from continuing operations****-
                Basic**
            
            $
            0.22
            
            $
            (0.03
            )**-
                Diluted**
            
            $
            0.17
            
            $
            (0.03
            )**Income
                per share from gain from disposition of discontinued
                operations****-
                Basic**
            
            $
            0.02
            
            $
            -**-
                Diluted**
            
            $
            0.01
            
            $
            -**Loss
                per share from loss from discontinued operations****-
                Basic**
            
            $
            (0.01
            )
            $
            -**-
                Diluted**
            
            $
            (0.01
            )
            $
            -**Net
                income (loss) per share****-
                Basic**
            
            $
            0.23
            
            $
            (0.03
            )**-
                Diluted**
            
            $
            0.18
            
            $
            (0.03
            )





See
      accompanying notes to the consolidated financial statements.


F-4
 **GENERAL
              COMPONENTS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
              STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**
 **FOR
              THE YEARS ENDED DECEMBER 31, 2006 AND
              2005**








**Common
                Stock**
            
            **Additional
              Paid-in**
            
            **Retained**
            
            **Accumulated
              Other
              Comprehensive****Shares**
            
            **Par
                Value**
            
            **Capital**
            
            **Earnings**
            
            **Income
                (Loss)**
            
            **Total****BALANCE,
                JANUARY 1, 2005**
            
            
            17,986,935
            
            $
            17,987
            
            $
            10,119,071
            
            $
            500,380
            
            $
            (28,428
            )
            $
            10,609,010Forgiveness
                of amount due to a shareholder
            
            
            -
            
            
            -
            
            
            414,365
            
            
            -
            
            
            -
            
            
            414,365Foreign
                currency translation gain
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            314,178
            
            
            314,178Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (459,261
            )
            
            -
            
            
            (459,261
            )**BALANCE,
                DECEMBER 31, 2005**
            
            
            17,986,935
            
            $
            17,987
            
            $
            10,533,436
            
            $
            41,119
            
            $
            285,750
            
            $
            10,878,292Common
                stock issued to a shareholder
            
            
            10,000
            
            
            10
            
            
            (10
            )
            
            -
            
            
            -
            
            
            -Recapitalization
            
            
            10,003,000
            
            
            10,003
            
            
            (481,975
            )
            
            -
            
            
            -
            
            
            (471,972
            )Warrants
                issued with convertible notes
            
            
            -
            
            
            -
            
            
            311,821
            
            
            -
            
            
            -
            
            
            311,821Beneficial
                conversion feature with convertible notes
            
            
            -
            
            
            -
            
            
            2,261,350
            
            
            -
            
            
            -
            
            
            2,261,350Foreign
                currency translation gain
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            404,975
            
            
            404,975Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            4,549,642
            
            
            -
            
            
            4,549,642**BALANCE,
                DECEMBER 31, 2006**
            
            
            27,999,935
            
            $
            28,000
            
            $
            12,624,622
            
            $
            4,590,761
            
            $
            690,725
            
            $
            17,934,108








See
      accompanying notes to the consolidated financial statements.


F-5
 **GENERAL
              COMPONENTS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
              STATEMENTS OF CASH FLOWS**
 **FOR
              THE YEARS ENDED DECEMBER 31, 2006 AND
              2005**


**2006**
            
            **2005****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Net
                income (loss)
            
            $
            4,549,642
            
            $
            (459,261
            )Adjustments
                to reconcile net income (loss) to net cash provided by
              operating
                activities:Depreciation
                and amortization
            
            
            799,154
            
            
            648,726Amortization
                of discounts to convertible notes payable
            
            
            293,858Investment
                loss
            
            
            -
            
            
            26,884Deferred
                portion of government grants realized
            
            
            -
            
            
            (1,538,696
            )Deferred
                taxes
            
            
            (444,199
            )
            
            (120,272
            )Minority
                interests’ share of net income (loss)
            
            
            339,156
            
            
            (42,682
            )(Gain)
                on disposal of discontinued operation-GCI Cayman
            
            
            (374,505
            )
            
            -**Changes
                in operating assets and liabilities, net of effects of
                acquisition:****(Increase)
                Decrease In:**Accounts
                receivable
            
            
            3,310,511
            
            
            1,713,908Inventories
            
            
            (9,666,486
            )
            
            (1,906,635
            )Other
                receivables, prepaid expenses, and other assets
            
            
            (471,968
            )
            
            (1,955
            )Prepayments
                for goods
            
            
            (2,081,431
            )
            
            157,945Due
                from employees
            
            
            (16,996
            )
            
            41,292Discontinued
                operations
            
            
            27,013
            
            
            -**Increase
                (Decrease) In:**Accounts
                payable
            
            
            666,642
            
            
            7,299Other
                payables and accrued liabilities
            
            
            2,693,377
            
            
            138,956Due
                to employees
            
            
            (17,544
            )
            
            16,336Taxes
                payable
            
            
            409,002
            
            
            127,505Customer
                deposits
            
            
            1,178,716
            
            
            3,643,772Discontinued
                operations
            
            
            703,831
            
            
            -Net
                cash provided by operating activities
            
            
            1,897,773
            
            
            2,453,122**CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchases
                of plant and equipment
            
            
            (1,008,863
            )
            
            (556,359
            )Purchases
                of construction in progress
            
            
            -
            
            
            (155,184
            )Repayments
                of notes receivable
            
            
            5,293,379
            
            
            -Increase
                in notes receivable
            
            
            (9,346,956
            )
            
            (226,103
            )Discontinued
                operations
            
            
            (2,277
            )
            
            -Purchase
                of a subsidiary, net of cash acquired
            
            
            46,855
            
            
            -Proceeds
                from disposal of discontinued operations, including cash
                retained
            
            
            (663,009
            )
            
            -Net
                cash used in investing activities
            
            
            (5,680,871
            )
            
            (937,646
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from short-term bank loans
            
            
            3,073,495
            
            
            2,230,428Repayments
                of short-term bank loans
            
            
            (4,409,125
            )
            
            (2,385,594
            )Repayment
                of long-term bank loans
            
            
            -
            
            
            (426,523
            )Proceeds
                from notes payable
            
            
            1,270,016
            
            
            65,674Repayments
                for notes payable
            
            
            (67,873
            )
            
            -Proceeds
                from convertible notes
            
            
            6,000,000
            
            
            -Cash
                received (repayment) to/from related parties, net
            
            
            (2,440,922
            )
            
            (1,616,587
            )Cash
                received from shareholder
            
            
            -
            
            
            414,365Net
                cash used in financing activities
            
            
            3,425,591
            
            
            (1,718,237
            )**DECREASE
                IN CASH AND CASH EQUIVALENTS**
            
            
            (357,507
            )
            
            (202,761
            )Effect
                of exchange rate changes on cash
            
            
            498,713
            
            
            262,315Cash
                and cash equivalents at beginning of year
            
            
            79,703
            
            
            20,149**CASH
                AND CASH EQUIVALENTS AT END OF YEAR**
            
            $
            220,909
            
            $
            79,703**SUPPLEMENTARY
                CASH FLOW INFORMATION:**Interest
                paid
            
            $
            371,435
            
            $
            721,059Income
                taxes paid
            
            $
            311,274
            
            $
            25,309




See
        accompanying notes to the consolidated financial statements.





F-6
 **GENERAL
            COMPONENTS, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
 **FOR
            THE YEARS ENDED DECEMBER 31, 2006 AND 2005**


**SUPPLEMENTAL
      NON-CASH DISCLOSURES:**





1.
            During
                2006 and 2005, $2,218,612 and $0 was transferred from construction
                in
                progress to plant and equipment,
                respectively.





2.
            During
                2006 and 2005, $0 and $414,365 of due to shareholder was forgiven
                and
                transferred to additional paid-in
                capital.





3.
            During
                2006, the operations of Voice Over Internet Protocol and General
                Components Inc., a Cayman Islands corporation, were disposed off
                for
                $581,000 and $1, respectively. The consideration consists of shares
                of a
                private company valued at $81,000, settlement of an outstanding accounts
                payable of $150,000, and the balance of cash proceeds and account
                receivables of $100,001 and
                $250,000.





4.
            On
                October 27, 2006, Magical Insight Investments Limited (“MIL”) acquired
                100% of the equity interest of Euro Asia Arbitrage Investment Limited
                (“Euro Asia”), a Hong Kong corporation, for HK$100,000, equivalent to
                $12,838. Prior to the acquisition, Euro Asia was a 100% holding company
                of
                Beijing Hi-Tech Wealth Software Co., Limited, which has a common
                director
                with MIL. The following represents the assets purchased and liabilities
                assumed at the date of the
                acquisition:





**October
                27, 2006**Plant
                and equipment, net
            
            $
            11,091Cash
                and cash equivalents
            
            
            59,693Other
                receivable and prepayments
            
            
            3,046Amounts
                due from related parties
            
            
            2,326,342Other
                assets
            
            
            443,357Total
                assets purchased
            
            $
            2,843,529Other
                payables and accrued expenses
            
            $
            (2,535,908
            )Deferred
                taxes
            
            
            (198,713
            )Other
                liabilities
            
            
            (96,070
            )Total
                liabilities assumed
            
            $
            (2,830,691
            )Total
                net assets
            
            $
            12,838Share
                percentage
            
            
            100
            %Net
                assets acquired
            
            $
            12,838Total
                consideration paid
            
            $
            12,838








See
      accompanying notes to the consolidated financial statements.


