UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    FORM 10-K

                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                   (Mark One)

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

                   For the fiscal year ended December 31, 2004

                                       OR

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

     For the transition period from __________________ to __________________

                        Commission file number 000-33119

                               YI WAN GROUP, INC.
             (Exact name of registrant as specified in its charter)

                     Florida                            33-0960062
          (State or other jurisdiction of            (I.R.S. Employer
          incorporation or organization)            Identification No.)

           101 E. 52 Street, 9th Floor
                New York, New York                       10022
     (Address of principal executive offices)          (Zip Code)

       Registrant's telephone number, including area code: (212) 752-9700

                             All Correspondence to:

                              Kevin K. Leung, Esq.
                             Richardson & Patel, LLP
                         10900 Wilshire Blvd. Suite 500
                              Los Angeles, CA 90024
                                 (310) 208-1182

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

     Title of each class         Name of each exchange on which registered
     -------------------         -----------------------------------------
           None                                    None

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

                           Common stock, no par value
                                (Title of Class)


<PAGE>

     Indicate by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  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 |_|

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes |_| No |X|

     The aggregate market value of the voting and non-voting  common equity held
by  nonaffiliates  computed by reference to the price at which the common equity
was last sold as of the last  business  day of the  registrant's  most  recently
completed second fiscal quarter (June 30, 2004) is $3,314,025.

     As of April 12,  2005,  there were  16,861,250  shares of our common  stock
issued and outstanding.


                                       2
<PAGE>

                                TABLE OF CONTENTS
                          TO ANNUAL REPORT ON FORM 10-K
                        FOR YEAR ENDED DECEMBER 31, 2004

                                                                            Page

PART I
Item 1.    Description of Business.........................................   5
Item 2.    Description of Property.........................................  43
Item 3.    Legal Proceedings...............................................  46
Item 4.    Submission of Matters to a Vote of Security Holders.............  46


PART II
Item 5.    Market for Registrant's Common Equity, Related Stockholder
           Matters and Issuer Purchases of Equity Securities...............  46
Item 6.    Selected Financial Data.........................................  48
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operation........................................  50
Item 7A.   Quantitative and Qualitative Disclosures about Market Risk......  58
Item 8.    Financial Statements and Supplementary Data.....................  59
Item 9.    Changes in and Disagreements on Accounting and Financial
           Disclosure......................................................  83
Item 9A.   Controls and Procedures.........................................  83


PART III
Item 10.   Directors and Executive Officers of the Registrant..............  83
Item 11.   Executive Compensation..........................................  87
Item 12.   Security Ownership of Certain Beneficial Owners
           and Management..................................................  91
Item 13.   Certain Relationships and Related Transactions..................  93
Item 14.   Controls and Procedure..........................................  94


PART IV
Item 15.   Exhibits, Financial Statements Schedules, and Reports
           on Form 8-K.....................................................  94

Signatures.................................................................  96



                                       3
<PAGE>

                           FORWARD-LOOKING STATEMENTS

The following  discussion  of our financial  condition and results of operations
should be read in conjunction  with the  consolidated  financial  statements and
related  notes  thereto.  The  following  discussion  contains   forward-looking
statements. Yi Wan Group, Inc. is referred to herein as "we" or "our." The words
or phrases  "would be," "will allow,"  "intends to," "will likely  result," "are
expected  to," "will  continue,"  "is  anticipated,"  "estimate,"  "project," or
similar expressions are intended to identify "forward-looking  statements." Such
statements include those concerning  expected financial  performance,  corporate
strategy,  and operational  plans.  Actual results could differ  materially from
those  projected in the  forward-looking  statements  as a result of a number of
risks and uncertainties,  including:  (a) general economic  conditions in China;
(b) regulatory  factors in China that may lead to additional  costs or otherwise
negatively  affect our  business;  (c) whether we are able to manage our planned
growth  efficiently,  including  whether  our  management  will be able to:  (i)
identify,  hire, train,  retain,  motivate and manage required personnel or (ii)
successfully manage and exploit existing and potential market opportunities; (d)
whether we are able to  generate  sufficient  revenues  or obtain  financing  to
sustain and grow our operations; (e) whether we are able to successfully fulfill
our primary cash  requirements  which are explained  below under  "Liquidity and
Capital  Resources";  (f) whether  there will be  continuing  negative  economic
effects  upon China and the China hotel and tourist  industries  due to possible
continuing  negative  perceptions  pertaining to SARS; and (g) whether worldwide
economic conditions will negatively affect the tourist industry in China and our
hotel related revenues.  Statements made herein are as of the date of the filing
of this Form 10-K with the Securities and Exchange  Commission and should not be
relied upon as of any subsequent date.  Unless otherwise  required by applicable
law, we do not undertake, and we specifically disclaim any obligation, to update
any   forward-looking   statements   to   reflect   occurrences,   developments,
unanticipated events or circumstances after the date of such statement. The safe
harbors  for  forward-looking  statements  provided  by the  Private  Securities
Litigation  Reform Act of 1995 (the "Reform Act") are  unavailable to issuers of
penny stock.  Our shares may be  considered  penny stock and as a result of such
safe harbors set forth under the Reform Act are unavailable to us.



                                       4
<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

We were incorporated under the laws of the state of Florida in the United States
in May 1999. We are authorized to issue  50,000,000  shares of common stock,  no
par  value,  of  which  16,861,250   shares  of  common  stock  are  issued  and
outstanding. We are authorized to issue 20,000,000 shares of preferred stock, no
par value, of which no shares are issued and outstanding.

We were  incorporated  to explore the  feasibility  of  acquiring  interests  in
several businesses located in China in which our president,  Mr. Cheng Wan Ming,
had an ownership  interest.  On January 1, 2000, we acquired  controlling equity
interests in three such China registered  companies,  which had ongoing business
operations in the hotel,  agriculture,  and communications  industries in China.
Our agriculture subsidiary ceased operations in December 2001. In December 2002,
we sold our agriculture subsidiary to a third party Since our inception, neither
we, nor any of our three subsidiaries, have ever been subject to any bankruptcy,
receivership or similar proceedings.  Our hotel and communications subsidiaries,
and our variable interest entity are described below:

JIAOZUO YI WAN HOTEL CO., LTD. On January 1, 2000, we acquired a 90% controlling
interest in Jiaozuo Yi Wan Hotel Co. Ltd., a Sino-Foreign  Joint Venture company
that was originally  formed in China in 1996. The remaining 10% equity  interest
in our hotel  subsidiary is owned by Shun'ao  Industry and Commerce  Company,  a
company  registered in China.  Our president has a 41.7%  ownership  interest in
Shun'ao Industry and Commerce  Company.  Our hotel  subsidiary  provides upscale
lodging, food and beverage,  entertainment,  and conference and meeting services
at:

         Jiaozuo Yi Wan Hotel Co., Ltd.
         No.189. Middle Min Zhu Road
         Jiaozuo, Henan - P.R. China 454150
         Tel: 86-391-262-3227
         Fax: 86-391-262-3767
         Email: yiwan@public2.lyptt.ha.cn

QINYANG YI WAN HOTEL  CO.,  LTD.  On March 20,  2001,  we  entered  into a joint
venture  agreement  with the Qinyang  Hotel.  This  agreement  provides  for the
establishment of a Joint Venture Limited Liability  Company,  the Qinyang Yi Wan
Hotel Co.,  Ltd.,  which  operates  the Quinyang Yi Wan Hotel in Qing Yang City,
Henan  Province,  China.  The joint  venture  agreement  provides that the joint
venture will provide up-scale  lodging,  food and beverage,  entertainment,  and
meeting and  conference  facility  services.  We entered into this joint venture
agreement with Qinyang Hotel (OLD  QINYANG),  a third party to set up Qinyang Yi
Wan Hotel Co., Ltd.  According to the joint venture  agreement,  the  registered
capital of QINYANG is approximately $2,413,389 (RMB20,000,000). On June 3, 2002,
the Jiaozuo  Foreign  Trade and Economy  Cooperative  Bureau  issued a temporary
license to Qinyang Yi Wan Hotel Co., Ltd. In 2003, the Jiaozuo Foreign Trade and
Economy  Cooperative Bureau conducted the audit and issued the official license.
Qinyang Yi Wan Hotel Co., Ltd. and the Qinyang Hotel are located at:



                                       5
<PAGE>

         Qinyang Yi Wan Hotel Co., Ltd./Qinyang Hotel
         53 West Huai Fu Road
         Qingyang City
         Henan Province, China
         Tel: 86-391-566-9000
         Fax: 86-391-566-9006
         Email: yiwan@public2.lyptt.ha.cn

SHUN DE YI WAN  COMMUNICATION  EQUIPMENT  PLANT CO. LTD. On January 1, 2000,  we
acquired 100% of the equity interest in Shun de Yi Wan  Communication  Equipment
Plant  Company,  Ltd.,  which in 1993 was  originally  established  as a foreign
investment   joint   venture  in  China.   Our   telecommunications   subsidiary
manufactures exchange distribution frames equipment and is located at:

         Shun de Yi Wan Communication Equipment Plant Co. Ltd.
         No 3., 5th Street Fengxiang Road, Daliang Town
         Shun de, Guangdong - P.R. China 528300
         Tel: 86-765-222-0984, 222-2097
         Fax: 86-765-223-8363
         Email: gzsdywt1@pub.sdnet.gd.cn

Our wholly owned foreign telecommunications subsidiary is classified in China as
a Wholly Foreign Owned  Enterprise  company.  Both Foreign  Invested  Enterprise
Joint  Ventures  and Wholly  Foreign  Owned  Enterprise  companies  in China are
referred to as Foreign Invested Enterprise companies.

YI WAN BEIJING HOTEL  MANAGEMENT CO., LTD. In order to expand our restaurant and
food services and still be in compliance  with the  regulations  of the People's
Republic of China ("PRC") with respect to restaurant services,  in July 2004, we
established  Yi Wan Beijing  Hotel  Management  Co. Ltd. ("Yi Wan  Beijing"),  a
variable  interest  entity through two persons who are PRC citizens and who each
legally  owned 50% of Yi Wan Beijing  ("Yi Wan  Beijing  Interest  Holders")  to
operate our  restaurant  business.  Pursuant to an Equity  Trust  Agreement,  we
transferred RMB$100,000 to the Yi Wan Beijing Interest Holders which was used to
form and capitalize Yi Wan Beijing. The Equity Trust Agreement provides that the
Trustees  are to  hold  the  equity  interest  in Yi Wan  Beijing  (the  "Equity
Interests")  in trust for the benefit of Yi Wan Group,  Inc.  The Yi Wan Beijing
Interest  Holders  have  agreed to not sell,  pledge,  hypothecate,  encumber or
otherwise  dispose of the Equity  Interests.  Any such transfer will result in a
breach of the Equity Trust  Agreement  and the Yi Wan Beijing  Interest  Holders
will be required to transfer the Equity Interest to the Company.  Further the Yi
Wan Beijing  Interest  Holders  have agreed to promptly  distribute  any and all
dividends,  distributions  or other  payments  received from Yi Wan Beijing with
respect to the Equity  Interest  to the  Company.  Finally,  the Yi Wan  Beijing
Interest Holders granted  irrevocable proxies to two directors of the Company to
exercise  all voting  rights  such Yi Wan  Beijing  Interest  Holders  have with
respect to their ownership interest in Yi Wan Beijing.  The irrevocable  proxies
further  provides  that if such two  directors  cease to be an  employee  of the
Company, the Yi Wan Beijing Interest Holders agree to immediately  terminate the
proxy and to grant a proxy to another person designated by the Company.

BUSINESS LICENSES

The  term of our  business  license  for our  Wholly  Foreign  Owned  Enterprise
telecommunications  company  is 15  years.  The  term  of  this  venture  may be
terminated  prior to the date of expiration if unanimously  decided by the board
of directors and approved by the original examination and approval authority. We


                                       6
<PAGE>

own 100% of the equity  interests of the subsidiary and control the selection of
its board of directors.

Each of our subsidiaries is registered as independent Chinese registered limited
liability  companies,  with legal structures similar to regular corporations and
limited liability companies organized under state laws in the United States. The
respective Articles of Association of our two Foreign Invested Enterprise hotels
provide for a 30-year term while our  telecommunications  company provides for a
15-year term. The term of our agreements and business licenses for our two joint
venture  hotel  companies  are 30 years.  The term can be extended or terminated
prior to the date of expiration if unanimously decided by the board of directors
of those  subsidiaries  and  approved by the original  examination  and approval
authority  in China.  We control the board of  directors  for our joint  venture
hotel  companies.  In  addition,  we have the ability to select six of the seven
board  members  for our hotel  subsidiaries.  The  operational,  management  and
corporate governance decisions of the board are by a simple majority, except for
the revision of the Articles of  Association,  the increase or assignment of the
registered  capital,  the business  combination  of the joint  venture and, with
certain  limitations,  the  termination  of the joint  venture,  which require a
unanimous vote.

The term of business  license  for YI WAN  BEIJING is twenty (20) years.  YI WAN
BEIJING is a variable interest entity,  through two designated  shareholders who
are PRC citizens and who legally own YI WAN  BEIJING.  Yi Wan Group, Inc. is the
primary  beneficiary of YI WAN BEIJING's business operations and qualifies to be
consolidated under FIN 46(R).

Our subsidiaries operate as a separate division,  as well as a separate business
segment,  as defined  by  generally  accepted  accounting  principles.  Detailed
financial information concerning the revenues,  income and assets of each of our
business  segments is  provided in our  financial  statements  and  accompanying
notes. Accordingly, we conveniently refer to the subsidiaries as:

     o    Hotel Division or Hotel Company;

     o    Telecommunications Division or Telecommunications Company; and

     o    Restaurant Management Company.

ORGANIZATIONAL HISTORIES OF OUR SUBSIDIARY COMPANIES

Prior to our acquisition of our hotel and  telecommunications  companies,  these
companies were owned by:

     o    Shun'ao Industry and Commerce Company, a company established under the
          laws of the People's Republic of China;

     o    Marco Wan Da  Construction,  a company  established  under the laws of
          Macao,  a  Portuguese  overseas  territory  located in the South China
          area; and

     o    Shun De Zhiyuan  Developing Co., a company  established under the laws
          of the People's Republic of China and which had an ownership  interest
          in only our telecommunications company.

As a result of the transactions  described  below, all of the former  individual
owners of Shun'ao  Industry and Commerce Company are also our  shareholders.  In


                                       7
<PAGE>

addition, as a result of the transactions  described below we have the following
ownership interests in our subsidiaries:

     o    90% ownership in our Jiaozuo Yi Wan hotel company;

     o    100% ownership in our telecommunications company; and

     o    80% ownership in our Qinyang Yi Wan Hotel company.

JIAOZUO YI WAN HOTEL CO., LTD. Our Jiaozuo Yi Wan Hotel  division was originally
formed in December 1996, as a Foreign  Invested  Enterprise Joint Venture in the
Jiaozuo City region of Henan Province,  China. Originally,  Shun'ao Industry and
Commerce  Company,  a China based  company,  owned a 70% equity  interest in the
hotel company,  and Marco Wan Da Construction,  a company  established under the
laws of Macao, owned a 30% equity interest.  All of the individual owners of the
China and Macao based companies are also our shareholders. In November 1999, the
China and Macao based companies  agreed to transfer 90% of their total equity in
the hotel company to us, with 60% being  transferred  by the China based company
and 30% being  transferred by the Macao based investor.  The amended articles of
association,  the joint venture contract and the equity transfer agreement among
the  original  joint  venture  parties  and us provide  that we assume the total
capital  contribution  requirement of the foreign  investor in the amount of RMB
7,500,000 (approximately US $906,000) and a portion of the China based company's
capital contribution requirement in the amount of RMB 15,000,000  (approximately
US $1.8 million). In addition,  the joint venture contract, the articles and the
equity transfer agreement require that an additional investment of approximately
US $3  million  be made  into the  hotel  company  above  and  beyond  the joint
venture's  registered  capital and that we pay our share of the total investment
(approximately  US $2.7  million)  within  six months of the  issuance  of a new
business  license for the joint  venture.  These  transfers were approved by the
Chinese approval authorities;  thereafter, the equity split has been 10% for the
China based company,  while we have a 90% interest.  The original parties in the
hotel joint venture made the required total  investment  and registered  capital
contributions to the joint venture.  Accordingly,  our obligations to contribute
to registered  capital and the total  investment in the hotel joint venture have
been satisfied by our assumption of 90% of the equity  interests of the original
partners.  Our  obligations  to the original  parties under the equity  transfer
agreement,  however,  amount to RMB 22,500,000  (approximately  US $2.7 million)
owed to the original  partners to the hotel joint venture for their  transfer to
us of 90% of the joint venture equity interests.

QINYANG YI WAN HOTEL CO., LTD. On March 20, 2001 we entered into a joint venture
agreement with Qinyang Hotel providing for the  establishment of a Joint Venture
Limited  Liability  company,  the Qinyang Yi Wan Hotel Co., Ltd., which operates
the Qinyang Yi Wan Hotel in Qing Yang City,  Henan  Province,  China. On June 3,
2002,  the  Jiaozuo  Foreign  Trade  and  Economy  Cooperative  Bureau  issued a
temporary  license  to  Qinyang Yi Wan Hotel Co.,  Ltd.  The  official  license,
however,  could not be issued  until the Qinyang Yi Wan Hotel Co.,  Ltd. met the
registered  capital  requirement of US$2,413,389 (RMB 20,000,000).  Although the
full registered capital requirement of US$2,413,389 (RMB 20,000,000) has already
been made, a verification report on the capital contribution must be made by the
Jiaozuo  Foreign  Trade and Economy  Cooperative  Bureau.  In 2003,  the Jiaozuo
Foreign Trade and Economy  Cooperative  Bureau  conducted the audit and verified
the capital contribution, and issued the official license.



                                       8
<PAGE>

SHUN DE YI WAN COMMUNICATIONS  EQUIPMENT PLANT CO., LTD. Our  telecommunications
company was originally formed in Shun de City,  Guangdong Province,  China, as a
Foreign  Invested  Enterprise Joint Venture in September 1993 by Shun de Zhiyuan
Developing Co., a China based company,  and Marco Wan Da  Construction,  a Macao
based company. In March 2000, both the China-based  investor and the Macao-based
company agreed to transfer 100% of the equity in the telecommunications  company
to us, with 35% and 65% being  transferred  by the  China-based  company and the
Macao-based company,  respectively.  The articles of association provide that we
assume the total  capital  contribution  requirements  of the  enterprise in the
amount  of US  $1,500,000  (approximately  RMB  12,400,000).  In  addition,  the
articles require that an additional  investment of  approximately  US$500,000 be
made into the  telecommunications  company,  above  and  beyond  that  company's
registered capital, and that we pay our share of the total investment within one
year of the  issuance  of a new  business  license  for the joint  venture.  The
articles,  which reflect the  transfers  and  establish  our  telecommunications
company as a Wholly Foreign Owned  Enterprise,  were approved by the appropriate
Chinese approval authorities;  thereafter, we own 100% of the telecommunications
company.