F-7
 **GENERAL
              COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
              OF DECEMBER 31, 2006 AND 2005**


**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES**




General
      Components, Inc. (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. (“Pro-Active”), which had only limited operations and had been a
      development stage company. On July 7, 2004, Pro-Active changed its name to
      General Components, Inc..





On
      September 24, 2004, GCI and the shareholders (collectively, “Shareholders”) of
      General Components, Inc., a Cayman Islands corporation (“GCI-Cayman”), closed
      the transactions contemplated by the share exchange agreement (the “GCI Share
      Exchange Agreement”) dated as of September 24, 2004. Pursuant to the GCI Share
      Exchange Agreement, the Shareholders agreed to transfer to GCI and GCI 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 2 million shares
      of
      GCI’s common stock to be issued on the closing date, which shares constituted
      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.





On
      October 27, 2006, the Company and the beneficial owners (collectively, “Owners”)
      of Magical Insight Investments Limited, a British Virgin Islands corporation
      (“MIL”), consummated an exchange of shares (the “Share Exchange”) pursuant to a
      Share Exchange Agreement dated as of September 6, 2006 (the “Share Exchange
      Agreement”), which resulted in a change in control of GCI. In connection with
      the transaction, GCI issued an aggregate of 17,986,721 shares of its common
      stock and warrants to purchase an additional 28,013,279 shares of its common
      stock, after giving effect to the 1 for 10 reverse split of the common stock
      on
      February 13, 2007, in exchange for the sole outstanding share of MIL, which
      constituted 100% of the outstanding capital stock of GCI. Immediately after
      the
      closing of the Share Exchange, the new issued common stock and warrants
      constituted approximately 82.14% of the ownership of GCI.





This
      Share Exchange transaction resulted in those shareholders obtaining a majority
      voting interest in GCI. Generally accepted accounting principles require that
      MIL retain the majority interest in a combined business be treated as the
      accounting acquirer. The exchange transaction has been accounted for a reverse
      acquisition in accordance with Statement of Financial Accounting Standards
      (“SFAS”) No. 141 “Business Combinations”. The acquisition is accounted for as
      the recapitalization of MIL. Accordingly, the accompanying consolidated
      statements of income (loss) include the results of operations of MIL for the
      years ended December 31, 2006 and 2005.





The
      consideration of the reverse acquisition was measured at the net fair value
      of
      GCI as the common stock of GCI did not appear to be more indicative of fair
      value. As a result, no goodwill was recognized from the share exchange. Also
      see
      Notes 14 and 19.





F-8
 **GENERAL
          COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONTINUED)**




Before
      acquiring MIL, the principal activity of the Company and its subsidiaries was
      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 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 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. However,
      the
      POF global market did not develop as rapidly as the Company anticipated and
      the
      Company deferred the commercialization and launch of POF products and reduced
      research and development on POF. The Company is currently seeking buyers for
      its
      POF business.





Prior
      to
      acquiring MIL, while searching for new business direction, the Company developed
      a product line of Voice Over Internet Protocol (“VOIP”) to provide the voice
      communication services within the internet environment. However, since the
      Company did not have sufficient financial resources to fully develop its new
      VOIP business on September 8, 2006, the Company entered into an Asset Purchase
      Agreement (“APA”) for the sale of its VOIP business. The agreement provides for
      the sale of the Company’s VOIP business for consideration of 15% of the buyer’s
      outstanding equity securities and $500,000 in cash payable in three
      installments: the first installment of $250,000 to be received on the closing
      date, net of the payment of approximately $150,000 to the Company’s software
      supplier and $30,000 previously received by the Company; and the second and
      third installments of $125,000, each to be received within 60 days and 150
      days
      from the date of the closing, respectively. The second and third installments
      are subject to certain adjustments as provided in the APA. The transaction
      contemplated by the APA closed on November 6, 2006. Also see Note
      16.





On
      December 22, 2006, the Company entered into an Asset Purchase Agreement with
      General Components International Limited, a British Virgin Islands company.
      Pursuant to the agreement the Company agreed to sell all of its interest in
      the
      business operations of and its 100% equity interest in General Components Inc,
      (“GCI Cayman”), a Cayman Islands corporation, and its subsidiaries, to a third
      party for $1. GCI Cayman is the 100% ultimate holding company of General
      Components, Inc., a New Jersey corporation, General Components Limited, a Hong
      Kong corporation, and General Components, Inc., a China corporation. Also see
      Note 16.





Going
      forward, the Company intends to carry out the business of MIL and its primary
      operating subsidiary, Beihai Hi-Tech Wealth Technology Development Co., Ltd.
      (“HTW”). HTW is a provider of advanced electronic and mobile communication
      products in the People’s Republic of China (the “PRC”).


F-9
 **GENERAL
          COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONTINUED)**




On
      November 28, 2006, MIL increased its shares in HTW through an
      additional investment of $3,600,000 into HTW. Thereafter, HTW became a
      92.3% owned subsidiary of the Company.  This resulted in negative goodwill
      of $104,332, which was applied against the long-term assets acquired. Also
      see
      Notes 17(b) and 19(c).





On
      October 27, 2006, MIL acquired 100% equity interest of Euro Asia Arbitrage
      Investment Limited (“Euro Asia”), a Hong Kong corporation, for HK$100,000,
      equivalent to US$12,838. Euro Asia is investment holding company, which owns
      100% of Beijing Hi-Tech Wealth Software Co., Limited. As a result, Euro Asia
      and
      its subsidiary were consolidated into the accompanying consolidated financial
      statements for the year ended December 31, 2006. Also see Note 17.




On
      February 13, 2007, the Company completed a 1 for 10 reverse split of its
      outstanding common stock. As a result, all the amounts in the accompanying
      consolidated financial statements for the years ended December 31, 2006 and
      2005
      have been restated to give effect to the 1 for 10 reverse split.








**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**




(a)
      Principles of Consolidation





The
      consolidated financial statements include the accounts of General Components,
      Inc. and the following subsidiaries:





(i)
            Magical
                Insight Investments Limited (“MIL”) (100% subsidiary of the Company).





(ii)
            Beihai
                Hi-Tech Wealth Technology Development Co., Ltd (“HTW”) (92.3% subsidiary
                of MIL).





(iii)
            Beihai
                Hi-Tech Wealth Electronic Products Co., Ltd (“HEP”) (90% subsidiary of
                HTW)





(iv)
            Beijing
                Mobile Communication Technology Co., Ltd (“BMCT”) (50% subsidiary of HTW).
                The board of directors of HTW have significant influence and control
                over
                BMCT. In May 2006, HTW formed BMCT by contributing cash of $60,400
                representing 50% of its paid-in
                capital.





F-10
 **GENERAL
          COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(v)
            Euro
                Asia Arbitrage Investment Limited (“Euro Asia”) (100% subsidiary of MIL).





(vi)
            Beijing
                Hi-Tech Wealth Software Co., Limited (“BJ HTS”) (100% subsidiary of Euro
                Asia).





All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.




Certain
      prior year amounts have been reclassified to conform to the current year’s
      presentation.




(b)
      Concentrations





The
      Company had various customers in 2006 and 2005 who accounted for the following
      percentage of total sales and total accounts receivable:





**Sales**
            
            **Accounts
                Receivable****Major
                Customers**
            
            **2006**
            **2005**
            
            **2006**
            **2005**Company
                A
            
            19.50%
            -
            
            -
            -Company
                B
            
            6.30%
            -
            
            8.72%
            -Company
                C
            
            5.0%
            -
            
            9.43%
            -Company
                D
            
            5.0%
            -
            
            -
            -Company
                E
            
            2.0%
            33.71%
            
            -
            -Company
                F
            
            -
            4.25%
            
            -
            -Company
                G
            
            -
            3.12%
            
            -
            -Company
                H
            
            -
            3.08%
            
            -
            -Company
                I
            
            -
            -
            
            -
            83.27%Company
                J
            
            -
            -
            
            15%
            16.49%





Company
      E
      is a related party. Beijing Mobil XP Technology Co., Ltd is a company controlled
      by the director of MIL. Also see Notes 3 and 5.





The
      sole
      market of the Company is the PRC for the years ended December 31, 2006 and
      2005.








F-11
 **GENERAL
          COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(b)
      Concentrations (Continued)





The
      Company had various suppliers in 2006 and 2005 who accounted for the following
      percentage of total purchases and total accounts payable:





**Purchases**
            
            **Accounts
                Payable****Major
                Suppliers**
            
            **2006**
            **2005**
            
            **2006**
            **2005**Company
                A
            
            61.6%
            45%
            
            -
            -Company
                B
            
            14.5%
            -
            
            11.25%
            -Company
                C
            
            8.1%
            7.9%
            
            -
            -Company
                D
            
            3.6%
            -
            
            -
            -





Company
      A
      is a related party. Beijing Hi-Tech Wealth Electronic Products Company Limited
      is a company controlled by the director of MIL.





(c)
      Economic and Political Risks





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





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





(d)
      Use
      of Estimates





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





Management
      makes these estimates using the best information available at the time the
      estimates are made. Actual results could differ materially from those
      estimates.








F-12
 **GENERAL
            COMPONENTS, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(e)
      Fair
      Value of Financial Instruments





The
      Company’s financial instruments include cash and cash equivalents, accounts
      receivable, notes receivable, due to/from related parties, other receivables
      and
      prepaid expenses, due from/to employees, prepayments for goods, accounts
      payable, notes payables, short-term bank loans, other payables and accrued
      liabilities, taxes payable and customer deposits. Management has estimated
      that
      the carrying amount approximates fair value due to their short-term
      nature.





The
      fair
      value of the Company’s long term debt is estimated based on the current rates
      offered to the Company for debt of similar terms and maturities. Under this
      method, the Company’s fair value of long term debt was not significantly
      different from the carrying value at December 31, 2006 and 2005.





(f)
      Cash
      and Cash Equivalents





For
      financial reporting purpose, the Company considers all highly liquid investments
      purchased with original maturity of three months or less to be cash equivalents.
      The Company maintains no bank account in the United States of
      America.





(g)
      Inventories





Inventories
      are stated at the lower of cost or net realizable value. Cost of raw materials
      is determined on the basis of weighted average. Finished goods are determined
      on
      the weighted average basis and comprise direct materials, direct labor and
      an
      appropriate proportion of overhead.





Net
      realizable value is based on estimated selling prices less any further costs
      expected to be incurred for completion and disposal.





At
      December 31, 2006 and 2005, the Company has no reserves against
      inventories.





(h)
      Trade
      Receivables





Trade
      receivables are recognized and carried at original invoice amount less allowance
      for any uncollectible amounts. An estimate for doubtful accounts is made when
      collection of the full amount is no longer probable. At December 31, 2006 and
      2005, the Company has no allowance for doubtful accounts.





(i)
      Prepayments for goods





Prepayments
      for goods represent cash paid in advance to suppliers for purchasing raw
      materials.





F-13
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(j)
      Deposits





In
      2006,
      the Company paid $153,675 as deposits to acquire certain technology related
      to a
      solar power mobile development project.   The total consideration
      for the technology is $268,931 to be paid in four installments. The
      first installment of $88,747 was made before signing the agreement and the
      second installment of $64,543 was made within 10 days after the agreement was
      signed. The third installment of $77,900 will be made when the project is
      completed and accepted by the Company. The last installment of $37,651 will
      be
      made when the product is being produced. The deposit was recorded in prepayments
      in the accompanying consolidated balance sheet.





(k)
      Long-Term Investment





The
      Company invested in Hi-Tech Wealth Holding Co. Ltd. (“HTWH”), a Hong Kong
      company, which is an investment holding company. The cost of the investment
      is
      $4,000, and the interest owned in HTWH is 4%.





HTWH
      is
      also a related party of the Company, also see Note 5(h).





As
      of
      December 31, 2006 and 2005, the Company does not have more than 20% interest
      in
      this investment and does not exercise significant influence over it. The Company
      accounts for the investment under the cost method. Investment income is
      recognized by the Company when the investee declares a dividend and the Company
      believes it is collectible.





(l)
      Plant
      and Equipment





Plant
      and
      equipment are carried at cost less accumulated depreciation and amortization.
      Depreciation is provided over their estimated useful lives, using the
      straight-line method. Leasehold improvements are amortized over the life of
      the
      asset or the term of the lease, whichever is shorter. Estimated useful lives
      are
      as follows:





Buildings
            20
                to 40 yearsMachinery
            5
                to 10 yearsMotor
                vehicles
            5
                to 10 yearsOffice
                equipment
            5
                yearsLeasehold
                improvements
            5
                to 25 years





The
      cost
      and related accumulated depreciation of assets sold or otherwise retired are
      eliminated from the accounts and any gain or loss is included in the statement
      of income (loss). The cost of maintenance and repairs is charged to income
      as
      incurred, whereas significant renewals and betterments are capitalized.


F-14
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





(m)
      Construction in Progress





Construction
      in progress represents costs of construction or the acquisition cost of
      buildings or machinery and design fees. Capitalization of these costs ceases
      and
      the construction in progress is transferred to plant and equipment when
      substantially all the activities necessary to prepare the assets for their
      intended use are completed. No depreciation is provided until the assets are
      completed and ready for their intended use.




(n)
      Capitalized Interest





The
      Company capitalizes interest as a component of building construction costs,
      and
      this amounted to $0 and $187,787 for the years ended December 31, 2006 and
      2005,
      respectively. Total interest incurred for the years ended December 31, 2006
      and
      2005 amounted to $1,005,298 and $731,290, respectively.





(o)
      Land
      Use Right





According
      to the laws of China, the government owns all the land in China. Companies
      or
      individuals are authorized to possess and use the land only through land use
      right granted by the Chinese government. The land use right granted to the
      Company is being amortized using the straight-line method over the lease term
      of
      fifty years.





(p)
      Software





Software
      installed in smart phones owned by the Company are amortized over their
      beneficial period of 3 years, using the straight-line method. The original
      cost
      is $54,324, and accumulated amortization is $21,126 at December 31, 2006.
      Amortization expense for this software was $8,172 for year ended December 31,
      2006.





(q)
      Impairment of Long-Term Assets





Long-term
      assets of the Company are reviewed annually as to whether their carrying value
      has become impaired, pursuant to the guidelines established in SFAS No. 144,
      “Accounting for the Impairment or Disposal of Long-Lived Assets”. The Company
      also periodically evaluates the amortization periods of its depreciable assets
      to determine whether subsequent events and circumstances warrant revised
      estimates of the useful lives. There were no impairments in 2006 and
      2005.








F-15
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





(r)
      Revenue Recognition





Revenue
      related to smart phone and electronic products represents the invoiced value
      of
      goods sold recognized upon the delivery of goods to customers. According to
      the
      contracts, goods delivered by the Company could be returned within 7 days,
      if
      there is any defect. The Company estimates a reserve for returns based on the
      amount of goods actually returned after the reporting period. A reserve of
      $0
      and $34,152 was netted against revenue for the years ended December 31, 2006
      and
      2005, respectively.




Revenue
      is recognized when all of the following criteria are met:





-
      Persuasive evidence of an arrangement exists,


-
      Delivery has occurred or services have been rendered, when no subsequent return
      is noted,


-
      The
      seller’s price to the buyer is fixed or determinable, and


-
      Collectibility is reasonably assured.





Revenue
      related to software products represents the invoiced value of software sold
      recognized only when the software is installed into the assembled hardware
      devices. The Company does not have any further obligation to service the
      software once it is installed into the hardware devices.





(s)
      Government Grants





Grants
      received from the PRC Government for assisting the Company’s technical research
      and development are recognized as other income when the proceeds are earned
      and
      received or collectible. The Company did not incur any research and development
      expenses for the year ended December 31, 2005.





For
      the
      years ended December 31, 2006 and 2005, $454,941 of rewards were received in
      2006 for research and development projects in former years, and $1,558,273
      was
      received in 2005 from the PRC Government for assisting the Company’s technical
      research and development. These amounts were recognized as other
      income.





For
      the
      years ended December 31, 2006 and 2005, $62,976 and $0 was received a bonus
      from
      the PRC Government for the Company’s performance and was recognized as other
      income.





(t)
      Research and Development Costs





Expenditures
      relating to the development of new products and processes, including significant
      improvements to existing products are expensed as incurred.  Research and
      development expenses were $92,862 and $0 for the years ended December 31, 2006
      and 2005, respectively.


F-16
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





(u)
      Retirement Benefits





Retirement
      benefits in the form of contributions under defined
      contribution retirement plans to the relevant authorities are charged to
      operations as incurred. Retirement benefits amounting to $18,694 and $12,418
      were charged to operations for the years ended December 31, 2006 and 2005,
      respectively.





(v)
      Foreign Currency Translation





The
      accompanying consolidated financial statements are presented in United States
      dollars. The functional currency of the Company is the Renminbi (RMB). The
      consolidated financial statements are translated into United States dollars
      from
      RMB at year-end exchange rates as to assets and liabilities and average exchange
      rates as to revenues and expenses. Capital accounts are translated at their
      historical exchange rates when the capital transactions occurred.





December
                31, 2006
            
            December
                31, 2005Year
                end RMB: US$ exchange rate
            7.8087
            
            8.0702Average
                yearly RMB: US$ exchange rate
            7.9395
            
            8.1734





(w)
      Income Taxes





The
      Company accounts for income tax using the asset and liability approach. Deferred
      taxes are provided for the net tax effects of temporary differences between
      the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. A valuation allowance is provided
      for
      deferred tax assets if it is more likely than not these items will either expire
      before the Company is able to realize their benefits, or that future utilization
      is uncertain.





(x)
      Reserve Fund





In
      2006
      and 2005, the subsidiaries of the Company in China transferred 15% of their
      PRC
      profit after taxation to the surplus reserve fund. Subject to certain
      restrictions set out in the PRC Companies Law, the surplus reserve fund may
      be
      distributed to shareholders in the form of share bonus issues and/or cash
      dividends. The Company’s retained earnings in the amount of $1,202,599 and
      $349,153 are restricted as of December 31, 2006 and 2005, respectively for
      the
      surplus reserve fund.





F-17
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





(y)
      Comprehensive Income





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by owners and distributions to owners. Among other disclosures,
      all
      items that are required to be recognized under current accounting standards
      as
      components of comprehensive income should be reported in a financial statement
      that is presented with the same prominence as other financial statements. The
      Company’s only current component of comprehensive income is the foreign currency
      translation adjustment.