The original parties in the  Telecommunications  joint venture made the required
and  registered  capital  contributions  of US $1,500,000 to the joint  venture.
Accordingly,  the  obligation to contribute to registered  capital in this joint
venture has been satisfied.  Pursuant to the articles of association, we have an
obligation to  contribute  an additional  investment of US $500,000 to the joint
venture. A new business license was issued for our telecommunications company on
June 22, 2000. Until approximately June 21, 2001, we failed to make the required
additional  investment  contribution  of US $500,000  to our  telecommunications
company.  On June 22, 2001, in accordance with a unanimous written resolution of
our telecommunications company's board of directors, we received an extension to
June 22, 2003 to make this  payment.  On June 22,  2003,  in  accordance  with a
unanimous  written  resolution  of our  telecommunications  company's  Board  of
Directors,  we received another extension to June 22, 2004. On June 22, 2004, in
accordance  with  a  unanimous  written  resolution  of  our  telecommunications
company's Board of Directors, we received an extension to June 22, 2006.

YI WAN BEIJING HOTEL  MANAGEMENT CO., LTD. In order to expand our restaurant and
food services and still be in compliance  with the  regulations  of the People's
Republic of China ("PRC") with respect to restaurant services,  in July 2004, we
established  Yi Wan Beijing  Hotel  Management  Co. Ltd. ("Yi Wan  Beijing"),  a
variable  interest  entity through two persons who are PRC citizens and who each
legally  owned 50% of Yi Wan Beijing  ("Yi Wan  Beijing  Interest  Holders")  to
operate our  restaurant  business.  Pursuant to an Equity  Trust  Agreement,  we
transferred RMB$100,000 to the Yi Wan Beijing Interest Holders which was used to
form and capitalize Yi Wan Beijing. The Equity Trust Agreement provides that the
Trustees  are to  hold  the  equity  interest  in Yi Wan  Beijing  (the  "Equity
Interests")  in trust for the benefit of Yi Wan Group,  Inc.  The Yi Wan Beijing
Interest  Holders  have  agreed to not sell,  pledge,  hypothecate,  encumber or
otherwise  dispose of the Equity  Interests.  Any such transfer will result in a
breach of the Equity Trust  Agreement  and the Yi Wan Beijing  Interest  Holders
will be required to transfer the Equity Interest to the Company.  Further the Yi
Wan Beijing  Interest  Holders  have agreed to promptly  distribute  any and all
dividends,  distributions  or other  payments  received from Yi Wan Beijing with
respect to the Equity  Interest  to the  Company.  Finally,  the Yi Wan  Beijing
Interest Holders granted  irrevocable proxies to two directors of the Company to
exercise  all voting  rights  such Yi Wan  Beijing  Interest  Holders  have with
respect to their ownership interest in Yi Wan Beijing.  The irrevocable  proxies
further  provides  that if such two  directors  cease to be an  employee  of the


                                       9
<PAGE>

Company, the Yi Wan Beijing Interest Holders agree to immediately  terminate the
proxy and to grant a proxy to another person designated by the Company.

DESCRIPTION OF OUR BUSINESS OPERATIONS BY DIVISION

THE JIAOZUO YI WAN HOTEL CO., LTD.

The Jiaozuo Yi Wan Hotel Co., Ltd., our hotel division,  manages and operates an
upscale hotel  conference  and  entertainment  facility in Jiaozuo  City,  Henan
province.  This  division  focuses  on  providing  lodging,  food and  beverage,
entertainment, and conference and meeting products and services.

The significant events relating to the hotel company's history include:

     o    In September  1996,  the hotel  company  purchased  the Tengfei  Hotel
          located  in the  center of Jiaozuo  City from the city  government  of
          Jiaozuo;

     o    In February  1996,  the hotel company began  extensive  renovation and
          remodeling of its hotel's main building and  construction of a 150,695
          square foot lobby,  commercial  and common space  addition to the main
          building.  Most of the renovations and construction  were completed in
          October 1996 and the rest was completed in February 1997;

     o    In 1997, the hotel company began  recruiting  personnel and developing
          western style operational and management training systems;

     o    In 1997,  the  hotel  company  received  certification  from the Henan
          National Tourism Board;

     o    In June 2000, the hotel company  received a four-star grade title from
          the Henan National Tourism Board;

     o    The  hotel  company  completed  construction  of the  17th  Floor  VIP
          Restaurant in February 2002 at which time it became operational;

     o    In November 2003, the newly renovated  Sauna-Health  Center was opened
          to the public; and

     o    The  hotel  company  completed  construction  of the  16th  Floor  VIP
          Restaurant in December 2003 at which time it became operational.

PRODUCTS AND SERVICES.  Our hotel has the following  primary product and service
offerings:

     o    Lodging operations (including conference and meeting facilities);

     o    Food and beverage operations; and

     o    Entertainment operations.

The hotel also has an on-site travel agency, bank, business center, and sundries
and gift store.

LODGING  OPERATIONS.  The  hotel has a total of 158  guest-sleeping  rooms on 22
floors consisting of 131 standard  guestrooms and 27 suites. All guest rooms are
equipped  with  either  double  or  queen  size  beds,  two  telephones,  remote


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<PAGE>

controlled  television,  full mini-bar,  work station,  large  closets,  in-room
climate control,  sitting area and large working desk.  Bathrooms include shower
and tub,  western  style  toilet,  spacious  vanity,  and  complimentary  travel
sundries. Suites include larger sitting and work areas, a second television, and
turn-down  service.  Executive  suites feature all of the above as well as large
partitioned living room-style sitting area, two bathrooms,  including one with a
Jacuzzi tub, fruit baskets, and two daily fresh flower arrangements.

The hotel also has 12 rooms  dedicated to meeting and  conference  space.  These
rooms service  small,  medium,  and large sized  conferences  and meetings,  and
include:

     o    Nine small meeting rooms capable of seating up to 20 people.  Seven of
          these rooms have multi-functional  seating  configurations.  Two rooms
          have large,  fixed position oval  conference  tables with side gallery
          space for  individual  chairs.  All rooms  have  climate  control  and
          private bathrooms;

     o    Two  conference  rooms  within the hotel  suitable  for  medium  sized
          meetings  of  up  to  60  people.  These  rooms  feature  large  fixed
          positioned conference tables,  built-in amplification  equipment,  and
          ample side gallery  space for  additional  meeting  attendees or small
          group  break-out  space.  These  rooms also have  climate  control and
          private bathrooms; and

     o    One large,  8,180  square  foot,  meeting  room capable of seating 460
          people is configured  in an auditorium  style with a sloping floor and
          large front  presentation  stage.  The room  features  built-in  sound
          system, lighting capabilities,  built-in multi-lingual  interpretation
          equipment,  and rear and front screen projection capability.  The room
          has an attached large reception room and a separate,  smaller, private
          VIP  reception  room. We believe that this meeting room is the largest
          non-government room of its kind in the province.

FOOD AND BEVERAGE  OPERATIONS.  The hotel has five food and beverage facilities,
two full service  restaurants,  a buffet coffee shop, and a lobby bar, which are
described  below.  The  combined  capacity  of all  food  and  beverage  service
facilities is 1,500 people,  which we believe to be the largest single  location
of food and beverage  facilities  in the city of Jiaozuo.  All food and beverage
facilities are open to the public.

     o    Main Floor  Restaurant.  The main floor restaurant  serves 700 people.
          Its decor is considered  traditional  Chinese and it is comprised of a
          large main dining room with  performance  stage,  stand-alone bar, two
          separate  banquet rooms and 15 private suite dining rooms.  All suites
          have deluxe stereo and karaoke equipment and a private bathroom.  Each
          banquet room has a performance stage and sound system.  The restaurant
          specializes  in serving a unique  blend of  Cantonese  and Henan style
          cuisine.  Additionally,  the  restaurant  has a separate  dining  area
          serving 150 people with facilities for private table hot pot dining, a
          style of dining that  requires a table with a center gas flame burner,
          and overhead table exhaust fan.

     o    17th  Floor  VIP  Restaurant.  We  completed  construction  of  a  new
          restaurant in February 2002 at which time it became operational.  This
          restaurant  is located at the 17th floor of the main  building  of the
          Jiaozuo  Yi Wan Hotel and  offers a city view to dining  guests.  This


                                       11
<PAGE>

          restaurant is a VIP dining  facility with 5 private  suites ranging in
          capacity from 10 to 16 people.  Each suite contains  separate  sitting
          areas, large color television, stereo system, karaoke equipment, and a
          private  bathroom.  Its decor is traditional  Chinese.  The restaurant
          specializes in the creation and presentation of haute culture, gourmet
          cuisine that is fresh,  and showcases the hotel's  signature  culinary
          style of blended  Cantonese and Henan flavors,  with special attention
          to artistic and theatrical presentation of each dish.

     o    16th Floor VIP Restaurant.  We completed  construction of a new luxury
          VIP restaurant in December,  2003. The grand opening of the restaurant
          took place on January 15, 2004.  The restaurant is located on the 16th
          floor of the main  building  of the  Jiaozuo Yi Wan Hotel and offers a
          city view to dining guests.  The  restaurant is a VIP dining  facility
          with three  private  suites  ranging in capacity from 40 to 50 people.
          Each suite contains  separate sitting areas,  large color  television,
          stereo system, karaoke equipment, and a private bathroom. Its decor is
          traditional Chinese with antiques.  The restaurant  specializes in the
          creation and  presentation  of haute couture  gourmet  cuisine that is
          fresh, and showcases the hotel's  signature  culinary style of blended
          Cantonese and Henam  flavors,  with special  attention to artistic and
          theatrical presentation of each dish.

     o    VIP Restaurant.  The second floor  restaurant is a VIP dining facility
          with 24 private suites ranging in capacity from 10 to 30 people.  Each
          suite contains a separate sitting area, large color  television,  high
          quality stereo system,  karaoke equipment,  and private bathroom.  The
          restaurant  specializes  in the  creation  and  presentation  of haute
          couture  gourmet  cuisine  that is fresh,  and  showcases  the hotel's
          signature  culinary  style of  blended  Cantonese  and Henan  flavors.
          Special attention is given to artistic and theatrical  presentation of
          each dish.  Each  course of the meal is  presented  and served to each
          guest individually.

     o    Buffet  Coffee  Shop.  The buffet  coffee  shop is located on the main
          floor  adjacent to the hotel lobby and serves 50 people.  The decor is
          western style, with the restaurant open 24 hours a day. It offers full
          breakfast, lunch, and dinner buffets of western and Asian style dishes
          for each meal.

ENTERTAINMENT   OPERATIONS.   Our  hotel   division   operates   the   following
entertainment facility, which is open to the public:

     o    Night Club. The nightclub is designed in a Las Vegas club style format
          with a large floor show  performance  area and a moveable front stage.
          The facility has  computerized  light show  capabilities  as well as a
          sound system with special effects capabilities. The floor show viewing
          area seats 330 people through a combination of floor seating,  private
          booth seating, and private balcony deluxe booth seating. The nightclub
          is located on the third floor of the main building and  specializes in
          floor show  entertainment as well as celebrity  entertainment  events,
          which  change  weekly.  The club  offers  19  private  karaoke  suites
          suitable for 4-10 people.  Each suite includes a serving area, karaoke
          equipment, and private bathroom.



                                       12
<PAGE>

SAUNA-HEALTH  CENTER. The Sauna-Health  Center is located on the second floor of
the main  building of the Jiaozuo Yi Wan Hotel.  Between  September and November
2003, we undertook  renovations and construction on the Sauna-Health Center. The
newly renovated  center was open to the public on November 22, 2003. It includes
both a Men's and Ladies' Section  offering  services  ranging from beauty salon,
massage, acupuncture, and pedicure to various self-guided relaxation activities,
such as full-body-massage water therapy,  shower, sauna, and steam. The facility
at the Men's  Section  includes an ancient  Egyptian  style bath  center,  which
includes a full-body-massage water therapy pool that can accommodate 150 people,
four 10-person soaking pools, 10 jacuzzis,  14 individual showers, one 10-person
sauna,  one  10-person  steam room,  and 20 massage  beds.  The  facility at the
Ladies'  Section  includes a  multi-person  water  therapy  pool,  10 individual
showers,  multi-functional  wet and  dry  sauna,  and 5  massage  beds.  The new
Sauna-Health Center also has a luxurious lounge, beauty salon, 70-person resting
lounge,  39 standard rooms, 6 deluxe VIP rooms,  kids' playing  ground,  fitness
room,  internet bar,  deluxe table tennis room,  deluxe  billiard room, 12 chess
rooms, and a Japanese style food court that can accommodate 300 people.  The new
Sauna-Health Center has a total capacity of 500 people.

SUPPLIERS.  The raw materials  that our Yi Wan hotel  division uses are many and
varied and common to all hotel and entertainment  facilities. A general sampling
of these items and their sources are as follows:

-------------------------------- -----------------------------------------------
ITEM                             SOURCE
-------------------------------- -----------------------------------------------
HOTEL DIVISION
-------------------------------- -----------------------------------------------
Cigarette/beverage               Jiaozuo Branch Office of Henan Province Tobacco
                                 Company, Jiaozuo City
-------------------------------- -----------------------------------------------
Seafood                          Xingli Haiyang Seafood Shop, Zhengzhou City
-------------------------------- -----------------------------------------------
Seafood                          Jianwei Seafood Shop, Zhengzhou City
-------------------------------- -----------------------------------------------
General cooking ingredients      Guangdong Lawei Shop, Zhengzhou City
-------------------------------- -----------------------------------------------
Gas                              Jiaozuo Branch Office of Henan Province
                                 Petroleum Company, Jiaozuo City
-------------------------------- -----------------------------------------------
Wine/Beer                        Fangda Shop, Jiaozuo City
-------------------------------- -----------------------------------------------
Seafood                          Haiyang Da Shi Jie Shop, Jiaozuo City
-------------------------------- -----------------------------------------------
General cooking ingredients      Yongsheng Ganxian Shop, Jiaozuo City
-------------------------------- -----------------------------------------------
Seafood and cooking ingredients  Kaifeng Zhang Da Co., Ltd., Kaifeng City
-------------------------------- -----------------------------------------------
Wine/Beer                        Jinshan Brewery, Henan Province, Zhengzhou City
-------------------------------- -----------------------------------------------
Cigarette/beverage               Zhenhua Shop, Jiaozuo City
-------------------------------- -----------------------------------------------
General cooking                  Maoyuan Gahuo Shop, Jiaouao City
ingredients
-------------------------------- -----------------------------------------------


                                       13
<PAGE>

-------------------------------- -----------------------------------------------
ITEM                             SOURCE
-------------------------------- -----------------------------------------------
HOTEL DIVISION (CONTINUED)
-------------------------------- -----------------------------------------------
General cooking                  Jiaonan Market, Jiaozuo City
ingredients
-------------------------------- -----------------------------------------------
Seafood                          Xincheng  Seafood Wholesale, Zhengzhou City
-------------------------------- -----------------------------------------------


The above  suppliers of materials  to our hotel  division are located  within an
approximately 200-mile radius of the hotel.

Our hotel division maintains a 10-day supply of common consumable goods, such as
alcohol products,  guest room sundries and similar products, which is considered
standard  industry  practice.  We believe that there are a number of alternative
suppliers for all of these products.

SEASONAL VARIATIONS. Our hotel division experiences minor seasonal variations in
overall revenue:

     o    Lodging  Operations.  Lodging revenue peaks during the period of April
          through October.  This time coincides with peak vacation travel season
          and the period of April through June when many Chinese  companies hold
          bi-annual company meetings.

     o    Food and Beverage  Operations.  Food and beverage revenues peak during
          the period of  January  through  April.  This is the time in the lunar
          calendar traditionally associated with the Chinese New Year.

     o    Entertainment   Operations.   Entertainment   revenues  experience  no
          seasonal variations.

     o    Conference and Meeting  Operations.  Conference  and meeting  revenues
          peak during the periods from April  through June and November  through
          December.  These  periods  coincide  with the times when many  Chinese
          companies hold their bi-annual meetings and product shows.

POTENTIAL FUTURE GROWTH AND OPERATIONS.  Our Jiaozuo Yi Wan Hotel is involved in
a number or projects  scheduled for completion within the next two years.  These
projects are in the development stage and are subject to further  research,  and
accordingly, may never be completed. These include:

     o    Restaurant  Expansion.  Our Jiaozuo Hotel Division is researching  the
          feasibility  of  opening  one  restaurant  in  Zhengzhou  City and one
          restaurant  in Beijing.  Our hotel  division is  researching,  and has
          discussed  with  a  number  of  interested   parties,   the  terms  of
          site-specific   management  and  ownership,   including   acquisition,
          franchise,  partnership,  and management  agreement,  regarding  these
          possible restaurant  openings.  Both restaurants would bear the Yi Wan
          name and  specialize  in a unique blend of  Guangdong  and Henan style
          cuisine. Both restaurants would target up-scale,  urban customers.  We
          have not entered into any specific  agreements  regarding a restaurant
          opening  and there are no  assurances  that we will be  successful  in
          securing any agreements relating to any such opening.


                                       14
<PAGE>

     o    Lodging  Expansion.  Our hotel division is researching the feasibility
          of  hotel  expansion  through  franchising  the Yi Wan  name  and  our
          hotel-restaurant  operating systems.  The Jiaozuo Industrial Institute
          is  working  with  hotel  management  to draft the  initial  franchise
          offering framework.  The target market for franchise  operations would
          be formerly  government owned hotel properties in the northern central
          provinces.

If we are successful in completing these projects and implementing them into our
operations, we will be required to hire the following additional employees:

Restaurant Expansion:

     o    12 managers

     o    86 employees

Lodging Expansion:

     o    15 managers

     o    95 employees

OUR MARKET.  Our hotel is located in the  metropolitan  city of  Jiaozuo,  Henan
province, and considers the city of Jiaozuo and all communities within a 30-mile
radius to be its primary market.

Our Jiaozuo hotel division has two primary target  markets:  travelers and local
professionals.