(z)
      Earnings (Loss) Per Share





Basic
      earnings (loss) per share are computed by dividing income available to common
      shareholders by the weighted-average number of common shares outstanding during
      the period. Diluted earnings (loss) per share is computed similar to basic
      earnings per share except that the denominator is increased to include the
      number of additional common shares that would have been outstanding if the
      potential common shares had been issued and if the additional common shares
      were
      dilutive. All potentially dilutive securities are included in EPS in 2006 and
      there were no potentially dilutive securities in 2005.





Basic
      and
      diluted earning (loss) per share are calculated as follows:





**Year
                ended December 31****2006**
            
            **2005****Basic:**Income
                (loss) applicable to common shareholders
            
            $
            4,549,642
            
            $
            (459,261
            )Weighted
                average shares outstanding during the year
            
            
            19,797,505
            
            
            17,986,335Net
                income (loss) per share
            
            $
            0.23
            
            $
            (0.03
            )**Diluted:**Income
                (loss) applicable to common shareholders
            
            $
            4,549,642
            
            $
            (459,261
            )Interest
                expense attributable to convertible notes
            
            
            135,738
            
            
            -Diluted
                income (loss) applicable to common shareholders
            
            
            4,685,380
            
            
            (459,261
            )Weighted
                average shares outstanding during the year
            
            
            19,797,505
            
            
            17,986,335Effect
                of dilutive securities:Warrants
                issued for reverse merger
            
            
            5,065,402
            
            
            -Convertible
                notes
            
            
            495,611
            
            
            -Warrants
            
            
            47,844
            
            
            -Weighted
                average diluted shares outstanding during the year
            
            
            25,406,362
            
            
            17,986,335Diluted
                net income (loss) per share
            
            $
            0.18
            
            $
            (0.03
            )


F-18
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(za)
      Recent Accounting Pronouncements





SFAS
      No.
      157, Fair Value Measurements, issued in September 2006 establishes a formal
      framework for measuring fair value under Generally Accepted Accounting
      Principles (“GAAP”). It defines and codifies the many definitions of fair value
      included among various other authoritative literature, clarifies and, in some
      instances, expands on the guidance for implementing fair value measurements,
      and
      increases the level of disclosure required for fair value measurements. Although
      SFAS No. 157 applies to and amends the provision of existing Financial
      Accounting Standards Board (“FASB”) and American Institute of Certified Public
      Accountants (“AICPA”) pronouncements, it does not, of itself, require any new
      fair value measurements, nor does it establish valuation standards. SFAS No.
      157
      applies to all other accounting pronouncements requiring or permitting fair
      value measurements, except for; SFAS No. 123 (R), share-based payment and
      related pronouncements, the practicability exceptions to fair value
      determinations allowed by various other authoritative pronouncements, and AICPA
      Statements of Position 97-2 and 98-9 that deal with software revenue
      recognition. This statement is effective for financial statements issued for
      fiscal years beginning after November 15, 2007, and interim periods within
      those
      fiscal years.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements". SAB No.
      108 was issued in order to eliminate the diversity in practice surrounding
      how
      public companies quantify financial statement misstatements SAB No. 108 requires
      that registrants quantify errors using both a balance sheet (iron curtain)
      approach and an income statement (rollover) approach, then evaluate whether
      either approach results in a misstated amount that, when all relevant
      quantitative and qualitative factors are considered, is material. SAB No. 108
      is
      effective for fiscal years ending after November 15, 2006. The Company has
      adopted the bulletin during 2006. The adoption did not have a material effect
      on
      the consolidated results of operations, financial position, or cash
      flows.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN 48"). FIN
      48
      clarifies the accounting for uncertainty in income taxes recognized in a
      company's financial statements in accordance with FAS 109, "Accounting for
      Income Taxes". FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. FIN 48 also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. The requirements of FIN 48 are
      effective beginning January 1, 2007.





F-19
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES
                (CONTINUED)**





(za)
      Recent Accounting Pronouncements (Continued)





The
      implementation of the above pronouncements are not expected to have a material
      effect on the Company’s consolidated financial statements or
      disclosures.








**3.**
            **NOTES
                RECEIVABLE**





Notes
      receivable at December 31, 2006 and 2005 consist of the following





**2006**
            
            **2005**Bank
                acceptable note
            
            $
            128,062
            
            $
            -Notes
                receivable from unrelated companies:Rongcheng
                Machinery & Electronic Co. Ltd., due on December 31,
                2006
            
            
            -
            
            
            1,577,103Beijing
                Fulai Chengsi Investment Co. Ltd., due on May 31, 2006
            
            
            -
            
            
            123,913Beijing
                Daheng Weye Trading Co. Ltd., due on May 31, 2006
            
            
            -
            
            
            123,913Beihai
                University Garden Management Co. Ltd., due on December 31,
                2007
            
            
            324,510
            
            
            227,255Hong
                Kong Qibao Group Co. Ltd., due on October 31, 2006
            
            
            -
            
            
            24,783$
            324,510
            
            $
            2,076,967Notes
                receivable from related companies:Beijing
                Hi-Tech Wealth Electronic Product Co. Ltd., due on December 27,
                2007
            
            
            2,652,961
            
            
            -Beijing
                Hi-Tech Wealth Electronic Product Co. Ltd., due on December 27,
                2008
            
            
            1,280,623
            
            
            -Beijing
                Mobil XP Technology Co., Ltd., due on December 27, 2007
            
            
            1,744,387
            
            
            -$
            5,677,971
            
            $
            -Less:
                Long-term portion of notes receivable
            
            
            (1,280,623
            )4,397,348
            
            
            -Total
                current notes receivable
            
            $
            4,849,920
            
            $
            2,076,967





The
      bank
      acceptable note has been subsequently settled in January 2007.





Notes
      receivable from unrelated companies are interest-free, unsecured and all
      current.





Notes
      receivable from related companies bear interest at 5% per annum and are
      unsecured.





F-20
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**4.**
            **INVENTORIES**





Inventories
      at December 31, 2006 and 2005 consist of the following:





**2006**
            
            **2005**Raw
                materials
            
            $
            11,487,668
            
            $
            2,314,162Finished
                goods
            
            
            1,967,793
            
            
            1,474,813Total
            
            $
            13,455,461
            
            $
            3,788,975








**5.**
            **DUE
                TO/FROM RELATED PARTIES**





(I)Due
                From Related Parties
            
            
            
            **2006**
            
            **2005**Beijing
                Hi-Tech Wealth Electronic Product Co.
              Ltd.
            
            
            (a
            )
            $
            368,897
            
            $
            6,016,616Beihai
                Hi-Tech Wealth Electronic Product Selling
              Co.
                Ltd.
            
            
            (b
            )
            
            -
            
            
            458,430Beihai
                Hongshanhu Software Co., Ltd.
            
            
            
            
            
            -
            
            
            34,984Beihai
                Hi-Tech Wealth Information Industry Co.
              Ltd.
            
            
            (c
            )
            
            15,367
            
            
            10,898Beijing
                Hi-Tech Wealth Software Co. Ltd.
            
            
            (d
            )
            
            -
            
            
            1,024,510Hong
                Kong Hi-Tech Wealth Electronic Products
              Co.
                Ltd.
            
            
            (e
            )
            
            949,177
            
            
            -Nanjing
                Hengzhi Communication Equipment Co.
              Ltd.
            
            
            (f
            )
            
            1,450,077
            
            
            -Total
                due from related parties
            
            
            
            
            $
            2,783,518
            
            $
            7,545,438








(II)Due
                To Related Parties
            
            
            
            **2006**
            
            **2005**Beihai
                Hi-Tech Wealth Electronic Product Selling
              Co.
                Ltd.
            
            
            (b
            )
            $
            491,019
            
            $
            -Zhejiang
                Hi-Tech Wealth E-Business Co. Ltd.
            
            
            
            
            
            -
            
            
            2,061Beijing
                Mobil XP Technology Co., Ltd.
            
            
            (g
            )
            
            -
            
            
            9,099,405Hi-Tech
                Wealth Holding Co. Ltd.
            
            
            (h
            )
            
            91,713
            
            
            1,383,962Hong
                Kong Hi-Tech Wealth Electronic Products
              Co.
                Ltd.
            
            
            (e
            )
            
            -
            
            
            352,099Hi-Tech
                Wealth Group Limited
            
            
            (i
            )
            
            498,381
            
            
            -Beijing
                Hi-Tech Wealth Investment and
              Development
                Co. Ltd.
            
            
            (j
            )
            
            256,125
            
            
            -Total
                due to related parties
            
            
            
            
            $
            1,337,238
            
            $
            10,837,527





(III)Due
                From Employees
            
            
            
            **2006**
            
            **2005**Current
            
            
            
            
            $
            76,330
            
            $
            59,334Total
                due from employees
            
            
            (k
            )
            $
            76,330
            
            $
            59,334





F-21
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**5.**  **DUE
      TO/FROM RELATED PARTIES (CONTINUED)**





(IV)Due
                To Employees
            
            
            
            **2006**
            
            **2005**Current
            
            
            
            
            $
            -
            
            $
            17,544Total
                due to employees
            
            
            (k
            )
            $
            -
            
            $
            17,544





(a)
            Beijing
                Hi-Tech Wealth Electronic Product Co. Ltd (“BJ HEP”) has a common director
                with MIL. During year ended December 31, 2006, MIL’s subsidiary Beihai
                Hi-Tech Wealth Technology Development Co., Ltd. (“HTW”) purchased raw
                materials and goods from BJ HEP in the amount of $30,256,399 and
                $2,980,607, respectively.





In
      2006,
      BJ HEP paid subcontracting fees on behalf of HTW in the amount of $434,274.
      In
      2005, BJ HEP paid advertising, transportation and subcontracting fees on behalf
      of HTW in the amount of $518,747, $741,048 and $107,666,
      respectively.





The
      remaining balance is interest free, unsecured and has no fixed repayment term.





(b)
            Beihai
                Hi-Tech Wealth Electronic Product Selling Co. Ltd. is a company controlled
                by a director of MIL. The remaining balance is interest free, unsecured
                and has no fixed repayment term.





(c)
            Beihai
                Hi-Tech Wealth Information Industry Co. Ltd. has a common director
                with
                MIL. The remaining balance is interest free, unsecured and has no
                fixed
                repayment term.





(d)
            Beijing
                Hi-Tech Wealth Software Co. Ltd. (“BJ HTS”) has a common director with
                MIL. From January 1, 2006 to October 26, 2006, HTW acquired software
                from
                BJ HTS in the amount of $3,644,357. The balance at December 31, 2005
                represented an advance to BJ HTS, which was interest free, unsecured
                and
                had no fixed payment term. On October 27, 2006, Euro Asia, a holding
                company of BJ HTS, was acquired by MIL and the inter-company transactions
                for 2006 have been eliminated for consolidation
                purposes.





(e)
            Hong
                Kong Hi-Tech Wealth Electronic Products Co., Ltd. (“HK HEP”) has common
                director with MIL. The amount represents an advance to HK HEP for
                the
                period. The remaining balance is interest free, unsecured and has
                no fixed
                repayment term.





(f)
            Nanjing
                Hengzhi Communication Equipment Co. Ltd. (“NHC”) has been controlled by a
                relative of a director of HTW. In 2006, HTW sold goods to NHC in
                the
                amount of $3,353,655. The remaining balance is interest free, unsecured
                and has no fixed repayment term.





F-22
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**5.**
            **DUE
                TO/FROM RELATED PARTIES
                (CONTINUED)**





(g)
            Beijing
                Mobil XP Technology Co., Ltd (“BMT”) is a company controlled by the
                director of MIL. In 2006 and 2005, HTW sold goods to BMT in the amount
                of
                $1,226,663 and $2,128,784, respectively. The remaining balance is
                interest
                free, unsecured and has no fixed repayment
                term.





(h)
            Hi-Tech
                Wealth Holding Co. Ltd. (“HTWH”) is an investment of MIL. The remaining
                balance is interest free, unsecured and has no fixed repayment term.
                Also
                see Note 2(k).





(i)
            Hi-Tech
                Wealth Group Limited has a common director with HTW. The remaining
                balance
                is interest free, unsecured and has no fixed repayment term.





(j)
            Beijing
                Hi-Tech Wealth Investment and Development Co. Ltd. is a minority
                shareholder of HTW. The remaining balance is interest free, unsecured
                and
                has no fixed repayment term.





(k)
            Due
                from/to employees are interest-free, unsecured and have no fixed
                repayment
                term.








**6.**
            **PLANT
                AND EQUIPMENT**





Plant
      and
      equipment consist of the following at December 31, 2006 and 2005:





**2006**
            
            **2005**At
                cost:Buildings
            
            $
            13,262,655
            
            $
            10,724,214Machinery
            
            
            2,711,482
            
            
            2,624,632Motor
                vehicles
            
            
            144,635
            
            
            82,783Office
                equipment
            
            
            257,099
            
            
            163,499Other
                equipment
            
            
            472,024
            
            
            128,39816,847,895
            
            
            13,723,526Less:
                Accumulated depreciationBuildings
            
            
            743,418
            
            
            371,582Machinery
            
            
            639,740
            
            
            356,767Motor
                vehicles
            
            
            58,400
            
            
            38,643Office
                equipment
            
            
            90,478
            
            
            44,297Other
                equipment
            
            
            34,212
            
            
            4,9131,566,248
            
            
            816,202Plant
                and equipment, net
            
            $
            15,281,647
            
            $
            12,907,324





The
      net
      book value of buildings pledged for certain bank loans at December 31, 2006
      and
      2005 is $10,796,659 and $8,446,156, respectively. Also see Notes 9 and
      10.





Depreciation
      expense for 2006 and 2005 was $740,714 and $598,550, respectively. During
      the year ended December 31, 2006, $2,218,612 of the construction in progress
      was
      transferred to buildings. Also see Note 8.


F-23
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**





**7.**
            **LAND
                USE RIGHT**





**2006**
            
            **2005**Cost
            
            $
            2,521,217
            
            $
            2,521,217Less:
                Accumulated amortization
            
            
            184,889
            
            
            134,465Land
                use right, net
            
            $
            2,336,328
            
            $
            2,386,752





Amortization
      expense for the years ended December 31, 2006 and 2005 is $50,424 and $49,788,
      respectively.





Amortization
      expense for the next five years and thereafter is as follows:





2007
            
            $
            50,4242008
            
            
            50,4242009
            
            
            50,4242010
            
            
            50,4242011
            
            
            50,424Thereafter
            
            
            2,084,208Total
            
            $
            2,336,328





The
      net
      book value of the land use right pledged for certain bank loans at December
      31,
      2006 and 2005 is $2,336,328 and $2,386,752, respectively. Also see Notes 9
      and
      10.








**8.**
            **CONSTRUCTION
                IN PROGRESS**





Construction
      in progress at December 31, 2006 and 2005 consists of the
      following:





******2006**
            
            **2005**Buildings
            
            $
            -
            
            $
            2,218,612Total
            
            $
            -
            
            $
            2,218,612





The
      value
      of the construction in progress pledged for certain bank loans at December
      31,
      2006 and 2005 is $0 and $2,218,612, respectively. Also see Notes 9 and
      10.





During
      the year ended December 31, 2006, the construction in progress was transferred
      to buildings. Also see Note 6.


F-24
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**9.**
            **SHORT-TERM
                DEBT**





Short-term
      debt as of December 31, 2006 and 2005 consist of the following:


**2006**
            
            **2005**Loans
                from Industrial and Commercial Bank of China, Nanzhu Branch, due
                June 28,
                2005, monthly interest only payments at 5.8590% per annum, secured
                by
                buildings, land use right and construction in progress of the Company
                (fully repaid on December 22, 2006). Also see Notes 6, 7 and
                8.
            
            $
            -
            
            $
            1,239,127Loans
                from Industrial and Commercial Bank of China, Nanzhu Branch, due
                December
                31, 2004, monthly interest only payments at 6.3000% and 5.7645% per
                annum,
                respectively, secured by the building, land use right and construction
                in
                progress of the Company (fully repaid on December 22, 2006). Also
                see
                Notes 6, 7 and 8.
            
            
            -
            
            
            1,239,127Loans
                from Industrial and Commercial Bank of China, Nanzhu Branch, due
                December
                21, 2007, monthly interest only payments at 7.956% per annum, secured
                by a
                building and a land use right of the Company. Also see Notes 6 and
                7.
            
            
            1,152,561
            
            
            -Total
                short-term bank loans
            
            $
            1,152,561
            
            $
            2,478,254





Notes
                payable to unrelated companies:Beihai
                Industry Garden Management Bureau
            
            $
            -
            
            $
            65,674Beijing
                Yanxin Times Science & Technology Co. , due November 11,
                2007
            
            
            38,419
            
            
            -Shanghai
                Yulin Trading Co. , due November 11, 2007
            
            
            1,024,498
            
            
            -Beijing
                HuayuJicheng Trading Co., Ltd. , due November 11, 2007
            
            
            204,900
            
            
            -Total
                notes payable
            
            
            1,267,817
            
            
            65,674Total
                short-term debt
            
            $
            2,420,378
            
            $
            2,543,928




Interest
      expense for 2006 and 2005 was $432,717 and $363,536, respectively.





Notes
      payable to unrelated companies are interest-free, unsecured and
      current.


F-25
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**10.**  **LONG-TERM
      BANK LOANS**





As
      of
      December 31, 2006 and 2005, the long-term bank loans consist of the
      following:


**2006**
            
            **2005**Industrial
                and Commercial Bank of China, Nanzhu Branch, outstanding principal
                of
                Rmb27,500,000, at an interest rate of 6.1425% (2005: 5.8590%) per
                annum,
                secured by building, a land use right and construction in progress
                of HTW.
                The loan is due on July 31, 2007. Also see Notes 6, 7 and
                8.
            
            $
            3,521,713
            
            $
            3,407,598Industrial
                and Commercial Bank of China, Nanzhu Branch, outstanding principal
                of
                Rmb20,000,000, at an interest rate of 6.1425% (2005: 5.8590%) per
                annum,
                secured by the land use right of HTW. The loan is due on July 31,
                2007.
                Also see Note 7.
            
            
            2,561,246
            
            
            2,478,253Agricultural
                Bank of China, Beihai Branch, due November 18, 2006, outstanding
                principal
                of Rmb15,800,000, monthly interest only payment at 11.340% after
                due date
                and 5.7645% before due date per annum, respectively, secured by a
                guarantee of an unrelated company. The extension of the loan to November
                18, 2007 has been submitted and the Company is waiting for the approval
                from the bank.
            