Our  "travelers"  market  includes  individual  business  travelers,  individual
leisure travelers,  and group professional travelers.  Our "local professionals"
market  includes local  individual  business and government  professionals,  and
groups of professionals.  In China, there are many conferences involving various
groups to exchange ideas and share study results,  including  marketing seminars
and fairs and exhibitions from different  industries,  city-wide,  province-wide
and nationwide.

Examples of conferences which were held at our Jiaozuo Yi Wan Hotel are:

Dinner parties:

     1.   Henan Zhanggong Group Business Reception: 280 people

     2.   China Unicom Jiaozuo Branch's customer appreciation party: 130 people

Conferences:

     1.   The Third Annual Jiaozuo  International  Travel News  Conference:  320
          people

     2.   McDonald's employment conference: 250 people

Products News Conferences:

     1.   Sichuan Quanxing Co., Ltd.'s wine promotional conference: 500 people


                                       15
<PAGE>

     2.   Volvo's product introduction conference: 200 people

Our  Jiaozuo  Yi Wan Hotel  Division  uses a  variety  of  methods  to reach its
customers, including advertising and promotional events as described below.

ADVERTISING.   Our  hotel  division  conducts   extensive  product   promotional
advertising in several venues:

     o    Local television advertising;

     o    Airport and train station billboards;

     o    City promotional materials;

     o    Local print media; and

     o    On-site point-of-purchase.

PROMOTIONAL  EVENTS.  Promotional  events are  chiefly  coordinated  through our
Jiaozuo  Yi Wan  Hotel  Division's  sales  department  in  conjunction  with its
entertainment  and food and beverage  operations.  Primary on-going  promotional
events  include  big  name  celebrity  entertainment  event  ticket  give-aways,
regional or national cuisine tasting, and other culinary events.

CHARITABLE  GIVING AND SPONSORSHIP.  Our Jiaozuo Yi Wan Hotel Division  promotes
its hotel by  corporate  sponsorship  of charity  events and  donations to local
philanthropic efforts.

COMPETITION

The hotel  industry in China and, in  particular,  the Henan  province is highly
competitive.  Within the primary  market,  there are nine hotels licensed by the
government to accept foreign  guests.  Hotels are rated by the National  Tourism
Administration  in  the  following  areas:  fitness,   maintenance  of  fitness,
sanitation,  service  level,  and guest  satisfaction.  The highest rank is five
stars. The Jiaozou Yi Wan Hotel is the only four-star-rated hotel in the primary
area.  There are two  three-star-rated  hotels in the primary area. For example,
Hilton  and  Holiday  Inn  Grand  are  rated  as  five  stars,  which  meet  the
international  highest  standard.  Three star  hotels are similar to Holiday Inn
Express. Hotels rated with three stars and above are permitted to accept foreign
tourists.  The Jiaozou Yi Wan Hotel  obtained the title  Appointed  Tourist Unit
issued by the  Travel & Tourism  Bureau of Henan  Province  as early as  January
1997, thereby permitting it to receive foreign travelers.

COMPETITION RELATING TO OUR LODGING OPERATIONS

Our Jiaozuo Yi Wan Hotel  Division's two main  competitors are the Jiaozuo Yueji
Hotel and Jiaozuo  Shanyang  Hotel.  The Jiaozuo Yueji Hotel has 110 guest rooms
and the Jiaozuo  Shanang  Hotel has 148 guest  rooms.  Both of these  hotels are
government  owned and operated  and have  received a  three-star  rating.  These
hotels offer the following services and products:

     o    Full service restaurant (less than 200 person capacity);

     o    Beauty parlor and business center;


                                       16
<PAGE>

     o    Sundries and gift store;

     o    Nightclub and karaoke suites (150-200 person capacity);

     o    Massage service; and

     o    Small and medium  sized  meeting and  conference  rooms (less than 100
          person capacity).

These competitors  engage in some advertising  efforts and compete primarily for
price  sensitive  travelers,  including  budget  business,  leisure,  and  group
travelers.  We also believe that our Hotel Division has the ability to favorably
compete  against  these  hotels  within its primary  markets  for the  following
reasons:

     o    Higher   quality  guest  room  physical   condition,   due  to  recent
          renovation;

     o    We believe  that these  competing  hotels are in need of overhaul  and
          renovation;

     o    Cleaner guest rooms;

     o    Higher number of in-guest room amenities; and

     o    Higher quality peripheral hotel services (restaurants,  entertainment,
          meeting rooms).

Our Jiaozuo Yi Wan Hotel Division believes that it would take substantial effort
for these competitors to match our lodging product.

COMPETITION RELATING TO OUR FOOD AND BEVERAGE OPERATIONS

Our Jiaozuo Yi Wan Hotel  Division  offers what it  considers  to be a fresh and
innovative  fusion blend of Cantonese and Henan style  cuisines.  This style has
become  its  culinary  signature  and all  menus  in each of the  four  food and
beverage facilities reflect this central theme.

To support this strategy, this division has hired 12 chefs from Guangdong and 16
from Henan.  Two chefs are  designated  solely for the  production of dim sum, a
Guangdong  specialty.  To stimulate the generation of new menu items, this hotel
division  requires each chef to create one new menu item each month and to daily
meet and greet a specific  number of guests.  This  program is known as the Chef
New Product  Development  Program.  Chefs are motivated to create new menu items
through  a bonus  system  and  promotion  options.  To our  knowledge,  no other
competitor has a similar program.

Our Jiaozuo Yi Wan Hotel  Division  places  heavy  emphasis  on the  purchase of
natural raw  ingredients  and  operates a special  purchasing  program to source
these raw ingredients.  This division owns the only industrial size fruit juicer
machine in the primary area and is the only  facility to offer a wide  selection
of fresh fruit juices.

COMPETITION RELATING TO OUR ENTERTAINMENT OPERATIONS NIGHT CLUB

Our Jiaozuo Yi Wan Hotel Division faces competition from the two- and three-star
hotel  nightclubs  in our primary  market,  the Jiaozuo  Yueji Hotel and Jiaozuo


                                       17
<PAGE>

Hotel,  respectively.  Both of these  competitors  are  physically  smaller  and
configured in a social club format  featuring a center dance area. Both of these
competitors   offer  occasional  live  local   entertainment.   Neither  of  the
competitors engage in wide promotion effort.

We believe that our hotel division has the ability to compete  because the hotel
has:

     o    Higher quality lighting and special effects capabilities;

     o    Higher quality sound system;

     o    Distinctive  atmosphere created through internal  architectural detail
          and decoration;

     o    Larger physical size;

     o    Greater  seating  variations,  including floor table,  booth,  and the
          deluxe balcony booth;

     o    Unique floor show offering;

     o    Greater variety entertainment (weekly changing floor show programs);

     o    Unique "big name" celebrity  entertainment  events (no other entity in
          the province offers these events); and

     o    Higher quality karaoke suites.

TRADEMARKS, LICENSES AND CONCESSIONS

Our Jiaozuo Yi Wan Hotel  Division has  registered the Jiaozuo Yi Wan Hotel Co.,
Ltd.  name  and  the  Yi  Wan  hotel   operations  logo  with  the  Ministry  of
Administration  and  Trademarks  in China.  Our hotel  division  has a  business
license in China,  which  currently  expires in December  2027. The trademark is
registered in perpetuity provided yearly fees are paid.

Our Jiaozuo Yi Wan Hotel Division is considered to be a foreign investment joint
venture by the  government  in China and receives  special  income tax treatment
from both the provisional  (Jiaozuo City) and central government in China, which
concessions  were granted in 1997.  Under the special tax  treatment,  the hotel
company was exempt from  central and  provincial  government  income tax for the
years ended  December  31, 1997 and 1998,  followed  by a 50%  reduction  in the
central  and  provincial  government  income tax for the next three  years ended
December 31, 1999,  2000, and 2001.  Because this status has expired,  our hotel
subsidiary  has been subject to central  government  income tax at a rate of 30%
and a 3% provincial government income tax since 2002.

The China National Tourism Board is the central  government agency in China that
establishes  regulations and requirements for the entire nation.  The Travel and
Tourism  Board of Henan  Province  is a legal  government  agency  that  governs
compliance to the central government's regulations and requirements that a hotel
must meet to be qualified to receive foreign travelers, as follows:

     o    A high standard operating facility, including building and equipment;


                                       18
<PAGE>

     o    A qualified management and service team;

     o    A facility equipped to provide service to tourist groups; and

     o    A facility that meets the health and fire safety standards.

An  initial  certification  and  annual  review is  conducted  by the Travel and
Tourism Board of Henan Province to be qualified to receive foreign travelers. If
a hotel fails to meet the above standards,  the  certification  may be withheld.
Our hotel received its  certification on January 1, 1997, which has been renewed
every year up to and including  December,  2003.  Our next annual  inspection is
scheduled for approximately January 2006.

EMPLOYEES

As of December 31, 2004,  our hotel  division  employed a total of 612 full-time
employees, comprised of approximately 95 management personnel and 517 staff.

QINYANG YI WAN HOTEL

PRODUCTS AND SERVICES.

Our  Qinyang  Yi Wan  Hotel  has  the  following  primary  product  and  service
offerings:

     o    Lodging operations (including conference and meeting facilities);

     o    Food and beverage operations; and

     o    Entertainment operations.

LODGING OPERATIONS.  The hotel has a total of 58 guest-sleeping rooms consisting
of 54 standard  guest  rooms and 4 suites.  All guest  rooms are  equipped  with
double or queen size beds, two telephones,  remote controlled  television,  full
mini-bar, work station, large closets, in-room climate control, sitting area and
large  working desk.  Bathrooms  include  shower and tub,  western style toilet,
spacious  vanity,  and  complimentary  travel  sundries.  Suites  include larger
sitting and work areas, a second television, and turn-down service.

The Qinyang Yi Wan Hotel also has 2  conference  rooms  dedicated to meeting and
conference space, including:

     o    One small meeting room, 99.3 square feet,  capable of seating up to 20
          people, which has  multi-functional  seating  configurations,  climate
          control and private bathrooms.

     o    One large,  391.8  square  foot  meeting  room  capable of seating 300
          people,  which is  configured  in an  auditorium  style with a sloping
          floor and large front presentation stage.

FOOD AND  BEVERAGE  OPERATIONS.  The Qin Yang  Hotel has four food and  beverage
facilities  composed of two Chinese  restaurants,  a Muslim restaurant and lobby
bar:

     o    Main Floor  Restaurant.  The main floor restaurant  serves 150 people.
          Its decor is considered traditional Chinese.


                                       19
<PAGE>

     o    VIP Restaurant.  The second floor  restaurant is a VIP dining facility
          with 20 private suites and serves 50 people.

     o    Muslim  restaurant.  The Muslim restaurant  includes one large banquet
          room located on the main floor  adjacent to the hotel lobby and serves
          80 people and 9 VIP rooms located on the 2nd floor serving 100 people.

ENTERTAINMENT  OPERATIONS.  Our  Qinyang  Hotel  operates  the  following  three
entertainment facilities, which are open to the public:

     o    Sauna-Health  Center. The sauna-health center is located on the second
          floor of the main building. It offers beauty salon,  acupuncture,  and
          massage services, as well as self-guided health relaxation activities,
          such as soaking tubs, whirlpools,  and saunas. The facility includes a
          beauty  salon,  waiting  lounge,  changing  facilities,  shower  area,
          soaking pools,  large Jacuzzis,  wet and dry multi-person  saunas,  33
          private resting rooms,  semi-private  massage rooms, large quiet room,
          private  massage suites and 9 executive  suites  consisting of private
          toilet and shower, sauna, Jacuzzi, massage area, and resting area. The
          sauna-health center has a total capacity of 250 people.

     o    Karaoke Rooms. The hotel offers 16 private karaoke suites suitable for
          4-10 people.  Each suite includes a serving area,  karaoke  equipment,
          and private bathroom.

SUPPLIERS

---------------------------- ---------------------------------------------------
ITEM                         SOURCE
---------------------------- ---------------------------------------------------
Wine/Beer                    Fang Da Department Store, Jiaozuo City
---------------------------- ---------------------------------------------------
Seafood                      Quanhong Seafood Shop, Qinyang City
---------------------------- ---------------------------------------------------
Coal                         Wang Zhong Liang, Qinyang City
---------------------------- ---------------------------------------------------
Seafood                      Liu San, Qinyang City
---------------------------- ---------------------------------------------------
Seafood                      Qiu Feng, Qinyang City
---------------------------- ---------------------------------------------------
Beverage                     Jiaozuo City Hua Hua Dairy Products, Jiaozuo City
---------------------------- ---------------------------------------------------
General cooking ingredients  Song Bao Chang, Qinyang City
---------------------------- ---------------------------------------------------
General cooking ingredients  Shang Da Jun, Qinyang City
---------------------------- ---------------------------------------------------
Daily use lodging items      Hui Jie Shop, Qinyang City
---------------------------- ---------------------------------------------------


The above  suppliers to our hotel division are located  within an  approximately
200-mile radius of the hotel.

Our Qinyang Yi Wan Hotel maintains a 10-day supply of common  consumable  goods,
such as alcohol  products,  guest room sundries and similar  products,  which is
considered  standard  industry  practice.  We believe that there are a number of
alternative suppliers for all of these products.


                                       20
<PAGE>

SEASONAL VARIATIONS. Our hotel division experiences minor seasonal variations in
overall revenue. However, because this hotel has only 59 room and has been fully
occupied  since  it  was  open,  it  has  not  experienced  any  major  seasonal
variations.  The hotel's Food and Beverage Operations and Conference and Meeting
revenues  peak during the periods from March  through  July and October  through
December.   These  periods   coincide  with  the  times  when  many   government
organizations and companies hold their annual and bi-annual meetings and product
shows.

POTENTIAL  FUTURE  GROWTH.  In order to satisfy the  increasing  demands for the
rooms and restaurants,  we plan to expand this hotel by adding 60 standard rooms
and 11 suites to  accommodate  210 guests.  The room  expansion  will occupy 3.5
acres.  This expansion is contingent upon receiving  financing of RMB 15 million
(US$1.8 million).  We have not received any binding  commitments to provide such
financing  and there are no  assurances  that we will be successful in obtaining
such financing.  If we are successful in this expansion,  we will be required to
hire 37 employees and 3 managers.

MARKET. Qinyang Yi Wan Hotel has two primary target markets: travelers and local
professionals.  Our "travelers" market includes  individual  business travelers,
individual  leisure  travelers  and group  professional  travelers.  Our  "local
professionals"   market  includes  local  individual   business  and  government
professionals,   and  groups  of  professionals.  In  Qinyang  City,  there  are
conferences  involving various groups to exchange ideas and share study results,
including   marketing   seminars  and  fairs  and  exhibitions   from  different
industries, city-wide, province-wide and nationwide.

Examples of conferences that have been held at the Qinyang Yi Wan Hotel are:

Business conferences:

     1.   Nation  Patent  Project  Issuance  Meeting  held by Henan  Science and
          Technology Bureau: 120 people

     2.   The  meeting  about  State  Enterprise   Innovation  held  by  Qinyang
          Government: 95 people

Meetings held by companies:

     1.   Chengdu ShenGang Dealer Symposium: 100 people

     2.   The Ceremony of sign the  continuation  project  agreement for Qinyang
          Aluminum Company: 50 people

Product exhibits and sales meetings:

     1.   Anhui Huatuo Pharmaceutical Co.'s product exhibit: 150 people

     2.   Amway Co.'s product exhibit: 200 people

     Our Qinyang Yi Wan Hotel uses a variety of methods to reach its  customers,
     including advertising and promotional events as described below.

ADVERTISING.  Our  Qinyang  Yi Wan Hotel  Division  conducts  extensive  product
promotional advertising in several venues:


                                       21
<PAGE>

     o    Local television advertising;

     o    Airport and train station billboards;

     o    City promotional materials;

     o    Local print media; and

     o    On-site point-of-purchase.

PROMOTIONAL EVENTS.  These promotional events are mainly coordinated through our
hotel division's sales department in conjunction with its entertainment and food
and  beverage   operations.   On-going   promotional  events  include  celebrity
entertainment event ticket give-away,  regional or national cuisine tasting, and
other culinary events.

CHARITABLE  GIVING AND  SPONSORSHIP.  Our hotel  division  promotes its hotel by
corporate  sponsorship  of charity  events and donations to local  philanthropic
efforts.

COMPETITION

COMPETITION RELATING TO OUR LODGING OPERATIONS

Qinyang Yi Wan  Hotel's two main  competitors  are the  Qinyang  Guesthouse  and
Yinsha Hotel, both of which are located in Qinyang city. The Qinyang  Guesthouse
is approximately  two miles from the Quinyang Yi Wan Hotel, and the Yinsha Hotel
is approximately 0.3 miles from the Qinyang Yi Wan Hotel. The Qinyang Guesthouse
has 54 guest rooms and the Yinsha Hotel has 48 guest rooms. Both of these hotels
are government owned and operated and have received a two-star rating.

These competitors  engage in some advertising  efforts and compete primarily for
price  sensitive  travelers,  including  budget  business,  leisure,  and  group
travelers. We also believe that Qinyang Yi Wan Hotel Division has the ability to
favorably  compete  against  these  hotels  within its  primary  markets for the
following reasons:

     o    Higher  quality  guest room physical  condition due to the  relatively
          recent  construction  of  the  hotel,  its  guest  rooms  and  parking
          structure in October 2001;

     o    Higher number of in-guest room amenities; and

     o    Higher  quality  peripheral  hotel  services,  including  restaurants,
          entertainment, and meeting rooms.

COMPETITION RELATING TO OUR FOOD AND BEVERAGE OPERATIONS

The Qinyang Yi Wan Hotel offers what it  considers to be a fresh and  innovative
fusion blend of Cantonese  and Henan style  cuisines.  This style has become its
culinary  signature  and all  menus  in  each of the  three  food  and  beverage
facilities reflect this central theme. To support this strategy,  our Qinyang Yi
Wan Hotel has  hired 9 chefs  specializing  in  Guangdong  cuisine  and 13 chefs
specializing  in  Henan  cuisine.  Two  chefs  are  designated  solely  for  the
production of dim sum, a Guangdong specialty. To stimulate the generation of new
menu items,  our Qinyang Yi Wan Hotel  requires each chef to create one new menu
item each month and to daily meet and greet a  specific  number of guests.  This


                                       22
<PAGE>

program  is known  as the  Chef  New  Product  Development  Program.  Chefs  are
motivated to create new menu items through a bonus system and promotion options.
To our knowledge, no other competitor has a similar program.