            
            2,023,384
            
            
            2,230,428Total
                long-term bank loans
            
            $
            8,106,343
            
            $
            8,116,279Less:
                Current portion
            
            
            (8,106,343
            )
            
            (2,230,428
            )Long-term
                portion
            
            $
            -
            
            $
            5,885,851




Subsequent
                settlements:Agricultural
                Bank of China during November 2006
            
            $
            -
            
            $
            261,126$
            -
            
            $
            261,126





Interest
      expense for 2006 and 2005 was $390,402 and $357,523, respectively.








**11.**
            **CONVERTIBLE
                NOTES**




At
      December 31, 2006, convertible notes outstanding are as follows:


**2006**Origination
                on September 5, 2006, outstanding principal of $165,000, due on September
                5, 2007 at an interest rate of 8% per annum and accrued interest
                of $4,231
                at December 31, 2006 payable on maturity. Both principal and interest
                have
                been secured by cash proceeds of $250,000 received by General Components,
                Inc., a Cayman Islands company, from the disposition of the VOIP
                operations under an assets purchase agreement which was consummated
                on
                November 6, 2006. Also see Note 17.
            
            $
            165,000Origination
                on November 1, 2006, outstanding principal of $2,000,000, net of
                discount
                of $33,831, due on May 1, 2007 at an interest rate of 24% per annum
                and
                accrued interest of $78,904 at December 31, 2006 payable on maturity.
                Subsequently converted to Series B preferred stock. Also see Note
                19.
            
            
            1,966,169Origination
                on December 11, 2006, outstanding principal of $4,000,000, net of
                discount
                of $2,245,482, due on June 11, 2007 at an interest rate of 24% per
                annum
                and accrued interest of $52,603 at December 31, 2006 payable on maturity.
                Subsequently converted to Series B preferred stock. Also see Note
                19.
            
            
            1,754,518Total
                convertible notes
            
            $
            3,885,687


F-26
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**11.**
            **CONVERTIBLE
                NOTES (CONTINUED)**




**September
      5, 2006 Notes**





The
      notes
      are convertible at the option of the holder, at any time on or before maturity
      on September 5, 2007, into shares of the Company’s common stock at a conversion
      price of $0.50 per share. Interest on the notes is payable on the maturity
      date
      or the earlier conversion of such principal amount of the notes. In 2006, $4,231
      was recognized as interest expense.





**November
      1, 2006 Notes**





The
      Company sold in a private placement $2,000,000 principal amount of 24% per
      annum
      unsecured notes due May 1, 2007, with common stock purchase warrants to purchase
      300,000 shares of the Company’s common stock at an exercise price of $1.00 per
      share, exercisable any time after November 1, 2006 through November 1, 2009.
      There was no beneficial conversion feature at the time of the sale of the
      notes.





The
      fair
      value of the warrants of $50,470 at the time of issuance was determined using
      the Black-Scholes option-pricing model with the following
      assumptions:





Risk
                free interest rate
            
            
            4.60
            %Expected
                life
            
            
            3
                yearsExpected
                volatility
            
            
            35.59
            %Expected
                dividend yield
            
            
            0
            %





The
      fair
      value of the warrants was recorded as additional paid-in capital and a discount
      to the notes and is being amortized over the term of the notes.  At
      December 31, 2006, the unamortized discount on the notes is $33,831.
      Amortization of the discount to the notes as interest expense for 2006 was
      $16,639. Accrued interest at December 31, 2006 was $78,904, and was recognized
      as interest expense for the year ended December 31, 2006. Interest on the notes
      is payable on the maturity date or the earlier conversion of such principal
      amount of the note.





Before
      the maturity of the notes, the notes are convertible into Series B Preferred
      Stock having an annual preferred dividend of 6% and conversion rights entitling
      the holder to convert such shares into common stock of the Company at a
      conversion price of $1.00 per share. Also see Note 19.







F-27
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**11.**
            **CONVERTIBLE
                NOTES (CONTINUED)**




**December
      11, 2006 Notes**





The
      Company sold in a private placement $4,000,000 principal amount of 24% per
      annum
      unsecured notes due June 11, 2007, with common stock purchase warrants to
      purchase 400,000 shares of the Company’s common stock at an exercise price of
      $1.00 per share, exercisable any time after December 11, 2006 through December
      11, 2009.





The
      fair
      value of the warrants of $261,351 at the issuance date was determined using
      the
      Black-Scholes option-pricing model with the following assumptions:





Risk
                free interest rate
            
            
            4.60
            %Expected
                life of options
            
            
            3
                yearsExpected
                volatility
            
            
            35.59
            %Expected
                dividend yield
            
            
            0
            %





The
      convertible notes also contained a beneficial conversion feature, and the
      intrinsic value at the date of issuance of the notes amounted to $2,261,351.
      The
      fair value of the warrants and the intrinsic value of the beneficial conversion
      feature of $2,522,702 was recorded as a discount to the notes and an increase
      to
      additional paid-in capital. The discount is being amortized over the term of
      the
      notes.  At December 31, 2006, the unamortized discount on the notes is
      $2,245,482, and the a mortization
      of discount to the notes for 2006 was $277,220. Interest
      on the notes is payable on the maturity date or the earlier conversion of such
      principal amount of the notes. Accrued
      interest at December 31, 2006 was $52,603 ,
      and was
      recognized as interest expense for the year ended December 31,
      2006.





Before
      the maturity of the notes, the notes are convertible into Series B Preferred
      Stock having an annual preferred dividend of 6% and conversion rights entitling
      the holders to convert such shares into common stock of the Company at a
      conversion price of $1.00 per share.





On
      February 8, 2007, $6,000,000 unsecured convertible notes, which were issued
      on
      November 1, 2006 and December 11, 2006, were converted into Series B Preferred
      Stock. Also sees Note 19(e).





F-28
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**12.**
            **INCOME
                TAXES**





(a)
      Corporation Income Tax (“CIT”)





In
      2006, HTW applied to the local tax authority for a favorable corporate
      income tax rate of 15% for companies registered in the coastal economic zone
      of
      PRC, which was approved in December 2006.  As a result, the corporate
      income tax rate applicable to HTW was changed from 24% to 15% and $162,358
      of
      income tax expense was recorded to reflect the tax rate adjustment on deferred
      taxes.





In
      accordance with the relevant taxation laws in the PRC, from its first profitable
      tax year, as a foreign investment company, HTW, is exempt from corporate income
      tax for its first two years and is then entitled to a 50% tax reduction for
      the
      succeeding three years. For HTW, the first profitable year for income tax
      purposes as a foreign investment company was the year ended December 31, 2003
      and therefore there is a 50% tax exemption from CIT for the years ended December
      31, 2005 to 2007. Therefore, HTW’s actual corporate income tax rate is 7.5% for
      year ended December 31, 2006.





HEP
      is a
      subsidiary of HTW, and its applicable CIT rate is 33%. As this company is
      established in the Guangxi Province, it is entitled to a 100% exemption from
      CIT
      for 5 years through 2009 in accordance with the tax incentives offered by the
      Government of Guangxi Province.





BJ
      HTS is
      a subsidiary of Euro Asia, and its applicable CIT rate is 15% as this company
      is
      a foreign hi-tech enterprise authorized by the PRC Government. In addition
      to
      the local regulations for developing new technology industries offered by the
      Government of Beijing, it is entitled to a 100% exemption from CIT for the
      first
      3 years and a 50% reduction of the CIT rate in the fourth to sixth year. BJ
      HTS’s actual CIT rate is 7.5% for the year ended December 31,
      2006.





Income
      tax expense for the years ended December 31, 2006 and 2005 are summarized as
      follows:








**2006**
            
            **2005**Current:CIT
            
            $
            (731,217
            )
            $
            (151,204
            )Deferred:CIT
            
            $
            444,199
            
            $
            120,272Income
                tax expense
            
            $
            (287,018
            )
            $
            (30,932
            )











F-29
 **GENERAL
            COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            OF DECEMBER 31, 2006 AND 2005**


**12.**
            **INCOME
                TAXES (CONTINUED)**





The
      Company’s income tax expense differs from the “expected” tax (expense) benefit
      for the years ended December 31, 2006 and 2005 (computed by applying the CIT
      rate of 15 percent and 24 percent to income before income taxes, respectively)
      as follows:





**2006**
            
            **2005**Computed
                “expected” (expense) benefit
            
            $
            (907,929
            )
            $
            113,043Permanent
                differences
            
            
            (39,556
            )
            
            -Tax
                rate adjustment
            
            
            (162,358
            )
            
            -Timing
                differences
            
            
            -
            
            
            (291,416
            )Tax
                exemptions
            
            
            822,825
            
            
            147,441Income
                tax expense
            
            $
            (287,018
            )
            $
            (30,932
            )





The
      tax
      effects of temporary differences that give rise to the Company’s net deferred
      tax assets and liabilities as of December 31, 2006 and 2005 are as follows:


**2006**
            
            **2005**Deferred
                tax assets:Non-current
                portion:
            
            $
            53,443
            
            $
            18,199Current
                portion:Advertising
                expenses
            
            
            681,073
            
            
            135,738Sales
                cut-off and returns
            
            
            483,057
            
            
            -Selling
                expenses
            
            
            -
            
            
            265,974Processing
                expenses
            
            
            173,432
            
            
            24,584Administrative
                expenses
            
            
            74,410
            
            
            41,456Research
                and development costs
            
            
            7,761
            
            
            -Other
            
            
            16,891
            
            
            2,786Subtotal
            
            
            1,436,624
            
            
            470,538Total
                deferred tax assets
            
            
            1,490,067
            
            
            488,737Deferred
                tax liabilities:Current
                portion:Sales
                cut-off
            
            
            (407,202
            )
            
            (18,694
            )Capitalized
                interest
            
            
            -
            
            
            (43,629
            )Interest
                income
            
            
            -
            
            
            (473
            )Subtotal
            
            
            (407,202
            )
            
            (62,796
            )Total
                deferred tax liabilities
            
            
            (407,202
            )
            
            (62,796
            )Net
                deferred tax assets
            
            $
            1,082,865
            
            $
            425,941





F-30
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**12.**
            **INCOME
                TAXES (CONTINUED)**





(b)
      Value
      Added Tax (“VAT”)





Enterprises
      or individuals who sell commodities, engage in repair and maintenance or import
      or export goods in the PRC are subject to a value added tax in accordance with
      Chinese Laws.  The value added tax standard rate is 17% of the gross sales
      price. A credit is available whereby VAT paid on the purchases of semi-finished
      products or raw materials used in the production of the Company’s finished
      products can be used to offset the VAT due on the sales of the finished
      products.





The
      VAT
      payable of $1,045,926 and $20,517 at December 31, 2006 and 2005, respectively,
      is included in other payables and accrued expenses in the accompanying
      consolidated balance sheets.





For
      the
      years ended December 31, 2006 and 2005, $122,038 and $0 was received as VAT
      refund by BJ HTS from the PRC Government, which was recognized as other
      income.








**13.**
            **COMMITMENTS**





The
      Company occupies plant and office space leased from third parties. Accordingly,
      for the years ended December 31, 2006 and 2005 the Company recognized rental
      expense for these spaces of $30,837 and $2,023, respectively.





As
      of
      December 31, 2006, the Company has outstanding commitments with respect to
      non-cancelable operating leases for real estate, which fall due as
      follows:





Year
                Ending December 31
            
            Amount2007
            
            $
            136,608














F-31
 **GENERAL
            COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
            OF DECEMBER 31, 2006 AND 2005**


**14.**
            **SHAREHOLDERS’
                EQUITY**





(a)
      Issuance of Common Stocks and Warrants for Share Exchange





On
      October 27, 2006, the Company and the beneficial owners (collectively, “Owners”)
      of Magical Insight Investments Limited, a British Virgin Islands corporation
      (“MIL”), consummated an exchange of shares (the “Share Exchange”) pursuant to a
      Share Exchange Agreement dated as of September 6, 2006 (the “Share Exchange
      Agreement”), which resulted in a change in control of the Company. In connection
      with the transaction, the Company issued an aggregate of 17,986,721 shares
      of
      its common stock and warrants to purchase an additional 28,013,279 shares of
      its
      common stock, after giving effect to the 1 for 10 reverse split of the common
      stock on February 13, 2007, in exchange for the sole outstanding share of MIL,
      which constituted 100% of the outstanding capital stock of MIL. The warrants
      have an exercise price of $0.00001 per share and expire on October 27, 2011.
      Also see Notes 1 and 19.





(b)
      Pledge of Common Stock





On
      October 13, 2006, Dr. Zhang Zhengyu, Ms. Li Ming and Mr. Ma Qing (the
“Pledgors”) entered into a Share Release and Pledge Agreement (“Share Release
      Agreement”) with Warburg Pincus Asia LLC (“Security Trustee”) for pledging
      14,162,991 shares of common stock and 22,037,009 warrants (“Pledged
      Collateral”), amounting to 50.6% of equity interest of the Company at December
      31, 2006. The pledge guarantees a non-compete agreement with Sincere Kingdom
      Limited, a technology research and development company. If the Pledgors fail
      to
      adhere to the non-compete agreement, as the vendor of the smartphone software
      solution, and/or employ the key employee of Sincere Kingdom Limited, the
      Security Trustee may take any or all of the following actions at the Pledgors’
expense and without prior notice to the Pledgors except as required under
      applicable law: a) give notice of such failure to any person, collect dividends
      and other amounts constituting or payable in respect of Pledged Collateral,
      and
      enforce all rights of each Pledgor in the Pledged Collateral, b) take possession
      of any or all of Pledged Collateral, c) foreclose its lien upon any or of the
      Pledgor Collateral, d) sell, lease or otherwise dispose of any or all of the
      Pledged Collateral at public of private sale, e) pledge or otherwise encumber
      any or all the Pledged Collateral, and f) exercise any or all other right or
      remedies available to the Security Trustee under applicable law. Under the
      Share
      Release Agreement, the pledge would be released upon the earlier occurrence
      of
      a) after February 28, 2007, each of the Pledgors receive an offer of share
      transfer or sale of the Company’s common stocks and warrants, or after February
      28, 2007, the Company completes a firm-commitment underwritten public offering
      of the Company’s stock on any national exchange market with international
      reputation and standing, duly approved by the Board of the Company, b) the
      date
      on which the WP Parties, which consist of Warburg Pincus Private Equity VIII,
      L.P., Warburg Pincus Netherlands Private Equity VIII I, C.V., Warburg Pincus
      Germany Private Equity VIII K.G., Warburg Pincus


F-32
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**14.**
            **SHAREHOLDERS’
                EQUITY**





(b)
      Pledge of Common Stock (Continued)





International
      Partners, L.P., Warburg Pincus Netherlands International Partners I, C.V.,
      and
      Warburg Pincus Germany International Partners, KG, no longer hold any equity
      securities in Sincere Kingdom Limited, and c) February 28, 2008.





(c)
      Private Placements of $6,000,000 Convertible Notes and Warrants





See
      Note
      11 for stockholders’ equity effect of private placements of convertible notes
      and warrants.








**15.**
            **WARRANTS**








**Warrants**
              **Granted**
            
            **Weighted
                Average Exercise Price**Outstanding
                as of January 1, 2005Granted
            
            
            -
            
            
            -Exercised
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Outstanding
                as of December 31, 2005
            
            
            -
            
            
            -Granted
            
            
            28,713,206
            
            $
            0.024Exercised
            
            
            -
            
            
            -Cancelled
            
            
            -
            
            
            -Outstanding
                as of December 31, 2006
            
            
            28,713,206
            
            $
            0.024





Also
      see
      Notes 11 and 19.











F-33
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**16.**
            **DISCONTINUED
                OPERATIONS**





(a)
            Sale
                of Business





On
      November 6, 2006, the Company sold the business operations of Voice of Internet
      Protocol for a cash consideration of $500,000 and 81,000 shares of common stock
      of a Delaware corporation, which was valued at $81,000. The following represents
      the assets sold and liabilities assumed at the date of disposal:





**November
                6,**
              **2006**Plant
                and equipment, net
            
            $
            14,755Total
                assets sold
            
            
            14,755Accounts
                payable
            
            
            (127,307
            )Total
                liabilities assumed
            
            
            (127,307
            )Total
                net liabilities
            
            
            (112,552
            )Share
                percentage
            
            
            100
            %Net
                liabilities disposed
            
            $
            (112,552
            )





In
      association with the agreement, the business operations of VOIP were no longer
      operations of the Company. In accordance with SFAS 144, “Accounting for the
      Impairment or Disposal of Long−Lived Assets,” the result of disposition of VOIP
      is presented separately as “Discontinued operations”. The gain from disposition
      was $693,552 in 2006 and is reflected in the Company’s consolidated statement of
      income for the year ended December 31, 2006.





The
      following is the unaudited pro forma net income and basic and diluted net income
      per share of the Company for the years ended December 31, 2006 and 2005 assuming
      the disposal of business was completed on January 1, 2006 and 2005,
      respectively.





**2006**
            
            **2005**Net
                income
            
            $
            4,617,176
            
            $
            231,487Net
                income per share-
                Basic
            
            $
            0.23
            
            $
            0.01-
                Diluted
            
            $
            0.18
            
            $
            0.01








F-34
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**16.**  **DISCONTINUED
      OPERATIONS (CONTINUED)**





(b)
            Sale
                of Subsidiary





On
      December 22, 2006, the Company entered into an assets purchase agreement with
      General Components International Limited, a British Virgin Islands company.
      Pursuant to the agreement the Company agreed to sell all of its interest in
      the
      business operations of and its 100% equity interest in GCI Cayman, a Cayman
      Islands corporation, and its subsidiaries, for $1. GCI Cayman is the 100%
      ultimate holding company of General Components, Inc., a New Jersey corporation,
      General Components Limited, a Hong Kong corporation, and General Components,
      Inc., a China corporation.





The
      following represents the assets and liabilities sold of at the date of
      disposal:





**December
                22, 2006**Plant
                and equipment, net
            
            $
            83,130Investment
            
            
            81,000Cash
                and cash equivalents
            
            
            883,006Accounts
                receivable
            
            
            405,676Inventories
            
            
            686,126Prepaid
                expenses and other current assets
            
            
            44,335Accumulated
                losses and other reserves
            
            
            277,553Total
                assets sold
            
            
            2,460,826Accounts
                payable
            
            
            (710,484
            )Advances
                from customers
            
            
            (27,743
            )Other
                payables
            
            
            (1,238,551
            )Amount
                due to holding company
            
            
            (165,000
            )Total
                liabilities sold
            
            
            (2,141,778
            )Total
                net assets sold
            
            $
            319,048


F-35
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**16.**
            **DISCONTINUED
                OPERATIONS (CONTINUED)**





(b)  Sale
      of
      Subsidiary (Continued)





In
      association with the agreements, GCI Cayman was no longer the subsidiary of
      the
      Company. In accordance with SFAS 144, “Accounting for the Impairment or Disposal
      of Long−Lived Assets,” the result of operation of GCI Cayman is presented
      separately as “Discontinued operations”. The loss from discontinued operations
      of $67,534 for the year ended December 31, 2006, and the loss from disposition
      of discontinued operations of $319,047 in 2006 are reflected in the Company’s
      consolidated statement of income for the year ended December 31,
      2006.