Our Qinyang Yi Wan Hotel  places  heavy  emphasis on the purchase of natural raw
ingredients  and  operates  a special  purchasing  program  to source  these raw
ingredients. The Qinyang Yi Wan Hotel owns the only industrial size fruit juicer
machine in the  primary  area of the hotel and is the only  facility  to offer a
wide selection of fresh fruit juices.

COMPETITION RELATING TO OUR ENTERTAINMENT OPERATIONS

Night Club

Our Qinyang Yi Wan Hotel  Division  faces  competition  from the two-star  hotel
nightclubs in our primary market,  the Qinyang Guesthouse and Yinsha Hotel. Both
competitors  are  physically  smaller  and  configured  in a social  club format
featuring a center dance area. Both offer  occasional live local  entertainment.
Neither of the competitors engages in wide promotional effort.

We believe that our hotel division has the ability to favorably  compete because
the hotel has:

     o    Higher quality lighting and special effects capabilities;

     o    Higher quality sound system;

     o    Distinctive  atmosphere created through internal  architectural detail
          and decoration;

     o    Larger physical size;

     o    Greater  seating  variations,  including floor table,  booth,  and the
          deluxe balcony booth; and

     o    Higher quality karaoke suites.

TRADEMARKS, LICENSES AND CONCESSIONS

Our Qinyang Yi Wan Hotel  Division has registered the Qingyang Yi Wan Hotel Co.,
Ltd.  with the  Ministry of  Administration  and  Trademarks.  The  trademark is
registered in perpetuity provided yearly fees are paid, which we have paid.

The China National Tourism Board is the central  government agency in China that
establishes  regulations and requirements for the entire nation.  The Travel and
Tourism  Board of Henan  Province  is a legal  government  agency  that  governs
compliance to the central government's regulations and requirements that a hotel
must meet to be qualified to receive foreign travelers, as follows:

     o    A high standard operating facility, including building and equipment;

     o    A qualified management and service team;

     o    A facility equipped to provide service to tourist groups; and

     o    A facility that meets the health and fire safety standards.


                                       23
<PAGE>

An  initial  certification  and  annual  review is  conducted  by the Travel and
Tourism Board of Henan Province to be qualified to receive foreign travelers. If
a hotel fails to meet the above standards,  the  certification  may be withheld.
Our hotel  received its  certification  on October 2003,  which has been renewed
every year up to and including October 2005.

EMPLOYEES

As of December 31, 2004, our Qinyang Yi Wan Hotel  Division  employed a total of
235 full-time employees,  comprised of approximately 34 management personnel and
201 staff.

YI WAN BEIJING HOTEL MANAGEMENT LTD.

PRODUCTS AND SERVICES

Yi Wan Beijing  Hotel  Management  Ltd. has the  following  primary  product and
service offerings:

     o    Food and Beverage Operations

FOOD AND BEVERAGE OPERATIONS

Our Yi Wan Beijing Hotel Management Co., Ltd. operates one restaurant in our new
"Diyikou"  brand  fast-food  chain in  Beijing  city.  The  total  space for the
restaurant is 429 square  meters,  which  includes two VIP rooms and one saloon,
with a total occupancy of 180 people. The restaurant specializes in serving Hong
Kong style fast foods

SUPPLIERS.

--------------------------------------------- ----------------------------------
ITEM                                          SOURCE
--------------------------------------------- ----------------------------------
Wine/Beer                                     Yan Ping, Beijing City
--------------------------------------------- ----------------------------------
Diesel Oil                                    Mao Junting, Beijing City
--------------------------------------------- ----------------------------------
General cooking ingredients                   Liang Juhong, Beijing City
--------------------------------------------- ----------------------------------
Daily use lodging items                       Wei Jinzhou, Beijing City
--------------------------------------------- ----------------------------------

SEASONAL   VARIATIONS.   Food  and  beverage  revenues  experience  no  seasonal
variations.

POTENTIAL  FUTURE  GROWTH.  We expect to open similar  fast-food  restaurants in
Beijing and Shanghai over the next five years.

MARKET.  Yi Wan Beijing Hotel  Management  Ltd. has two primary target  markets:
travelers and local townsfolk around the restaurant.

ADVERTISING.  Our restaurant conducts extensive product promotional  advertising
in several venues:


                                       24
<PAGE>

     o    Local television advertising;

     o    City promotional materials;

     o    Local print media; and

     o    On-site point-of-purchase.

CHARITABLE  GIVING AND  SPONSORSHIP.  Our Yi Wan Beijing Hotel  Management  Ltd.
promotes its restaurant by corporate sponsorship of charity events and donations
to local philanthropic efforts.

COMPETITION

Beijing's  fast food  industry  generates  approximately  US$3  billion  (RMB 24
billion) in annual revenue, according to the Beijing Bureau of Commerce, and the
trend is expected to accelerate  during the 2008  Olympics.  American  fast-food
chains  such as  McDonald's,  Pizza Hut and KFC have  multiplied  in  Beijing in
recent years,  and a few Chinese  companies have started chains based on Western
business  principles  but offering  Chinese  cuisines  including  Yoshinori  and
Sichuan food. Yi Wan Beijing Hotel Management Co., Ltd. believes it is the first
to  focus  on Hong  Kong-style  food  distinguished  by  fresh  ingredients  and
high-quality preparation.

TRADEMARKS, LICENSES AND CONCESSIONS

Our Yi Wan Beijing Hotel Management Ltd. has registered the Yi Wan Beijing Hotel
Management  Co.,  Ltd.  name  and the  "Diyikou"  brand  with  the  Ministry  of
Administration and Trademarks in China. Our Yi Wan Beijing Hotel Management Ltd.
has a  business  license in China,  which  currently  expires in July 2024.  The
trademark is registered in perpetuity provided yearly fees are paid.

EMPLOYEES

As of December 31, 2004, we had approximately 55 full-time employees, consisting
of 15 managers and 40 staff.

For accounting  purposes,  our Hotel Operations are divided into three operating
segments:

     o    Food and Beverage also known as restaurant operations;

     o    Lodging; and

     o    Entertainment.

Set forth below for each of the last three  fiscal  years is the  percentage  of
total  revenue  from  each  such  segment  within  our  Hotel  Divisions,  which
collectively,  accounted  for more than  approximately  87% of our  consolidated
revenues during these fiscal years.



                                       25
<PAGE>

------------------------------------------------------ -------------------------
2002:
------------------------------------------------------ -------------------------
Food and Beverage Operations                           52.3%
------------------------------------------------------ -------------------------
Lodging Operations                                     24.7%
------------------------------------------------------ -------------------------
Entertainment Operations                               22.9%
------------------------------------------------------ -------------------------
Total of our consolidated revenues                     $9,890,845
------------------------------------------------------ -------------------------

------------------------------------------------------ -------------------------
2003:
------------------------------------------------------ -------------------------
Food and Beverage Operations                           54.0%
------------------------------------------------------ -------------------------
Lodging Operations                                     26.4%
------------------------------------------------------ -------------------------
Entertainment Operations                               19.6%
------------------------------------------------------ -------------------------
Total of our consolidated revenues                     $9,216,576
------------------------------------------------------ -------------------------

------------------------------------------------------ -------------------------
2004:
------------------------------------------------------ -------------------------
Food and Beverage Operations                           54.97%
------------------------------------------------------ -------------------------
Lodging Operations                                     25.13%
------------------------------------------------------ -------------------------
Entertainment Operations                               19.9%
------------------------------------------------------ -------------------------
Total of our consolidated revenues                     $9,730,345
------------------------------------------------------ -------------------------


SHUN DE YI WAN COMMUNICATION EQUIPMENT PLANT CO. LTD.

The  business  of Shun de Yi Wan  Communication  Equipment  Plant  Company,  our
Telecommunications Division, focuses on:

     o    Designing and  manufacturing  telephone  network  switching  component
          parts for use in telephone main distribution frames; and

     o    Manufacturing  and  selling  assembled   telephone  main  distribution
          frames.

A telephone  main  distribution  frame  connects a company's or an  individual's
internal telephone system to the telephone company's external lines.

Our Telecommunications  Division's initial design and production efforts focused
on developing  analog switching  component parts and the manufacture of a series
of analog main distribution  frames.  Recent design and production  efforts have
expanded to include  digital  switching  component  parts and the manufacture of
digital telephone main distribution frames.


                                       26
<PAGE>

Some of the  significant  events in our  Telecommunications  Division's  history
include:

     o    In 1995, our  telecommunications  company earned the award for product
          excellence  and  development  from the  National  Ministry of Post and
          Telecommunications,  also known as the  Ministry  of  Information  and
          Industry in China.

     o    In  1996,   our   telecommunications   company   received  two  patent
          certificates  in China from the Ministry of Trademarks and Patents for
          design of a switching  component  part and a tool used in the assembly
          and on-going  maintenance of telephone main distribution  frames which
          provides for patent protection in China only.

     o    In 1996,  our  telecommunications  company  received the public verbal
          commendation   for  product   excellence  and   contribution   to  the
          development  of the nation from the Vice  Minister of the  Ministry of
          Posts and Telecommunication, Mr. Xie Gaojue.

     o    In  1997,  our  telecommunications   company  produced  in  China  the
          telephone switching equipment industry's first intelligent  management
          system  software used for the  monitoring  and management of telephone
          distribution frame  performance.  Although the main distribution frame
          management   system  is  not  proprietary   software,   our  telephone
          communications  manufacturing  company has  encrypted  the software to
          protect its patent on the equipment.

     o    In 1999,  Our  Telecommunications  Division  had  approximately  a ten
          percent (10%) market share.

     o    Our  Telecommunications  Division had approximately a six percent (6%)
          market share for the period from 2000 to 2003.

PRODUCTS AND SERVICES

Our   Telecommunications   Division   specializes  in  producing   communication
connecting  and  distributing  equipment  called  main  distribution  frames for
telephone  exchange systems.  A main distribution frame is the main distribution
facility of a network,  often  described as a main hub or central hub,  which is
used as the starting point of a site network. The main distribution  facility is
typically  used  where the  outside  telephone  line  connections  and  internal
telephone line routers converge.

There are three primary types of main distribution frames:

     o    Analog - Standard  telephone line,  sometimes referred to as plain old
          telephone service.

     o    Digital - Often referred to as integrated  services digital network or
          referred to as ISDN, a digital line registers the human voice over the
          telephone  network using a stream of ones and zeros. The effectiveness
          of ISDN  allows  many  advanced  features  to be  programmed  on these
          phones, including multiple call appearances and data transmission.

     o    Optical - Uses fiber  optic light  cables  that have larger  capacity,
          higher speed, and wider bandwidth than ISDN.


                                       27
<PAGE>

Our Telecommunications Division manufactures two types of analog and one type of
digital main distribution  frames.  In addition,  this division produces its own
component parts and assembles them into distribution frame configurations at its
manufacturing  facility.  The  component  parts and  peripheral  frame parts are
stored  in  inventory  until  an  order  is  received.  At the  time an order is
received,  parts are drawn from  inventory and assembled to meet the  customer's
specifications  within  existing  product line  parameters.  The product is then
transported  to the  customer  via third  party  delivery.  Upon  arrival at the
customer's site, a sales technician  assists the customer in the installation of
the distribution main frame and reviewing operating procedures.

Every model produced by our telephone  communications  manufacturing company can
be specially  designed to have  different  capacities  according to the clients'
requirements  for the nature and quantity of the lines.  All of the distribution
frames can be  combined,  coupled,  and matched to become a  distribution  frame
system with a much larger capacity.

Our Telecommunications  Division experiences seasonal variations in revenue from
the sale of its products.  Because the majority of this division's customers are
divisions of  government  ministries,  its revenue  stream  closely  follows the
government  schedule of planning and  procurement.  Because  ministries plan and
petition the government for funds to purchase  equipment  during the period from
March  through  June,  revenue is at the lowest  point of the year  during  this
period. During the period of July through December ministries place orders; as a
result,  revenue peaks during the months of September through  December.  During
the period of January  through  February,  final  orders are filled and  revenue
begins to decline.

SUPPLIERS

Our  primary   suppliers  of  materials   which  are  used  to  manufacture  our
telecommunications  equipment  are located  within an  approximately  1,300 mile
radius.  Seventy to eighty  similar  supplier  companies are located in the same
area as the above suppliers.  Consequently, we do not believe that our telephone
communications  manufacturing  company  would have any  difficulty  in  locating
alternative suppliers. Our telecommunications parts suppliers are:

-------------------------------------- -----------------------------------------
SUPPLIERS
-------------------------------------- -----------------------------------------
Yi Wan Telecommunication
-------------------------------------- -----------------------------------------
Discharging Tube                       JiangSu Zhangjiagang Electrical Equipment
                                       Manufacture, Inc., Zhang Jia Gang City
-------------------------------------- -----------------------------------------
PTC Heat Sensitive Resistor            Shanghai Shun'an Communication Protector,
                                       Ltd., Shanghai City
-------------------------------------- -----------------------------------------
Reed, Connecter, cable                 FoShan No 6 Wireless Communication
                                       Manufacture, Inc., FoShan City
-------------------------------------- -----------------------------------------
Circuit board                          ZhongShan Dongfeng Tongfa Electrical
                                       Equipment Co., Zhongshan City
-------------------------------------- -----------------------------------------
Anti-fire ABS, Plastic                 Sanshui Jinhu Industrial Plastics
                                       Manufacture, Sanshui City
-------------------------------------- -----------------------------------------


                                       28
<PAGE>

-------------------------------------- -----------------------------------------
SUPPLIERS (CONTINUED)
-------------------------------------- -----------------------------------------
Silvering, Tinning                     Shunde Guizhou YuanXinLong DianDu Ltd.,
                                       Shunde City
-------------------------------------- -----------------------------------------
Zinc white copper                      Shanghai Copper Manufacture Sales
                                       Department, Shanghai City
-------------------------------------- -----------------------------------------
Electronic components capacitor,       Guangzhou Saibo Electronic Ltd.,
Nylon belt                             Guangzhou City
-------------------------------------- -----------------------------------------
Cold board, Tri-angle Iron,            Shunde Lecong Steel Trading Ltd. No 30
Flat iron                              Sales Department, Shunde City
-------------------------------------- -----------------------------------------
Easy Fusibility annulus                Guangzhou Non-Ferrouse Metal Research and
                                       Development Institution, Guangzhou City
-------------------------------------- -----------------------------------------
Brass board, Bronze                    Nanhai Lianxing Jinhua Hardware
                                       Manufacture, Nanhai City
-------------------------------------- -----------------------------------------
Paint spray                            Zhongshan Kede Paint Manufacture,
                                       Zhongshan City
-------------------------------------- -----------------------------------------
Cylindric plug                         Shunde Yongchang Hardware Manufacture,
                                       Shunde City
-------------------------------------- -----------------------------------------
Slide                                  Foshan Lanshi Electrical Equipment Co.,
                                       Foshan City
-------------------------------------- -----------------------------------------
Timber                                 Shunde Lunjiao Jielong Furniture
                                       Manufacture, Shunde City
-------------------------------------- -----------------------------------------


MARKET

The level of telephone network  development varies greatly among China's various
regions.  Generally,  the level of  development  is highest in the  southern and
coastal  provinces  where the majority of the market for our  telecommunications
division is located.  At present,  large portions of China are not  sufficiently
developed  from  a  technological   standpoint  to  utilize   telephone  network
distribution  technologies.  However,  the national  government has acknowledged
that  China's  central  province  areas  are  where  the next  wave of  economic
development  will  occur.  To this  end,  our  Telecommunications  Division  has
targeted the northern central provinces as a secondary target market area.

In China, all public telephone  communication is coordinated by the government's
Ministry of Information and Industry, formerly known as the Ministry of Post and
Telecommunications,  through a series of municipal ministry agencies.  There are
no private telephone service providers.  Additionally, other national ministries
maintain their own separate telephone communication networks.

Our  Telecommunications  Division's  primary customers are municipal agencies of
the national Ministry of Post and Telecommunications,  other national government
ministries  such as the  Ministry of Rail  Transportation,  Ministry of Electric
Power,   the  People's   Liberation  Army,  and  large  government  and  private


                                       29
<PAGE>

businesses.  Its  principal  customers  are either local or national  government
entities  that  could  cancel an order or  renegotiate  the terms of sale at any
time.  However,  since  all  production  is on a per job  basis and there are no
long-term production agreements, the risk of cancellation or renegotiating is no
greater than with any non-government customer.

In order to sell its  product to  government  entities,  our  telecommunications
division is required to obtain a permit  from the  Ministry of  Information  and
Industry. This permit is granted each year and is based on inspection of product
quality and the  company's  operations.  We have been  granted a permit for each
year that our  telecommunications  division  has been  required  to obtain  such
permit.  Failure to obtain this permit could  reduce our  revenues  derived from
Shun de Yi Wan Communication Equipment Plant Company.

Potential  customers  in China are  primarily  obtained  through  sales calls or
visits  from its sales  staff.  In  addition,  our  Telecommunications  Division
undertakes the following activities:

     o    Trade Shows.  Promotion of its brand name through active participation
          in trade shows throughout China.  Participation often includes keynote
          seminar presentations.

     o    Advertising.  Promotion of its brand name through on-going advertising
          in industry  trade  publications  and by  maintaining a listing on the
          Ministry of Post and Telecommunication Internet website.

     o    Public Relations. The sales department promotes the telecommunications
          division's  brand name by maintaining  an active and on-going  "client
          focused"  public  relations  effort.  This  effort  includes  frequent
          telephone    communication,    on-site   visits,   and   complimentary
          entertaining and gifts to existing clients.

     o    Industry  Trade  Articles.  Promotion of its brand name by  frequently
          contributing to trade  publications  research  articles that highlight
          technological trends and developments.

Our   Telecommunications   Division  only  uses  in-house  sales  persons.  Each
individual sales person receives commissions of 1.5% to 2% of total sales.

LICENSES, TRADEMARKS, AND PATENTS

Our  Telecommunications  Division has  registered its name and its logo with the
Ministry of Administration and Trademarks.

The term of our Telecommunications Division's business license is from September
1993 to September  2019,  which  permits it to operate as a company in China for
that period.  Business  licenses in China are granted only for a specific period
of  time.  Upon a  business  license  expiration  date  a  company  must  make a
reapplication for a new license.

Our  Telecommunications  Division has received two patent registrations from the
Ministry of Administration and Trademarks in China, which are listed below:

     o    A  component  part  used in the  assembly  of  analog  telephone  main
          distribution frames registered as patent number 235727.


                                       30
<PAGE>

     o    A tool used by customers to simultaneously install two wire clips into
          a distribution frame, registered as patent number 213907.

The patents are  registered in  perpetuity,  provided  yearly fees of $7,300 are
paid to the Ministry of Administration and Trademarks through December 31, 2002.
We have made all such payments.

COMPETITION

The  business of our  Telecommunications  Division is highly  competitive.  Many
companies that have greater capital  resources and more established  reputations
provide the same  products and  services  that our  Telecommunications  Division
provides. If competitors lower their prices or our  Telecommunications  Division
is forced to lower its prices,  our revenues  derived from this  division may be
reduced.

Moreover, our  Telecommunications  Division's competitors may be able to respond
more  quickly  to  new  or  emerging   technologies   and  changes  in  customer
requirements.  In addition, our Telecommunications Division's competitors may be
able to devote  greater  resources to the  development,  promotion,  and sale of
their products and services.

Nationwide,  there are 50  companies  in China  licensed  to  produce  telephone
distribution  switching  equipment.  Competitors compete chiefly on the basis of
price and technological capabilities. Thirty-six of the 50 companies licensed by
the  government to produce and sell telephone  distribution  frames in China are
approved  by the  government  in  China  to be  suppliers,  one of  which is our
Telecommunications Division. Of these 36 companies, the four largest competitors
have a combined  market  share of 50%.  Our  Telecommunications  Division has an
approximately 6% market share according to the China Telecommunication  Industry
Annual Report for the period from 2000 to 2003 published by the Ministry of Post
and Telecommunications.  Our Telecommunications Division had a 2.8% market share
in 2004.

PRODUCT RESEARCH AND DEVELOPMENT

From January 1999 to December 2001, we conducted research and development in the
proposed products summarized below. During 2002, our Telecommunications Division
tested these products  internally.  This testing  continued through 2003. We did
not perform any testing in 2004.  To date,  we have not decided  whether we will
bring any of these products to market.

DIGITAL SWITCHING COMPONENTS

Our Telecommunications Division is involved in research and development projects
concerning  production of component parts capable of utilizing digital switching
technologies   and  the   manufacture  of  digital   switching   telephone  main
distribution  frames. We produce a limited line of digital switching  components
and manufacture one digital switching  telephone main distribution frame. We are
also  researching  building  an  expanded  product  line  of  digital  switching
telephone main distribution frames.

OPTICAL SWITCHING COMPONENTS

Our  Telecommunications  Division  is  involved  in a  number  of  research  and
development  projects  concerning the  production of component  parts of optical
switching telephone main distribution frames. At present, our telecommunications


                                       31
<PAGE>

division does not possess the technology to produce optical switching components
or optical switching telephone main distribution frames.

CONFERENCE LANGUAGE INTERPRETATION SYSTEM

Our  Telecommunications   Division  is  in  its  advanced  stages  of  research,
development,  and testing of  equipment  suitable for  multi-lingual  conference
communication,  and  audience  response  tabulation.  This  product  is based on
existing  switching  component  technologies  and is  capable  of  five-language
channel   simultaneous   communication,    audience   voting   tabulation,   and
five-category  multi-choice response tabulation.  The product utilizes touch pad
technology and is capable of visually communicating information on each audience
member's  screen.  There are two versions of this machine in the testing  phase:
one intended for audience  sizes from 1-100  persons and the other  intended for
audience sizes from 101-400  persons.  The results of these tests have been very
favorable  with the results of the smaller unit showing  slightly fewer required
modifications  than the larger unit. We are proceeding with on going testing and
modification of both units.

Our  Telecommunications  Division  spent the  following  funds for  research and
development purposes:

     o    2001 - RMB 80,000 or approximately US$9,638

     o    2002 - RMB 0 or US$0

     o    2003 - RMB 520,000 or approximately US$62,920

     o    2004 - RMB 0 or approximately US$0

In  order to  complete  these  projects,  it will  need to  spend  at least  the
following amounts for the specified items:

     o    Digital  Switching  Components  - RMB  8,800,000.00  or  approximately
          US$1,060,000.

     o    Optical  Switching  Components  - RMB  6,100,000.00  or  approximately
          US$736,000.

     o    Conference  Language  Interpretation  System  -  RMB  8,000,000.00  or
          approximately US$970,000.

We  anticipate  that these  funds will be provided  from our  telecommunications
division's  operating  cash flow.  We  anticipate  hiring  the seven  additional
technical  employees  over the next 12 months to  accomplish  our  research  and
development projects.

NUMBER OF EMPLOYEES

As of December 31, 2004, we had approximately 27 full-time employees, consisting
of 13 managers and 14 staff.



                                       32
<PAGE>

DOING BUSINESS IN CHINA AND GOVERNMENT REGULATIONS IN CHINA

CHINA'S ENTRY INTO THE WORLD TRADE ORGANIZATION

China  became a member of the World Trade  Organization  (WTO) on  December  11,
2001.  The WTO is the only  international  organization  dealing with the global
rules of trade between nations.  Its main function is to ensure that trade flows
as smoothly, predictable and freely as possible. The WTO is the successor to the
General  Agreement on Tariffs and Trade  (GATT).  China's  entrance into the WTO
potentially  will bring profits,  and challenges as well,  particularly  for the
following industries:

     TELECOMMUNICATIONS  - China  agreed  to  drop  geographic  restrictions  on
imports of pagers, mobile/cellular phones and domestic wire-line services within
six  years  of entry  into  the WTO.  China  allowed  up to 49  percent  foreign
ownership of all services and 51 percent  foreign  ownership for value added and
paging services within four years of entry.

     BANKING - China agreed to allow foreign banks to conduct  business in local
currency from 2002.

     INSURANCE - Foreign  ownership of life insurance  firms of up to 50 percent
will be  allowed  upon WTO  entry,  increasing  to 51  percent  after  one year.
Non-life and  reinsurance  firms will be allowed to take a 51 percent stake in a
joint venture immediately and be permitted to form wholly-owned  subsidiaries in
two years.

     TECHNOLOGY  -  By  the  year  2005,   China  will   eliminate   tariffs  on
semiconductors,  computers computer equipment,  telecommunications equipment and
other technology products.

     AUTOS - Reduction in auto tariffs from their  current 80% to 100% to 25% in
2005,  with auto parts tariffs cut to an average of 10%.  Quotas on auto imports
will be phased out by 2005.

     TRAVEL  AND  TOURISM  - China  agreed to allow  unrestricted  access to the
Chinese market for hotel operators immediately upon WTO entry, with 100% foreign
ownership allowed within three years of entry.

     CHEMICALS - China has pledged to reduce  tariffs to the levels of other WTO
members of around 5.5% to 6.5%.

     WOOD AND PAPER - Tariffs cut from present levels of 12% to 18% for wood and
15% to 25% for paper to between 5% and 7%.

China's WTO membership  brings  opportunities  to achieve  greater market share,
introduce  a  wider  range  of  products  and  services,   streamline  corporate
structures, and gain control over distribution and after-sales services. China's
WTO membership  will likely leave  far-reaching  influences on China's  domestic
industries.  Chinese  enterprises  may  benefit  from  multinational  management
experience  of  other  countries  and,  as a  result,  change  their  management
structure,  possibly leading to business innovation and increased  international
business.  Some  industries  that  previously  enjoyed  high tariff  protection,
however,  such as automobiles,  agriculture,  oil refining,  chemical fibers and
drugs,  will  experience  operational  difficulties as tariff rates are lowered,
market access expands and intellectual property protection is tougher.


                                       33
<PAGE>

TELECOMMUNICATIONS

According  to the  terms of WTO  membership,  tariffs  on IT  products,  such as
computers, semiconductors, and all internet-related equipment will fall from the
current  average  of 13.5%  to 0% by the year  2005.  Foreign  participation  in
China's basic wireline telecom services will be permitted. Foreign participation
in basic  telecom  services  will be allowed  from 25% to 49% in about six years
after China's WTO entry,  while  geographic  restrictions  on different  telecom
services will be phased out within five or six years.

An  increase  in the  number of network  operators  could  bring  more  business
opportunities  to domestic  equipment  manufacturers.  Lower  tariffs on telecom
equipment  could  have a  limited  impact  as  domestic  makers  do not count on
protection from high tariffs.

China's  domestic  telecom  equipment  manufacturers  have as a  whole  achieved
breakthroughs in their development.  The digital switching systems,  which enjoy
independent  intellectual  property rights, have reached advanced  international
standards. The signal and command systems, network administration systems, ISDN,
interfaces for various services and software functions are more suitable for the
Chinese telecom network. For these enterprises,  such as our  Telecommunications
division,  China's  WTO entry not only  clears  the way for us to march into the
international   market,  it  also  brings  us  more  opportunities  for  further
development.

HOTEL AND TOURISM

The  accession  into the WTO will  provide  opportunities  for  China's  tourism
industry.  The tourism  sector in China will become more  proactive  in Asia and
play an important part in the global tourism market.  China's accession into the
WTO will have a number of positive  effects on inbound tourism in China.  First,
it will be conducive to optimizing  the  development  of all sectors  related to
inbound tourism such as the financial industry,  the information  industry,  and
the auto industry. Second, it also will be conducive to establishing operational
mechanisms that conform to international  management  practices so as to provide
an ideal  situation for the  development of inbound  tourism.  Third, it will be
conducive to increasing  international arrivals. By becoming a WTO member, China
agreed to allow  unrestricted  access to the Chinese market for hotel  operators
with the  ability  to see up 100%  foreign-owned  hotels  in three  years,  with
majority  ownership  allowed upon  accession.  Thus,  foreign hotels with modern
management  concept,  service standards,  by virtue of their advantage in scale,
customers,  brands and network,  will compete with our tourist  enterprises  and
hotel services.

GOVERNMENTAL REGULATION OF OUR OPERATIONS IN CHINA

All of our subsidiary  companies operate from facilities that are located in the
People's  Republic of China.  Accordingly,  our  subsidiaries'  operations  must
conform to the governmental regulations and rules of China.

ENVIRONMENTAL COMPLIANCE

Our Hotel and Telecommunications Division's are subject to the People's Republic
of China's national Environmental  Protection Law, which was enacted on December
26, 1989, as well as a number of other  national and local laws and  regulations
regulating  air,  water,  and noise  pollution and setting  pollutant  discharge
standards.  Violation  of such laws and  regulations  could  result in warnings,


                                       34
<PAGE>

fines, orders to cease operations, and even criminal penalties, depending on the
circumstances  of such violation.  We believe that all  manufacturing  and other
operations  of  our  three  operating  divisions  are  in  compliance  with  all
applicable  environmental laws, including those laws relating to air, water, and
noise pollution.

BUREAUCRATIC  REVIEW AND APPROVALS AND  APPLICABLE  LAWS IN CHINA  AFFECTING OUR
SUBSIDIARIES

The Chinese  government's  involvement  and  influence in the operation of joint
venture companies is limited to a well defined legal/bureaucratic infrastructure
in three areas operated through three separate State entities:

     o    Review by Foreign Investment  Commission - Foreign Invested Enterprise
          joint ventures must be reviewed by the Foreign Investment  Commission,
          or its  delegate,  for  approval  as a  Foreign  Invested  Enterprise.
          Changes  in  ownership  identity  or  registered  capital of a Foreign
          Invested  Enterprise  must be  reviewed  and  approved  by the Foreign
          Investment Commission.

     o    Industrial  and  Commercial  Registration  Administration  Bureau  - A
          Foreign  Invested  Enterprise must have a business license to operate,
          which  is  issued  by  the  Industrial  and  Commercial   Registration
          Administration  Bureau. In addition,  any change in a Foreign Invested
          Enterprise's  ownership  must be reported to this bureau for a reissue
          of a business license.

     o    Laws Associated with State-Owned Enterprises - The Chinese partners in
          joint venture Foreign  Invested  Enterprise  companies or Sino-Foreign
          Equity Joint  Ventures  may be  State-Owned  Enterprises.  State-Owned
          Enterprises  have defined  rights and areas of  authority  regarding a
          joint  venture  as  set  forth  in the  joint  venture's  articles  of
          association  and the joint  venture  contract.  As such,  the  Foreign
          Investment  Commission and the Industrial and Commercial  Registration
          Commission have a limited, defined area of operation,  responsibility,
          and authority.  As discussed  below,  none of these State entities has
          the  ability  to  change  the laws,  the  articles,  or the  contracts
          governing the rights,  obligations,  operation,  or existence of joint
          venture companies. Further, the minority partners in our joint venture
          companies  are  not  State-Owned  Enterprises.  As  a  non-State-Owned
          Enterprise, the minority partners have no direct relationship with the
          People's Republic of China government.

SINO-FOREIGN INVESTED ENTERPRISE LAWS: FIE LAWS

Both of our joint  venture  companies  are  Sino-Foreign  Equity Joint  Ventures
established  under the law of the People's  Republic of China in accordance with
the People's  Republic of China  Sino-Foreign  Equity Joint Ventures Law, or EJV
Law. Article 2 of the EJV Law, provides that the Chinese Government, pursuant to
the provisions of agreements, contracts, and articles of association that it has
approved,   shall   protect  in  accordance   with  the  law  the   investments,
distributable  profits,  and  other  lawful  rights  and  interests  of  foreign
investors.

Further, the EJV Law provides that the State shall not subject joint ventures to
nationalization or expropriation. In special circumstances, however, in order to
meet  the  requirements  of  the  public  interest,  the  State  may  carry  out


                                       35
<PAGE>

expropriation  against a joint venture in accordance with legal procedures,  but
corresponding compensation must be made.

The first  provision set forth above  reflects the principle that the State must
protect  the  interest  of the foreign  investor  based upon an  approved  Joint
Venture  Contract and Articles of Association.  This would extend to the control
provisions in the  contracts  and articles,  as control is one of the rights and
interests of the foreign investor in a majority-owned  EJV. The second statement
reflects the power that all national  governments,  including that of the United
States, reserve to them.

In  addition,  Article 33 of the  Implementing  Regulations  to the Equity Joint
Venture Law provides that "the highest authority of a Joint Venture shall be its
board of  directors,  which shall decide all major issues  concerning  the Joint
Venture."  Thus,  control  over the  Joint  Ventures  is  vested in the board of
directors,  not in the State.  While it is true that the State retains  ultimate
control of State-Owned  Enterprises,  Equity Joint Ventures are not  State-Owned
Enterprises,  but are an entirely  separate category of enterprise under the law
of the People's Republic of China.  While the State can influence the operations
of a joint venture where a Chinese party is a State-Owned Enterprise, legally it
can do so only through the party's representatives on the Joint Venture board of
directors.

Our  wholly-owned  subsidiary,  Shun  de Yi Wan  Communication  Equipment  Plant
Company Co.  Ltd.,  exists in  accordance  with the  People's  Republic of China
Wholly  Foreign-Owned  Enterprise  Law,  or WFOE Law.  Article 8 of the WFOE Law
provides that an enterprise  with foreign capital meets the conditions for being
considered a legal person  under  Chinese law and shall  acquire the status of a
Chinese legal person, in accordance with the law.

Further,  the WFOE Law provides in Article 4 that the  investments  of a foreign
investor  in  China,  the  profits  it earns  and its other  lawful  rights  and
interests are protected by Chinese law.  Furthermore,  Article 5 of the WFOE Law
states that the state cannot  nationalize  or requisition  any  enterprise  with
foreign capital.  Under special  circumstances,  when public interest  requires,
enterprises  with foreign capital may be  requisitioned  by legal procedures and
appropriate compensation shall be made.

As with the Equity Joint Venture Law, the first two  provisions  set forth above
reflect the  principle  that the State must  protect the interest of the foreign
investor  based upon  approved  Articles  of  Association.  The third  statement
reflects the power of all national  governments,  including  the United  States,
that are reserved to them.

Finally,  with respect to the  potential  retroactive  effect of any laws passed
concerning existing joint ventures,  Article 40 of the Foreign Economic Contract
Law, or FECL, which was adopted in 1985,  provides as that even if the law makes
new  provisions,   contracts  for  Sino-Foreign  Joint  Ventures,   Sino-Foreign
Cooperative  Joint Ventures,  and for Sino-Foreign  Cooperative  Exploration and
Exploitation  of  natural  resources  which  have  already  been  approved  by a
competent  authority  of the  State,  may still be  performed  according  to the
stipulation of those contracts.

Accordingly,  as the above laws indicate, the only realistic method by which the
Chinese   Government  can  effect  the  operation  of  these  Foreign   Invested
Enterprises  is  provided  by the  respective  Articles  of  Association.  Those
Articles,  combined with the Foreign Invested  Enterprise laws, provide that the


                                       36
<PAGE>

Chinese  Government does not and cannot have an intrusive role in the affairs of
a Foreign  Invested  Enterprise  company.  To the  contrary,  those laws place a
continuing duty on the government to ensure that the rights of foreign investors
in  Foreign  Invested  Enterprise  companies,   as  expressed  in  the  approved
provisions of Articles of Association, are protected and preserved.

FOREIGN COMPANIES DOING BUSINESS IN CHINA

There are three standard  investment  vehicles for foreigners  doing business in
China:

     o    Equity Joint Venture;

     o    Cooperative or contract Joint Venture; and

     o    Wholly Foreign-Owned Enterprise.

Each of these investment vehicles is known as a Foreign Invested Enterprise. The
applicable  legal framework for the  establishment  and  continuation of Foreign
Invested Enterprise laws is as follows:

----------------------------- --------------------------------------------------
GENERAL                       People's Republic of China Foreign Economic
                              Contract Law
----------------------------- --------------------------------------------------
ACCOUNTING                    People's Republic of China Accounting Law Laws
                              Concerning Enterprises with Foreign Investments
                              The General Accounting Standard for Enterprises
                              The Specific Accounting Standards
----------------------------- --------------------------------------------------
EQUITY JOINT VENTURE          People's Republic of China Sino-Foreign Equity
                              Joint Venture Law People's Republic of China
                              Sino-Foreign Equity Joint Venture Law Implementing
                              Regulations
----------------------------- --------------------------------------------------
COOPERATIVE VENTURE           People's Republic of China Sino-Foreign
                              Cooperative Joint Venture Law Detailed Rules for
                              the Implementation of the People's Republic of
                              China Sino-Foreign Cooperative Joint Venture Law
                              Regulations
----------------------------- --------------------------------------------------
WHOLLY FOREIGN-OWNED          People's Republic of China Wholly Foreign-Owned
ENTERPRISE                    Enterprise Law Implementing Rules of the Wholly
                              Foreign-Owned Enterprise Law Interpretations on
                              Various Provisions Concerning the Implementing
                              Rules of the Wholly Foreign-Owned Enterprise Law
----------------------------- --------------------------------------------------

The Foreign Invested Enterprise laws specifically  referenced in this prospectus
are the People's  Republic of China  Sino-Foreign  Equity Joint Venture Law, the
People's  Republic of China Wholly  Foreign-Owned  Enterprise  Law, the People's
Republic of China Foreign Economic Contract Law, and the Accounting Laws.