The
      following is the unaudited pro forma net income (loss) and basic and diluted
      net
      income (loss) per share of the Company for the years ended December 31, 2006
      and
      2005 assuming the disposal was completed on January 1, 2006 and 2005,
      respectively.





**2006**
            
            **2005**Net
                income (loss)
            
            $
            4,230,595
            
            $
            (579,011
            )Net
                income (loss) per share-
                Basic
            
            $
            0.21
            
            $
            (0.03
            )-
                Diluted
            
            $
            0.17
            
            $
            (0.03
            )





Also
      see
      Note 19(g) for disposal of Beijing Mobile Communication Technology Co.,
      Ltd.








F-36
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**17.**
            **BUSINESS
                COMBINATIONS**





(a)
      Acquisition of Company





On
      October 27, 2006, MIL acquired 100% of the equity interest of Euro Asia
      Arbitrage Investment Limited (“Euro Asia”), a Hong Kong corporation, for
      HK$100,000, equivalent to $12,838. Prior to the acquisition, Euro Asia was
      a
      100% holding company of Beijing Hi-Tech Wealth Software Co., Limited, which
      has
      a common director with MIL. The following represents the assets purchased and
      liabilities assumed at the date of acquisition:





**October
                27, 2006**Plant
                and equipment, net
            
            $
            11,091Cash
                and cash equivalents
            
            
            59,693Other
                receivable and prepayments
            
            
            3,046Amount
                due from related parties
            
            
            2,326,342Other
                assets
            
            
            443,357Total
                assets purchased
            
            $
            2,843,529Other
                payables and accrued expenses
            
            $
            (2,535,908
            )Deferred
                taxes
            
            
            (198,713
            )Other
                liabilities
            
            
            (96,070
            )Total
                liabilities assumed
            
            $
            (2,830,691
            )Total
                net assets
            
            $
            12,838Share
                percentage
            
            
            100
            %Net
                assets acquired
            
            $
            12,838Total
                consideration paid
            
            $
            12,838


The
      following is the unaudited pro forma net income (loss) and basic and diluted
      net
      income (loss) per share of the Company for the years ended December 31, 2006
      and
      2005 assuming the acquisition of company was completed on January 1, 2006 and
      2005, respectively.





**2006**
            
            **2005**Net
                income (loss)
            
            $
            7,529,404
            
            $
            (1,114,875
            )Net
                income (loss) per share-
                Basic
            
            $
            0.38
            
            $
            (0.06
            )-
                Diluted
            
            $
            0.30
            
            $
            (0.06
            )





F-37
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**17.**
            **BUSINESS
                COMBINATIONS (CONTINUED)**





(b)
      Increased Investment in HTW





On
      December 22, 2006, MIL increased its shares in HTW through an
      additional investment of $3,600,000 into HTW. Thereafter, HTW became a
      92.30% owned subsidiary of the Company.  This resulted in negative goodwill
      of $104,332 which reduced the basis of long-term assets acquired.





Also
      see
      Note 19(c).








**18.**
            **SEGMENT
                INFORMATION**





The
      Company operates two and one business segments for the years ended December
      31,
      2006 and 2005 respectively. The two segments in 2006 are the development,
      production and distribution of mobile phone products and mobile application
      software within China. The Company's segment information for 2006 is as
      follows:





**Year
                Ended December 31, 2006**
            
            **Smart
                Phone**
            
            **Software**
            
            **Corporate**
            
            **Consolidated**Revenues
            
            $
            58,893,690
            
            $
            2,995,959
            
            $
            -
            
            $
            61,889,649Advertising
            
            
            13,677,979
            
            
            -
            
            
            -
            
            
            13,677,979Other
                operating
              expenses
            
            
            2,207,647
            
            
            257,996
            
            
            1,020,825
            
            
            3,486,468


Operating
                income
            
            
            3,339,868
            
            
            1,652,986
            
            
            -
            
            
            4,992,854**December
                31, 2006**Identifiable
                assets
            
            $
            40,232,778
            
            $
            8,090,790
            
            $
            -
            
            $
            48,323,568








**19.**
            **SUBSEQUENT
                EVENTS**





(a)
      Reverse Split of Common Stock




On
      February 13, 2007, the Company completed a 1 for 10 reverse split of its
      outstanding common stock.


F-38
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**19.**
            **SUBSEQUENT
                EVENTS (CONTINUED)**





(b)
      Amendment to the Share Exchange Agreement





On
      February 8, 2007, GCI, MIL and the former shareholders of MIL entered into
      an
      amendment to the Share Exchange Agreement which revised the earnings and
      operational thresholds that must be achieved prior to the issuance of the
      contingent shares, increased the number of shares that may be issued from
      40,000,000 to 80,000,000, after giving effect to the 1 for 10 reverse split
      of
      the common stock on February 13, 2007, and extended the periods in respect
      of
      which the achievement of specified levels of net income may result in the
      issuance of such contingent shares through 2008 and 2009.





(c)
      Asset
      Purchase Agreement and Term Sheet





On
      February 8, 2007, the Company, MIL and Beijing Hi-Tech Wealth Investment and
      Development Company Limited (“BJ HID”) entered into an Asset Purchase Agreement
      (the “APA”) pursuant to which MIL agreed to purchase the approximate 8% interest
      it didn’t already own in the registered capital of HTW, its primary operating
      subsidiary in the PRC in exchange for 3,000,000 shares of common stock of the
      Company. On March 15, 2007, the transaction was approved by the PRC Government
      and consummated on March 27, 2007.





In
      addition, on February 8, 2007, MIL and BJ HID entered into a binding term sheet
      (the “Binding Term Sheet”) whereby BJ HID agreed to sell, and MIL agreed to
      purchase, the technology, patents and all intellectual property rights related
      to solar powered mobile phones owned by BJ HID for $10,000,000, which shall
      be
      payable in 10 equal installments of $1,000,000. Each such installment shall
      be
      due and payable following the sale by the Company of 100,000 solar power
      phones.




(d)
      Unregistered Sales of Equity Securities





On
      February 8, 2007, the Company completed a $13,250,000 financing through the
      issuance of 265 shares of its Series B preferred stock, with a stated value
      of
      $50,000 per share, and an
      annual preferred dividend of 6%, to
      both
      new investors and holders of the $6,000,000 unsecured convertible
      notes.





(e)
      Conversion of Unsecured Convertible Notes





On
      February 8, 2007, $6,000,000 unsecured convertible notes, which were issued
      on
      November 1, 2006 and December 11, 2006, and the accrued interest on the notes
      through February 8, 2007, were converted into Series B preferred stock. Also
      see
      Note 11.


F-39
 **GENERAL
          COMPONENTS INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **AS
          OF DECEMBER 31, 2006 AND 2005**


**19.**
            **SUBSEQUENT
                EVENTS (CONTINUED)**





(f)
      Exercises on Warrants




On
      March
      2, 2007, the former owners of MIL exercised all their warrants issued under
      the
      share exchange transaction with the Company on October 27, 2006. The Company
      received a total of $280 in connection with the exercise of 28,013,279 warrants.
      There are 56,012,215 shares of outstanding common stock after the exercise
      on
      March 2, 2007.





(g)
      Sale
      of Subsidiary




On
      December 28, 2006, HTW entered into an agreement to sell its 50% interests
      on
      Beijing Mobile Communication Technology Co., Ltd (“BMCT”), a 50% subsidiary of
      HTW, to another owner of BMCT at the consideration of $60,400. The transaction
      was approved by PRC Government and consummated on March 28, 2007.





In
      connection with the agreements, the business operations of BMCT were no longer
      operations and subsidiaries of the Company. In accordance with SFAS 144,
“Accounting for the Impairment or Disposal of Long−Lived Assets,” the result of
      operation of BMCT was presented separately as “discontinued operations”. The
      loss from discontinued operations of $124,009 for the year ended December 31,
      2006 is reflected in the Company’s consolidated statement of income for the year
      ended December 31, 2006.





The
      assets and liabilities of the discontinued operations are presented separately
      under the captions “Assets of discontinued operation” and “liabilities of
      discontinued operation”, respectively, in the accompanying balance sheet at
      December 31, 2006 and 2005.





The
      following is the unaudited pro forma net income (loss) and basic and diluted
      net
      income (loss) per share of the Company for the years ended December 31, 2006
      and
      2005 assuming the sale of the company was completed on January 1, 2006 and
      2005,
      respectively.





**2006**
            
            **2005**Net
                income (loss)
            
            $
            4,673,651
            
            $
            (459,261
            )Net
                income (loss) per share-
                Basic
            
            $
            0.24
            
            $
            (0.03
            )-
                Diluted
            
            $
            0.18
            
            $
            (0.03
            )





F-40