                                       37
<PAGE>

THE CHINESE LEGAL SYSTEM

The  practical  effect of the  People's  Republic of China  legal  system on our
business  operations  in China can be viewed from two separate  but  intertwined
considerations.

First,  as a matter of substantive  law, the Foreign  Invested  Enterprise  laws
provide significant protection from government interference.  In addition, these
laws  guarantee  the full  enjoyment of the  benefits of corporate  Articles and
contracts to Foreign Invested Enterprise  participants.  These laws, however, do
impose standards  concerning  corporate formation and governance,  which are not
qualitatively different from the General Corporation Laws of the several states.
Therefore,  as a practical matter, a Foreign Invested Enterprise needs to retain
or have  ready  access  to a local  Chinese  law  firm  for  routine  compliance
purposes.

Similarly,  the People's  Republic of China  accounting laws mandate  accounting
practices,  which are not co-existent with U.S.  Generally  Accepted  Accounting
Principles.  The China accounting laws require that an annual  "statutory audit"
be performed in accordance with People's Republic of China accounting  standards
and that the books of account of Foreign Invested  Enterprises are maintained in
accordance with Chinese  accounting laws. Article 14 of the People's Republic of
China  Wholly  Foreign-Owned  Enterprise  Law  requires  a Wholly  Foreign-Owned
Enterprise to submit certain periodic fiscal reports and statements to designate
financial and tax authorities,  at the risk of business license revocation. As a
practical  matter,  a Foreign  Invested  Enterprise  must retain a local Chinese
accounting  firm that has  experience  with both the Chinese  standards and U.S.
Generally Accepted Accounting Principles. This type of accounting firm can serve
the dual function of performing the annual Chinese statutory audit and preparing
the Foreign Invested Enterprise's  financial statements in a form acceptable for
an  independent  U.S.  certified  public  accountant to issue an audit report in
accordance with Generally Accepted Accounting Auditing Standards.

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

EARNINGS AND DISTRIBUTIONS OF THE FIE'S

Both  the  Foreign   Investment   Equity  Joint  Venture  laws  and  the  Wholly
Foreign-Owned  Enterprise  laws provide for and  guarantee the  distribution  of
profits to foreign investors in Chinese Foreign Invested Enterprises.  Article 7
of the People's Republic of China Sino-Foreign Equity Joint Venture Law requires


                                       38
<PAGE>

that  profits of an equity  joint  venture be  distributed  among the parties in
proportion  to their  respective  contributions  to  registered  capital.  These
distributions  are made from net profits after  deducting from gross profits,  a
reserve  fund,  a bonus and welfare  fund for  workers and staff,  and a venture
expansion fund, all as stipulated in the venture's Articles of Association.  The
Yi Wan joint venture  Articles of Association  provide in Chapter 7, Article 43,
that  allocations  for  these  statutory  funds be  determined  by the  Board of
Directors  each  year   "...according  to  the  actual  business  situation  and
profitability of the Joint Venture from after-tax profit."

Article 10 of the People's Republic of China  Sino-Foreign  Equity Joint Venture
Law allows the net profit that a foreign  investor  receives as its share of the
Foreign  Investment  Equity  Joint  Venture  profit  to be  "remitted  abroad in
accordance with foreign exchange control regulations...." Logistically, when the
statutory  funds are allocated in accordance  with Article 43, and any loans are
repaid  by the joint  venture  in  accordance  with the  terms  thereof  and the
after-tax  profits of the joint venture are distributed  based upon the ratio of
each  party's  registered  capital.  The  profits  are  decided  by the board of
directors,  whether for distribution or for the expansion of the joint venture's
business;  provided,  however,  that where profits are used for  expansion,  the
board of directors is required to distribute  the profits that are available for
distribution  in an  amount  sufficient  to  enable  each  party  to pay the tax
liabilities,  if any,  that  they  each may  incur  with  respect  to the  joint
venture's profits.

If the joint venture has incurred losses in previous  years,  the profits of the
current  year must be first used to make up  losses.  The joint  venture  cannot
distribute profits until the previous losses are made up. Remaining profits from
previous years may be added to the current year for profits distribution, or for
distribution  after making up the current year  deficit.  The profits of a party
may be used for  further  investment  inside  China or may be  remitted  outside
China.

Where the joint venture has foreign currency available for profit  distribution,
each party can  receive  an amount of  foreign  currency  in  proportion  to its
respective  contribution  to registered  capital.  The joint venture must assist
each party,  upon request,  in exchanging  profits available for distribution in
RMB into United States Dollars using the Foreign Exchange Adjustment Centers and
any other  reasonable  methods that may be available to the joint venture or any
party. The costs of cash exchanges are the responsibility of the party receiving
the foreign  currency  profit  distribution.  All profits  distributed  to us in
foreign  currency  are  freely  remittable  outside  of China to a bank  account
designated by us.

Similarly,  Article 19 of the People's  Republic of China Wholly  Foreign  Owned
Enterprise  Law provides that a foreign  investor may remit abroad  profits that
are earned by a Foreign  Invested  Enterprise,  as well as other funds remaining
after the enterprise is liquidated.

Because the four Chinese  businesses are controlled  foreign  corporations,  for
U.S.  federal  income tax  purposes,  we may be required to include in our gross
income for U.S. tax purposes:

     o    Those  companies'  "Subpart F" income,  which includes certain passive
          income and income from  certain  transactions  with  related  persons,
          whether or not this income is distributed to it; and


                                       39
<PAGE>

     o    Increases  in those  companies'  earnings  invested  in  certain  U.S.
          property.

Based on the current and expected  income,  assets,  and  operations of the four
Chinese  businesses,  we believe that it will not have  significant U.S. federal
income tax consequences under the controlled foreign corporation rules.

REQUIRED STATUTORY RESERVE FUNDS

In accordance with various regulations in China, a Foreign Invested  Enterprise,
such as our hotel  division,  can  distribute  their after tax profit only after
making transfers to certain statutory surplus reserves, collectively referred to
as "Surplus Funds." The order of distribution to investors is:

     o    Enterprise or corporate income tax payments;

     o    Application to eliminate prior year losses;

     o    Transfers to the three statutory funds per regulations; and

     o    Distribution to investors.

The three statutory reserve funds are described below:

     o    Statutory  surplus  reserves are to be utilized to offset prior years'
          losses,  or to increase its share capital.  When the statutory surplus
          reserve  fund of a limited  liability  company  converts  its  surplus
          reserves to capital in accordance with a shareholders' resolution, the
          company will either  distribute new shares in proportion to the number
          of shares held by the each  shareholder,  or increase the par value of
          each share.  Except for the  reduction of losses  incurred,  any other
          usage should not result in this reserve  balance  falling below 25% of
          the registered capital.

     o    Enterprise  expansion fund is to provide for capital  expenditures and
          working  capital.  When the fund is utilized,  and amount equal to the
          lower of cost of the assets and the balance of the fund is transferred
          from the expansion fund to the general surplus  reserve.  This reserve
          is  non-distributable  other than in  liquidation.  When the  relevant
          asset are disposed of or written off, the original  transfers from the
          expansion fund are reversed.

     o    Public  welfare  fund is to be  utilized  for  capital  items  for the
          collective  benefits of a company's employees such as the construction
          of  dormitories,  cafeteria and other staff welfare  facilities.  This
          fund is non-distributable other than in liquidation.  When the fund is
          utilized,  an amount  equal to the lower of cost of the assets and the
          balance of the fund is transferred  from the statutory  public welfare
          fund to the general surplus reserve. This reserve is non-distributable
          other than in liquidation. When the relevant assets are disposed of or
          written off, the original  transfers from the statutory public welfare
          fund are reversed.

The separate  allocation  to each of the  Statutory  Surplus  Reserve  Funds are
either pre-set in the articles of association or joint venture contracts, or can
be  determined  by the board of directors of each  entity.  In Foreign  Invested
Enterprises,  the  directors  determine  the separate  allocations  on an annual


                                       40
<PAGE>

basis.  The total  allocations  to the Surplus Funds required as a percentage of
net profits  after  income tax is not set by  regulations  for Foreign  Invested
Enterprise  joint ventures and is to be determined by the directors on an annual
basis.  The  allocations  for each fund are recorded  differently on the Foreign
Invested Enterprise financial statements. The reserve fund, enterprise expansion
fund and statutory  public  welfare fund are shown on the balance sheets as part
of owners' equity.

For all Foreign Invested  Enterprises,  once the  contributions to the statutory
surplus reserve fund equal 50% of the Foreign Invested  Enterprise's  registered
capital, no further  contributions to that fund need be made. No such limitation
exists for other funds.  Foreign  Invested  Enterprises do not have to set up or
contribute to an enterprise expansion fund.

In wholly-owned Foreign Invested Enterprises,  income after the payment of China
income taxes shall be allocated to the statutory  surplus reserves and statutory
public  welfare fund for staff and workers.  The  proportion of  allocation  for
reserve  funds is no less  than 10  percent  of the  profit  after tax until the
accumulative amount of allocation for statutory surplus reserve funds reaches 50
percent of the registered capital,  and then no more allocation may be made. The
proportion  of  allocation  for  statutory  public  welfare fund and  enterprise
expansion  fund is  decided by the  enterprise  itself.  A wholly  foreign-owned
enterprise  does not have to set up or  contribute  to an  enterprise  expansion
fund.

POLITICAL AND TRADE RELATIONS WITH THE UNITED STATES

Political and trade relations between the United States and Chinese  governments
within the past five  years have been  volatile  and may  continue  to be in the
future. Major causes of volatility,  the United States' considered revocation of
China's Most Favored  Nation trade status,  illegal  transshipments  of textiles
from China to the United States,  issues  surrounding the sovereignty of Taiwan,
and the United States' bombing of the Chinese embassy in Yugoslavia, have had no
direct  connection  to  our  operations;   however,  other  on-going  causes  of
volatility,  including the  protection of  intellectual  property  rights within
China and  sensitive  technology  transfer  from the United States to China have
closer  potential  connection to our operations.  There can be no assurance that
the  political  and trade  ramifications  of these causes of  volatility  or the
emergence  of new  causes  of  volatility  will not  cause  difficulties  in our
operations in the China marketplace.

ECONOMIC REFORM ISSUES

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

     o    We will be able to capitalize on economic reforms;

     o    The Chinese  government  will continue its pursuit of economic  reform
          policies;

     o    The economic policies, even if pursued, will be successful;


                                       41
<PAGE>

     o    Economic policies will not be significantly altered from time to time;
          and

     o    Business  operations  in China will not become  subject to the risk of
          nationalization.

Negative impact upon economic reform policies or nationalization could result in
a total investment loss in our common stock.

Since 1978, the Chinese  government has reformed its economic  systems.  Because
many reforms are unprecedented or experimental,  they are expected to be refined
and improved.  Other political,  economic and social factors,  such as political
changes, changes in the rates of economic growth,  unemployment or inflation, or
in the disparities in per capita wealth between regions within China, could lead
to further  readjustment of the reform measures.  This refining and readjustment
process may negatively affect our operations.

Our  Telecommunications  Division is partially  dependent upon the  government's
allocation of funds in its budgeting  processes.  These budgetary  processes are
not  necessarily  subject to fixed time  schedules;  accordingly,  our telephone
communications  manufacturing  company's  operations,  quarterly  revenues,  and
operating  results may be  adversely  affected by extended  periods of budgeting
freezes or restraints.

In addition,  our  Telecommunications  Division is partially  dependent upon the
availability  of bank credit to its  customers as mandated by the  government in
China.  Recently,  in  response  to  inflationary  concerns  and other  economic
factors,  the Chinese government imposed restrictions on the funds available for
lending  by the  banking  system.  In  addition,  we do  not  know  whether  the
restrictions on the  availability of credit will ease and, if so, the nature and
timing of these changes.  These fund  restrictions  could  adversely  affect the
operations of each of our subsidiaries.

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

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


                                       42
<PAGE>

CURRENCY CONVERSION AND EXCHANGE

The   currency  in  China  is   designated   as  the   Renminbi.   Although  the
Renminbi/United  States dollar exchange rate has been  relatively  stable in the
past five years there can be no assurance that the exchange rate will not become
volatile or that the Renminbi will not be officially devalued against the United
States dollar by direction of the Chinese government.

Exchange  rate  fluctuations  may  adversely  affect our  financial  performance
because of our foreign  currency  denominated  assets and  liabilities,  and may
reduce the value,  translated  or converted,  as  applicable  into United States
dollars, of our net fixed assets, our earnings and our declared dividends. We do
not engage in any hedging activities in order to minimize the effect of exchange
rate risks.

REPORTS TO SECURITY HOLDERS

We are subject to the informational  requirements of the Securities Exchange Act
of  1934.  Accordingly,   we  file  annual,  quarterly  and  other  reports  and
information with the Securities and Exchange  Commission.  You may read and copy
these  reports and other  information  we file at the  Securities  and  Exchange
Commission's public reference rooms in Washington, D.C., New York, New York, and
Chicago,  Illinois. Our filings are also available to the public from commercial
document retrieval services and the Internet worldwide website maintained by the
Securities and Exchange Commission at www.sec.gov.

ITEM 2.  PROPERTIES

The PRC Land  Administration  Law,  initially revised to reflect modern land use
regulation in December 1988 and most recently  revised  effective  January 1999,
governs  land  use  in  China.  This  revised   legislation   provides  for  the
transferability  of legal term  interests in land,  otherwise  treated under the
regulatory  scheme as a fee simple.  The  government  has rights of  termination
similar in concept to eminent  domain in common law,  which can be  exercised to
regulate  land use to satisfy  public  need.  These term  interests  in land are
evidenced  by  "Land  Use  Certificates"  that set  forth  the  location,  size,
permitted use and "owner" of the respective parcels.

OUR HOTEL FACILITIES

Our  Jiaozuo  Yi Wan Hotel  Division  has a Hotel  Land Use  Certificate,  which
consists of 2.42 acres and has a term of 40 years  expiring in January 2037. The
land identified in this Certificate is owned by our joint venture partner Shunao
Industry & Commerce  Company,  Ltd. and is located in Jiaozuo City.  The use and
purpose of the land as stated in the Certificate is "commerce";  accordingly the
Certificate enables us to operate hotel,  entertainment,  food and beverage, and
conference  facilities.  We have paid the  government in China a one-time fee of
13,000,000 RMB (approximately US$1,570,000), for this land use permit.

Our Jiaozuo Yi Wan hotel  facilities are located in Jiaozuo City, Henan province
at No. 189, Middle Min Zhu Road. They include:

     o    1 main building (approximately 22 stories/230 feet high/110,000 square
          feet);

     o    131 standard guest rooms;


                                       43
<PAGE>

     o    25 guest suites;

     o    2 executive guest suites;

     o    One 500-bed employee dormitory;

     o    5 full service restaurants (1,500 person capacity);

     o    1 buffet coffee shop (50 person capacity)

     o    1 lobby bar (25 person capacity);

     o    1 nightclub (334 person capacity);

     o    1 sauna-health club (500 person capacity);

     o    9 small and medium size  conference  and meeting  rooms (10-60  person
          capacity);

     o    1 large conference room (460 person capacity);

     o    1 business center;

     o    1 travel agency;

     o    1 sundries and gift store;

     o    1 beauty salon (four stations); and

     o    full facility smoke detectors and water sprinklers.

Our  Qinyang  Yi Wan Hotel  Division  has a Hotel  Land Use  Certificate,  which
consists of 2 acres and has a term of 30 years expiring in January 2031. The use
and purpose of the land as stated in the Certificate is "commerce";  accordingly
the Certificate enables us to operate hotel,  entertainment,  food and beverage,
and conference  facilities.  The Land Use  Certificate was obtained from its 20%
joint venture partner as a capital  contribution in the amount of  approximately
US$316,000.

Our Qinyang Yi Wan hotel  facilities are located in Qinyang City at No. 53. West
Huai Fu Road Qinyang City, Henan Province, China. They include:

     o    1 main building;

     o    54 standard guest rooms;

     o    5 guest suites;

     o    One 200-bed employee dormitory;

     o    1 Chinese  restaurant  (150  person  capacity)  with 20 VIP rooms (200
          person capacity);

     o    1 Muslim  restaurant (80 person capacity) with 9 VIP rooms (100 person
          capacity);

     o    1 sauna-health club (250 person capacity);


                                       44
<PAGE>

     o    16 KTV rooms (150 person capacity);

     o    1 small meeting room (20 person capacity);

     o    1 large conference room (300 person capacity);

     o    1 business center;

     o    1 travel agency;

     o    sundries and gift store;

     o    1 beauty salon (four stations); and

     o    full facility smoke detectors and water sprinklers.

OUR TELECOMMUNICATIONS DIVISION'S FACILITIES

Our Telecommunication Division has a Land Use Certificate, which consists of 676
acres of land and a building  occupying  10,515.21  square feet of land,  with a
permitted  building size of 32,024 square feet.  This Land Use Certificate has a
term of 50  years  expiring  in  February  2045.  The  land  identified  in this
Certificate is owned by Cen Minhong, one of our shareholders,  and is located in
Daliang  Town,  Shunde  City.  The  permitted  use of the land as  stated in the
Certificate  is  "manufacturing";  accordingly  the  Certificate  enables  us to
operate our manufacturing  facility. The Communications Land Use Certificate was
originally  purchased  by  Cen  Minhong,  one  of the  initial  partners  of our
telecommunications company who granted the company the right to use the land for
a period of 50 years,  beginning in March 1995.  The original owner has assigned
the  land  use  right  to our  Telecommunications  Division  for  no  additional
consideration  for the remaining  years. The original cost of the land use right
was RMB 2,300,000, or approximately US $280,000.

Our  Telecommunications  Division's  facilities  are  located  in Shun de  City,
Guangdong  province  at No. 3. 5th Street  Fengxiang  Road,  Daliang  Town,  and
include:

     o    1 production, management, and research building, four floors

     o    4 floor production facility (approximately 9750 square feet)

     o    1 warehouse

     o    50 sets of mechanical processing equipment

     o    150 sets of various mold and pressure tools

     o    40 kinds of testing and inspection equipment

     o    3 production lines

OUR YI WAN BEIJING HOTEL MANAGEMENT DIVISION'S FACILITIES

Our Yi Wan Beijing Hotel  Management Ltd.  Division's  facilities are located in
Xicheng  District,  Beijing city at No. 137 of Xi-zhi Men Wai Avenue.  The total


                                       45
<PAGE>

space for the restaurant is 429 square meters,  which includes two VIP rooms and
one saloon, with a total occupancy of 180 people.

ITEM 3.  LEGAL PROCEEDINGS

We are not a party to or aware of any pending or  threatened  legal  lawsuits or
other legal actions against us.

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

No matters were  submitted to a vote of our security  holders  during the fourth
quarter of the year ended December 31, 2004.


                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S  COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Our common stock became quoted on the OTC Bulletin  Board on September 10, 2002.
Below is the market information  pertaining to the range of the high and low bid
information  of our common  stock for each quarter for the last two fiscal years
as quoted on the OTC Bulletin Board. Our common stock is quoted under the symbol
"YIWA".  The quotations  reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission, and may not represent actual transactions.

     -------------------------------    ---------------    ---------------
                                              LOW               HIGH
     -------------------------------    ---------------    ---------------
                  2004
     -------------------------------    ---------------    ---------------
     Fourth Quarter                          $0.56              $1.05
     -------------------------------    ---------------    ---------------
     Third Quarter                           $0.65              $1.50
     -------------------------------    ---------------    ---------------
     Second Quarter                          $1.20              $2.85
     -------------------------------    ---------------    ---------------
     First Quarter                           $1.75              $5.50
     -------------------------------    ---------------    ---------------


     -------------------------------    ---------------    ---------------
                  2003
     -------------------------------    ---------------    ---------------
     Fourth Quarter                          $0.40              $9.00
     -------------------------------    ---------------    ---------------
     Third Quarter                           $0.15              $1.50
     -------------------------------    ---------------    ---------------
     Second Quarter                          $0.10              $0.15
     -------------------------------    ---------------    ---------------
     First Quarter                           $0.01              $2.25
     -------------------------------    ---------------    ---------------


                                       46
<PAGE>

A limited  trading  market exists for our common stock and there is no assurance
that a more  significant  trading  market will develop,  or if developed will be
sustained.  A  shareholder  in all  likelihood,  therefore,  will not be able to
resell  their  securities  should he or she  desire to do so when  eligible  for
public  resales.  Furthermore,  it is unlikely that a lending  institution  will
accept our securities as pledged  collateral for loans unless a more significant
trading market develops.

HOLDERS OF RECORD

As of April 12, 2005, there were 16,861,250 shares of common stock  outstanding,
which were held of record by 50 stockholders.

OPTIONS, WARRANTS

There  are no  outstanding  options  or  warrants  to  purchase,  or  securities
convertible into, our common equity.

DIVIDEND POLICY

Since our  inception,  we have not declared or paid any  dividends on our common
stock,  nor do we have  any  intentions  of  declaring  such a  dividend  in the
foreseeable  future. The payment of dividends,  if any, is within the discretion
of the Board and will depend upon our  earnings,  our capital  requirements  and
financial condition, and other relevant factors. Our Board of Directors does not
intend to declare any dividends in the foreseeable  future,  but instead intends
to retain all earnings, if any, for use in our operations.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Equity Compensation Plan Information

<TABLE>
<CAPTION>
--------------------------- -------------------------- ------------------------- --------------------------
Plan Category               Number of securities to    Weighted-average          Number of securities
                            be issued upon exercise    exercise price of         remaining available for
                            of outstanding options,    outstanding options,      future issuance under
                            warrants and rights        warrants and rights       equity compensation plans
--------------------------- -------------------------- ------------------------- --------------------------
<S>                         <C>                        <C>                       <C>
Equity compensation plans            None                       - - -                       None
approved by security
holders
--------------------------- -------------------------- ------------------------- --------------------------
Equity compensation plans         325,000 (1)                   - - -                    470,000 (2)
not approved by security           30,000 (2)
holders
--------------------------- -------------------------- ------------------------- --------------------------
Total                             355,000                       - - -                    470,000
--------------------------- -------------------------- ------------------------- --------------------------
</TABLE>

----------------------
(1) In April 2004 and June 2004, our board of directors approved agreements with
Stanley  Wunderlich and Yale Yu for their  consulting  services.  The Agreements
both provide that Mr.  Wunderlich and Mr. Wu will provide business and financial


                                       47
<PAGE>

consulting  services to the Company including  rendering  advice,  consultation,
information and services regarding  marketing and general financial and business
matters  including,  but not limited to,  mergers  and  acquisitions,  strategic
alliances  and such  others as the  Company  shall  from  time to time  request.
Pursuant to Mr. Wunderlich's  consulting agreement,  dated on or about April 15,
2004, the Company issued to Mr. Wunderlich 125,000 shares of its common stock in
exchange for his consulting services. Pursuant to Mr. Yu's consulting agreement,
dated on or about June 15, 2004,  the Company issued to Mr. Yu 200,000 shares of
its common stock in exchange for his consulting services.

(2) In December 2004, our board of directors  approved the 2004 Consultant Stock
Plan (the  "Plan") for the  issuance of our common  stock to persons who provide
consulting  services  to the  Company.  The board of  directors  or a  committee
appointed by the board has full, final and sole authority to designate  eligible
persons,  grant  awards,  interpret  the Plan,  and  designate  its authority in
relation  to the plan to  directors  who are  executive  officers of the Company
subject to  restrictions as the Plan committee or the board may decide to impose
on such  delegate  directors.  The  maximum  number of shares that may be issued
under the Plan is 500,000  shares of our common  stock.  In December  2004,  the
Company issued 30,000 shares to a consultant  for legal services  rendered under
the Plan.

RECENT  SALES  OF  UNREGISTERED  SECURITIES;  USE OF  PROCEEDS  FROM  REGISTERED
SECURITIES

We had no unregistered  securities issuances during our fiscal years ended 2004,
2003 and 2002.

ITEM 6.  SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

The following  discussion and analysis  should be read in  conjunction  with the
Consolidated  Financial Statements contained elsewhere in this prospectus.  They
present the results of  operations  from  January 1, 2000  through  December 31,
2004.

I.   OVERVIEW

As of December 31, 2004 we have three operating units, each producing  different
products and services:

o    Our two  hotel  divisions  provide  up-scale  lodging,  food and  beverage,
     entertainment, and conference and meeting facility services.

o    Our  Telecommunications  Division  produces  digital  and analog  telephone
     network main distribution frames and their component parts.

o    Our  variable  interest  entity YI WAN BEIJING is a  restaurant  management
     company  serving  Hong Kong  style fast foods and is located in the city of
     Beijing, People's Republic of China.

All of our operating units are located in the People's Republic of China.

II.  RESULTS OF OPERATIONS

The  following   selected  financial  data  with  respect  to  our  consolidated
statements of operations for the years ended December 31, 2000, 2001, 2002, 2003


                                       48
<PAGE>

and 2004 and  consolidated  balance sheets as of December 31, 2000,  2001, 2002,
2003 and 2004 are derived from the audited consolidated  financial statements of
the Company.  The following  information  should be read in conjunction with the
consolidated  financial  statements of the Company and the related notes thereto
and Item 7.  Management's  Discussion  and Analysis of Financial  Condition  and
Results of Operations, which is included elsewhere in this Annual Report on Form
10-K.

                       YI WAN GROUP. INC. AND SUBSIDIARIES
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                      Combined     Consolidated   Consolidated   Consolidated   Consolidated
                                    December 31,   December 31,   December 31,   December 31,   December 31,
                                        2000           2001           2002           2003           2004
                                    ------------   ------------   ------------   ------------   ------------
                                         USD            USD            USD            USD            USD
                                    ------------   ------------   ------------   ------------   ------------
<S>                                 <C>            <C>            <C>            <C>            <C>
Net Sales                             14,070,568     12,122,239     13,901,421     12,495,189     11,216,720
Cost of Sales                          5,416,003      4,421,636      5,134,589      4,772,291      4,163,352
Gross profit                           8,654,565      7,700,603      8,766,832      7,722,898      7,053,368
Operating Expenses                     4,068,658      4,043,937      5,087,303      4,371,566      5,080,471
Income From Operations                 4,585,907      3,656,666      3,679,529      3,351,332      1,972,897
Other Income (Expense)                    57,592         18,560         28,432       (460,559)      (235,807)
Net Income                             3,361,253      2,530,779      1,086,438      1,662,345        691,369
Earnings per share                          0.21           0.16           0.06           0.10           0.04

BALANCE SHEET
                                    December 31,   December 31,   December 31,   December 31,   December 31,
                                        2000           2001           2002           2003           2004
                                    ------------   ------------   ------------   ------------   ------------
                                         USD            USD            USD            USD            USD
                                    ------------   ------------   ------------   ------------   ------------
ASSETS

Total Current Assets                   5,838,988      5,608,102      6,938,058      9,146,425      7,886,022
Other Assets                          23,713,156     22,412,040     21,244,171     20,523,765     22,345,696
Total Assets                          29,552,144     28,020,142     28,182,229     29,670,190     30,231,718

LIABILITIES & STOCKHOLDER'S EQUITY

Current Liabilities:
  Accounts Payable & Accrued
  Liabilities                          3,567,913      3,453,778      3,795,717      3,814,708      2,901,303
  Payable to Stockholders/other       10,114,002      5,950,739      4,847,082      4,932,273      4,932,273
  Total Current Liabilities           13,681,915      9,404,517      8,642,799      8,746,981      7,833,576

Long Term Liabilities:

Total Liabilities                     13,681,915      9,404,517      8,746,981      8,428,143      7,833,576

Total Stockholder's Equity            14,609,796     17,151,131     17,730,938     19,398,849     20,374,142

Total Liabilities and
Stockholder Equity                    29,552,144     28,020,142     28,182,229     29,670,190     30,231,718
</TABLE>

                                       49
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATION

                           FORWARD-LOOKING STATEMENTS:

The following  discussion  of our financial  condition and results of operations
should be read in conjunction  with the  consolidated  financial  statements and
related  notes  thereto.  The  following  discussion  contains   forward-looking
statements. Yi Wan Group, Inc. is referred to herein as "we" or "our." The words
or phrases  "would be," "will allow,"  "intends to," "will likely  result," "are
expected  to," "will  continue,"  "is  anticipated,"  "estimate,"  "project," or
similar expressions are intended to identify "forward-looking  statements." Such
statements include those concerning  expected financial  performance,  corporate
strategy,  and operational  plans.  Actual results could differ  materially from
those  projected in the  forward-looking  statements  as a result of a number of
risks and uncertainties,  including:  (a) general economic  conditions in China;
(b) regulatory  factors in China that may lead to additional  costs or otherwise
negatively  affect our  business;  (c) whether we are able to manage our planned
growth  efficiently,  including  whether  our  management  will be able to:  (i)
identify,  hire, train,  retain,  motivate and manage required personnel or (ii)
successfully manage and exploit existing and potential market opportunities; (d)
whether we are able to  generate  sufficient  revenues  or obtain  financing  to
sustain and grow our operations; (e) whether we are able to successfully fulfill
our primary cash  requirements  which are explained  below under  "Liquidity and
Capital Resources";  (f) although the World Health Organization on June 24, 2003
removed its recommendation  that people should postpone all but essential travel
to Beijing, China due to SARS and on July 5, 2003 removed Taiwan, China from the
list of areas with recent  local  transmission  of SARS,  whether  there will be
continuing  negative economic effects upon China and the China hotel and tourist
industries due to possible continuing negative  perceptions  pertaining to SARS;
and (g) whether worldwide economic conditions will negatively affect the tourist
industry in China and our hotel related revenues.  Statements made herein are as
of the date of the  filing of this Form 10-K with the  Securities  and  Exchange
Commission  and  should not be relied  upon as of any  subsequent  date.  Unless
otherwise  required by applicable law, we do not undertake,  and we specifically
disclaim any  obligation,  to update any  forward-looking  statements to reflect
occurrences, developments,  unanticipated events or circumstances after the date
of such statement.  The safe harbors for forward-looking  statements provided by
the Private  Securities  Litigation  Reform Act of 1995 (the  "Reform  Act") are
unavailable to issuers of penny stock.  Our shares may be considered penny stock
and as a result  of such  safe  harbors  set  forth  under  the  Reform  Act are
unavailable to us.

GENERAL

Yi Wan Group operates two lines of businesses, a hotel & restaurant business and
a  telecommunications  business,  through  ownership of three  Chinese  business
entities.  We own a 90% interest in Jiaozuo Yi Wan Hotel Company Limited, an 80%
interest in Qinyang Yi Wan Hotel Company Limited, and a 100% interest in Shun De
Yi Wan Communications Equipment Plant Co., Ltd.

Our hotel & restaurant  business  consists of the operation and management of an
upscale hotel  conference  and  entertainment  facility in Jiaozuo  City,  Henan
province  and in the City of Qinyang.  This  business  line focuses on providing
lodging, food and beverage,  entertainment,  and conference and meeting products
and  services.  Recent  efforts are focused on  expanding  the food and beverage
business which we think can generate higher profit margins.


                                       50
<PAGE>

Our telecommunications business focuses on designing and manufacturing telephone
network switching component parts for use in telephone main distribution frames,
and manufacturing and selling  assembled  telephone main distribution  frames. A
telephone  main  distribution  frame  connects a  company's  or an  individual's
internal  telephone  system  to the  telephone  company's  external  lines.  Our
telecommunications  business'  initial design and production  efforts focused on
developing  analog switching  component parts and the manufacture of a series of
analog main distribution frames.

In order to expand our  restaurant  and food services and still be in compliance
with the  regulations of the People's  Republic of China ("PRC") with respect to
restaurant  services,  in  July  2004,  we  established  Yi  Wan  Beijing  Hotel
Management Co. Ltd. ("Yi Wan Beijing"),  a variable  interest entity through two
persons who are PRC citizens  and who each  legally  owned 50% of Yi Wan Beijing
("Yi Wan Beijing Interest Holders") to operate our restaurant business. Pursuant
to an Equity Trust  Agreement,  we transferred  RMB100,000 to the Yi Wan Beijing
Interest  Holders  which was used to form and  capitalize  Yi Wan  Beijing.  The
Equity  Trust  Agreement  provides  that the  Trustees  are to hold  the  equity
interest in Yi Wan Beijing (the "Equity  Interests") in trust for the benefit of
Yi Wan Group,  Inc. The Yi Wan Beijing Interest Holders have agreed to not sell,
pledge, hypothecate,  encumber or otherwise dispose of the Equity Interests. Any
such transfer  will result in a breach of the Equity Trust  Agreement and the Yi
Wan Beijing Interest Holders will be required to transfer the Equity Interest to
the Company. Further the Yi Wan Beijing Interest Holders have agreed to promptly
distribute any and all dividends,  distributions or other payments received from
Yi Wan Beijing with respect to the Equity Interest to the Company.  Finally, the
Yi Wan Beijing Interest Holders granted  irrevocable proxies to two directors of
the Company to exercise all voting rights such Yi Wan Beijing  Interest  Holders
have with respect to their ownership interest in Yi Wan Beijing. The irrevocable
proxies  further  provides that if such two directors cease to be an employee of
the Company, the Yi Wan Beijing Interest Holders agree to immediately  terminate
the proxy and to grant a proxy to another person designated by the Company.  The
restaurant  managed by Yi Wan  Beijing  serves Hong Kong style fast foods and is
located in the city of Beijing, PRC.

Through our Jiaozuo Yi Wan Hotel company, we have made an investment to set up a
luxury  restaurant in Zhengzhou  City,  the capital of Henan  Province,  PRC. To
comply  with  the  PRC's  regulations  with  respect  to  ownership  of food and
restaurant services, the Company will set up a variable interest entity with the
same  structure  as Yi Wan  Beijing  that  will  legally  own and  operate  this
restaurant.

RESULTS OF OPERATIONS

Presented below are the Company's consolidated  statements of operations for the
years ended December 31, 2004 and 2003:


                                       51
<PAGE>

                                                       2004            2003
                                                   ------------    ------------

NET SALES                                          $ 11,216,720    $ 12,495,189

COST OF SALES                                         4,163,352       4,772,291
                                                   ------------    ------------
GROSS PROFIT                                          7,053,368       7,722,898

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          5,080,471       4,371,566
                                                   ------------    ------------
INCOME FROM OPERATIONS                                1,972,897       3,351,332
                                                   ------------    ------------
OTHER INCOME (EXPENSE):
   Interest income                                      147,326          25,023
   Other income (expense)                              (383,133)       (485,582)
                                                   ------------    ------------
        Total other income (expense)                   (235,807)       (460,559)
                                                   ------------    ------------
INCOME FROM CONTINUING OPERATIONS BEFORE
PROVISION FOR INCOME TAXES AND MINORITY INTEREST      1,737,090       2,890,773

PROVISION FOR INCOME TAXES                              865,137       1,155,961
                                                   ------------    ------------
INCOME BEFORE MINORITY INTEREST                         871,953       1,734,812

MINORITY INTEREST                                      (180,802)       (138,888)
                                                   ------------    ------------
NET INCOME                                              691,151       1,595,924

OTHER COMPREHENSIVE INCOME:
   Foreign currency translation adjustment                  218          66,421
                                                   ------------    ------------

COMPREHENSIVE INCOME                               $    691,369    $  1,662,345
                                                   ============    ============

EARNINGS PER SHARE, BASIC AND DILUTED              $       0.04    $       0.10

WEIGHTED AVERAGE NUMBER OF SHARES                    16,672,140      16,506,250
                                                   ============    ============


As of December 31, 2004, we had $3,280,289 of retained earnings.  As of December
31,  2004,  we  had  cash  of  $5,173,440  and  total  shareholders'  equity  of
$20,374,142.  For the  year  ended  December  31,  2004,  we had  revenues  of $
11,216,720 and general administrative and sales expenses of $5,080,471.

CONSOLIDATED RESULTS

(1) SALES. Consolidated sales decreased by $ 1,278,469, or approximately 10.23%,
from  $12,495,189  for the year ended December 31, 2003 to  $11,216,720  for the
years  ended  December  31,  2004.  The 10%  decrease  was a direct  result of a
decrease in sales to our  telecommunications  business of $1,937,159,  which was
partially  offset by an increase in sales in our hotel and restaurant  business.
The reasons for the decrease in sales related to our telecommunications business
are:  (1)  our  telecommunication  business  has  not  yet  been  successful  in


                                       52
<PAGE>

developing  new  products to bring to the market;  and (2) a highly  competitive
industry.  We are in the process of evaluating our future  business plan for our
telecommunications  business. In addition, we are currently focusing more of our
efforts in developing and promoting the hotel and restaurant business.

(2) COST OF GOODS SOLD.  Consolidated  cost of goods sold  decreased by $608,939
from  4,772,291 for the year ended December 31, 2003 to $ 4,163,352 for the year
ended December 31, 2004.  Cost of goods sold as a percentage of sales  decreased
by 1.08%,  from  38.19% for the year ended  December  31, 2003 to 37.12% for the
year  ended  December  31,  2004.  The  decrease  in cost of sales  was due to a
decrease in our cost of raw materials in our hotel and  restaurant  business due
to a decrease in prices for meat,  eggs,  vegetables  and rice in  comparison to
last year's prices.  In addition,  the downsizing of operational  production and
failure to launch new  products  in the  telecommunication  sector in the fourth
quarter also contributed to the decrease in cost of sales.

(3)  GROSS  PROFIT.   Consolidated  gross  profit  decreased  by  $669,530  from
$7,722,898 for the year ended December 31, 2003 to $7,053,368 for the year ended
December 31, 2004.  Gross  profit as a percentage  of sales  increased by 1.08%,
from  61.81% for the year ended  December  31, 2003 to 62.88% for the year ended
December 31, 2004.  This  increase in gross profit as a percentage  of sales was
the result of the decreased cost of materials as discussed above.

(4) SELLING AND ADMINISTRATIVE  EXPENSES.  Selling and  administrative  expenses
increased by $708,905 from $ 4,371,566  for the year ended  December 31, 2003 to
$5,080,471 for the year ended December 31, 2004. The selling and  administrative
expenses as a percentage  of sales  increased by 10.31% from 34.99% for the year
ended  December 31, 2003 to 45.29% for the year ended December 31, 2004. For the
Hotel and Food segment, the increase in selling and administrative expenses as a
percentage of sales is  attributed to an increase in corporate  expenses such as
water,  fuel,  electricity and promotion cost. The increase in lease expense was
caused by the leasing of  restaurant  space by YI WAN  BEIJING,  which began its
operation  in July 2004.  The  increase in salaries  and  employee  benefits was
caused by the downsizing of the  telecommunication  segment,  in which severance
packages were provided to the laid-off employees.

(5) NET INCOME.  Consolidated net income decreased by $904,773, or approximately
56.69%, from $1,595,924 for the year ended December 31, 2003 to $691,151 for the
year ended  December 31, 2004. The decrease was mainly due to: (1) a decrease in
sales and increase in expenses related to our  telecommunications  business; and
(2) an increase in start up costs in the YI WAN BEIJING restaurant business.

SEGMENTED RESULTS

(1)  SALES.  An itemization of each operating  unit's data and an explanation of
significant changes are as follows:

     Hotel  and   Restaurant   Business:   Sales   increased  by  $658,690,   or
approximately  7.15%,  from  $9,216,576  for the year ended December 31, 2003 to
$9,875,266  for the year ended December 31, 2004. The increase was a result of a
new management team and an improvement in marketing strategies, such as offering
discount cards which can be used for various discounts in the restaurants, sauna
and night club, as well as for room discounts.

     Telecommunications    Business:   Sales   decreased   by   $1,937,159,   or
approximately  59.08%,  from  $3,278,613 for the year ended December 31, 2003 to
$1,341,454  for the year ended  December  31, 2004.  This  decrease was a direct


                                       53
<PAGE>

result of (1) our  telecommunication  operation being unsuccessful in developing
new products to bring to the market, and (2) a highly competitive  industry.  We
are in the process of evaluating our future plans for this business.

(2)  COST OF GOODS SOLD. An  itemization  of each  operating  unit's data and an
explanation of significant changes are as follows:

     Hotel and  Restaurant  Business:  Cost of goods sold increased by $294,995,
from  $2,939,163 for the year ended December 31, 2003 to $3,234,158 for the year
ended December 31, 2004.  Cost of goods sold as a percentage of sales  increased
by 0.86%,  from  31.89% for the year ended  December  31, 2003 to 32.75% for the
year ended  December 31, 2004.  The increase is attributed to an increase in our
cost of raw material due to an increase in prices for meat, eggs, vegetables and
rice in  comparison  to last year's  prices.  In  addition,  due to the positive
response to our discount  cards in 2003, we have offered more discount  cards to
customers in 2004 for use in the restaurants, sauna and nightclub as well as for
guest rooms.

     Telecommunications  Business: Cost of goods sold decreased by $903,934 from
$1,833,128  for the year ended  December 31, 2003 to $929,194 for the year ended
December 31, 2004.  Such decrease was due to the downsizing of production in the
fourth quarter of 2004 caused by the business downturn.  However,  cost of goods
sold as a percentage  of sales  increased to 69.27% for the year ended  December
31, 2004 from 55.91% for the year ended  December 31, 2003. The increase in cost
of goods sold as a  percentage  of sales was a result of an increase in the unit
cost of raw materials and a decrease in unit sales price of the products in 2004
as compared to 2003.

(3)  GROSS  PROFIT.  An  itemization  of  each  operating  unit's  data  and  an
explanation of significant changes is as follows:

     Hotel and  Restaurant  Business:  Gross profit  increased by $363,695  from
$6,277,413 for the year ended December 31, 2003 to $6,641,108 for the year ended
December 31, 2004. As a percentage of sales,  gross profit decreased from 68.11%
for the year ended  December 31, 2003 to 67.25% for the year ended  December 31,
2004.  The  decrease  in gross  profit  as a  percentage  of sales was due to an
increase  in the  cost of goods  sold and  increased  promotional  discounts  as
explained above.

     Telecommunications  Business:  Gross profit  decreased by  $1,033,225  from
$1,445,485  for the year ended  December 31, 2003 to $412,260 for the year ended
December 31, 2004. As a percentage of sales,  gross profit decreased from 44.09%
for the year ended  December 31, 2003 to 30.73% for the year ended  December 31,
2004.  The  decrease  in gross  profit  as a  percentage  of sales was due to an
increase in the cost of materials and a decrease in sales.

(4)  SELLING AND  ADMINISTRATIVE  EXPENSES.  An  itemization  of each  operating
unit's data and an explanation of significant changes are as follows:

     Hotel  and  Restaurant  Business:   Selling  and  administrative   expenses
increased by $379,530 from  $3,699,563  for the year ended  December 31, 2003 to
$4,079,093  for the year ended  December  31, 2004.  Selling and  administrative
expenses  as a  percentage  of sales  increased  to  41.31%  for the year  ended
December  31,  2004 from  40.14%  for the year ended  December  31,  2003.  This
increase was a result of increases in various  expenses  including  the start-up
costs of YI WAN BEIJING,  salaries and employee  benefits,  electricity and show
expenses for the new performance center.


                                       54
<PAGE>

     Telecommunications  Business: Selling and administrative expenses decreased
by $195,014 from  $672,003 for the year ended  December 31, 2003 to $476,989 for
the year ended  December  31,  2004.  Selling and  administrative  expenses as a
percentage of sales  increased to 35.56% for the year ended December 31, 2004 as
compared to 20.50% for the year ended December 31, 2003. The increase in selling
and administrative  expenses as a percentage of sales was a result of a decrease
in sales.

(5)  NET  INCOME.  An  itemization  of each  operating  unit's  data and further
explanations of significant changes are as follows:

     Hotel and  Restaurant  Business:  Net income  increased  by  $218,486  from
$1,239,668 or 13.45% of sales for the year ended December 31, 2003 to $1,458,154
or 14.77% of sales for the year ended  December  31,  2004.  The  increase  as a
percentage  of sales was a result  of a new  management  team and newly  applied
marketing strategies.

     Telecommunications   Business:  Net  income  decreased  by  $556,956,  from
$495,144  for the year ended  December 31, 2003 to a net loss of $61,812 for the
year ended  December 31, 2004.  The decrease was a result of a decrease in sales
and an increase in the unit cost of raw  materials,  as  explained  in the above
paragraphs.

LIQUIDITY AND CAPITAL RESOURCES

As of  December  31,  2004,  net  cash  provided  by  operating  activities  was
$3,268,023,  net cash used in investing activities was $1,412,994,  and net cash
used in financing activities was $47,431.

As of  December  31,  2003,  net  cash  provided  by  operating  activities  was
$2,599,614,  net cash used in investing activities was $1,350,872,  and net cash
used in financing activities was $18,054.

Net cash provided by operating  activities increased by $668,409 from $2,599,614
for the year ended  December 31, 2003 to $3,268,023  for the year ended December
31,  2004,  representing  a increase of  approximately  25.7%.  The increase was
mainly due to: (1) a decrease in temporary loan related to related parties;  and
(2) an increase in net withdrawal of account receivables.

Net cash used in investing  activities  increased by $62,122 to $(1,412,994) for
the year ended December 31, 2004, representing a 4.6% increase compared with the
$(1,350,872)  net cash used for the same period ended in 2003.  The increase was
due to our  investment  in a new  restaurant of $847,000  partially  offset by a
decrease in  spending on  equipment  upgrades  and an increase in proceeds  from
sales of equipments.

Net cash used in financing  activities increased by $29,377 to $(47,431) for the
year ended  December  31,  2004,  representing  a 162.7%  increase,  compared to
$(18,054) net cash used for the same period in 2003.  The increase was primarily
due to the  increases in payments to a shareholder  and notes payable  partially
offset by an increase of paid-in capital of YI WAN BEIJING.

Going forward,  our primary  requirements for cash consist of: (1) the continued
implementation of our Hotel and Telecommunications  Divisions' existing business
model in China and general  overhead and personnel  related  expenses to support
these activities; (2) continued promotional activities pertaining to our attempt
to increase  hotel  related  revenues;  (3) the  development  costs of our hotel

                                       55
<PAGE>

operations in China; (4) the payment of cash contributions to the joint ventures
under the joint  venture  agreements;  and (5) payments due to the former equity
owners of our subsidiaries.  We do not have any material commitments for capital
expenditures as of December 31, 2004. We anticipate  that our current  operating
activities will enable us to meet the anticipated cash requirements for the 2004
year.  Our Jiaozuo Yi Wan hotel expects to open one restaurant in Zhengzhou City
and one  restaurant  in  Beijing  under our "Yi Wan"  brand  over the next three
years. Our Yi Wan Beijing Hotel Management Co., Ltd. expects to open four or six
restaurants  under  our new  "Diyikou"  brand  fast-food  chain in  Beijing  and
Shanghai over the next five years.

Historically,  our  subsidiary  companies have financed  operations  principally
through  cash  generated  from  operations.  Initial  capital  for the Hotel and
Restaurant  business and  Telecommunications  business  came from  shareholders'
contributions and are as follows:  Hotel and Restaurant  business:  $11,960,000;
and Telecommunications business: $1,580,000. No bank loans were obtained for the
Hotel and  Restaurant  or  Telecommunications  businesses.  We have made capital
contributions to our subsidiaries and met the capital registration requirements.
An investment  requirement  we have yet to meet is the  $4,932,273  due to joint
venture's  former  partners.  The  balance  is to be  funded  from  the  profits
generated  from the  operations of the  subsidiaries  and, if necessary,  equity
financing. There is no assurance, however, that equity financing can be obtained
for the above  purposes.  The  joint  venture's  former  partners  extended  the
September  2004  payment date to September  2005 for capital  contributions.  We
intend to fund the hotel and restaurant's capital improvements from the positive
cash flow generated from hotel operations.

MANAGEMENT ASSUMPTIONS

Management anticipates,  based on internal forecasts and assumptions relating to
our operations  that existing cash and funds  generated from  operations will be
sufficient to meet working capital and capital  expenditure  requirements for at
least the next 12 months. In the event that plans change, our assumptions change
or prove  inaccurate  or if other  capital  resources  and  projected  cash flow
otherwise prove to be  insufficient  to fund  operations  (due to  unanticipated
expense,  technical  difficulties,  or otherwise),  we could be required to seek
additional  financing.  There can be no assurance that we will be able to obtain
additional financing on terms acceptable to it, or at all.

EFFECTS OF INFLATION

We are subject to commodity  price risks arising from price  fluctuations in the
market  prices of the various raw materials  that  comprise our products.  Price
risks are managed by each business unit through  productivity  improvements  and
cost-containment  measures.  Management  does not believe that inflation risk is
material to our  business or our  consolidated  financial  position,  results of
operations or cash flows.

EFFECT OF FLUCTUATION IN FOREIGN EXCHANGE RATES

Our operating  subsidiaries  are located in China.  These companies buy and sell
products in China using Chinese  Renminbi as the functional  currency.  Based on
China  government  regulation,  all  foreign  currencies  under the  category of
current accounts are allowed to be freely exchanged with hard currencies. During
the past two years of operation,  there were no significant  changes in exchange
rates;  however,  unforeseen  developments  may  cause a  significant  change in
exchange rates.


                                       56
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

None.

REORGANIZATION OF OPERATION OF RESTAURANT BUSINESS

In order to expand our  restaurant  and food services and still be in compliance
with the  regulations of the People's  Republic of China ("PRC") with respect to
restaurant  services,  in  July  2004,  we  established  Yi  Wan  Beijing  Hotel
Management Co. Ltd. ("Yi Wan Beijing"),  a variable  interest entity through two
persons who are PRC citizens  and who each  legally  owned 50% of Yi Wan Beijing
("Yi Wan Beijing Interest Holders") to operate our restaurant business. Pursuant
to an Equity Trust  Agreement,  we transferred  RMB100,000 to the Yi Wan Beijing
Interest  Holders  which was used to form and  capitalize  Yi Wan  Beijing.  The
Equity  Trust  Agreement  provides  that the  Trustees  are to hold  the  equity
interest in Yi Wan Beijing (the "Equity  Interests") in trust for the benefit of
Yi Wan Group,  Inc. The Yi Wan Beijing Interest Holders have agreed to not sell,
pledge, hypothecate,  encumber or otherwise dispose of the Equity Interests. Any
such transfer  will result in a breach of the Equity Trust  Agreement and the Yi
Wan Beijing Interest Holders will be required to transfer the Equity Interest to
the  Company.  Further,  the Yi Wan  Beijing  Interest  Holders  have  agreed to
promptly  distribute  any and all  dividends,  distributions  or other  payments
received from Yi Wan Beijing with respect to the Equity Interest to the Company.
Finally,  the Yi Wan Beijing Interest Holders granted irrevocable proxies to two
directors  of the  Company to  exercise  all voting  rights  such Yi Wan Beijing
Interest  Holders  have  with  respect  to their  ownership  interest  in Yi Wan
Beijing.  The irrevocable  proxies  further  provides that if such two directors
cease to be an employee of the  Company,  the Yi Wan  Beijing  Interest  Holders
agree to immediately  terminate the proxy and to grant a proxy to another person
designated by the Company.

CONTRACTUAL OBLIGATIONS

Table of Contractual Obligations

<TABLE>
<CAPTION>
--------------------------------------- -------------------------------------------------------
CONTRACTUAL OBLIGATIONS                                        PAYMENT DUE BY PERIOD
--------------------------------------- -------------------------------------------------------
                                                     LESS THAN     1-3        3-5     MORE THAN
                                           TOTAL      1 YEAR      YEARS      YEARS     5 YEARS
--------------------------------------- -----------  ---------  ---------  ---------  ---------
<S>                                     <C>          <C>        <C>        <C>        <C>
Long-Term Debt Obligations                 None             --         --         --         --
--------------------------------------- -----------  ---------  ---------  ---------  ---------
Capital Lease Obligations                  None             --         --         --         --
--------------------------------------- -----------  ---------  ---------  ---------  ---------
Operating Lease Obligations                1         $ 127,711  $ 383,133  $ 138,354         --
--------------------------------------- -----------  ---------  ---------  ---------  ---------
Purchase Obligations                       None             --         --         --         --
--------------------------------------- -----------  ---------  ---------  ---------  ---------
Other Long-Term Liabilities Reflected      None             --         --         --         --
on the Registrant's Balance Sheet
under GAAP
--------------------------------------- -----------  ---------  ---------  ---------  ---------
Total                                      1         $ 127,711  $ 383,133  $ 138,354         --
--------------------------------------- -----------  ---------  ---------  ---------  ---------
</TABLE>

                                       57
<PAGE>

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

While our reporting  currency is the U.S.  dollar,  to date virtually all of our
revenues and costs are denominated in Renminbi and a significant  portion of our
assets and liabilities are denominated in Renminbi.  As a result, we are exposed
to foreign  exchange  risk as our  revenues  and  results of  operations  may be
impacted by fluctuations in the exchange rate between U.S. Dollars and Renminbi.
If the Renminbi  depreciates  against the U.S. Dollar, the value of our Renminbi
revenues and assets as expressed in our U.S.  Dollar  financial  statements will
decline.  We do not hold any  derivative  or other  financial  instruments  that
expose us to substantial market risk.

The Renminbi is currently freely convertible under the "current account",  which
includes dividends, trade and service-related foreign exchange transactions, but
not under the "capital account",  which includes foreign direct  investment.  To
date, we have not entered into any hedging  transactions  in an effort to reduce
our exposure to foreign  currency  exchange  risk.  While we may decide to enter
into hedging  transactions in the future,  the effectiveness of these hedges may
be limited  and we may not be able to  successfully  hedge our  exposure at all.
Accordingly,  we may incur economic losses in the future due to foreign exchange
rate fluctuations, which could have a negative impact on our financial condition
and results of operations.


                                       58
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors
Yi Wan Group, Inc. and Subsidiaries

We have  audited  the  consolidated  balance  sheets of Yi Wan Group,  Inc.  and
subsidiaries  as of  December  31, 2004 and 2003,  and the related  consolidated
statements of income and other comprehensive  income,  shareholders'  equity and
cash  flows for each of the two years in the period  ended  December  31,  2004.
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  auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
consolidated financial statements are free of material misstatement. The Company
is not  required  to  have,  nor were we  engaged  to  perform,  an audit of its
internal control over financial reporting.  Our audit included  consideration of
internal  control  over  financial  reporting  for a basis for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the  effectiveness  of the Company's  internal  control
over  financial  reporting.  Accordingly,  we express no such opinion.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial positions of Yi Wan Group, Inc.
and  subsidiaries  as of December  31,  2004 and 2003,  and the results of their
operations  and their cash  flows for each of the two years in the period  ended
December  31,  2004,  in  conformity  with U.S.  generally  accepted  accounting
principles.

/s/ Moore Stephens Wurth Frazer and Torbet, LLP

March 21, 2005
Walnut, California



                                       59
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2004 AND 2003


                                     ASSETS
                                                          2004          2003
                                                      -----------   -----------

CURRENT ASSETS:
  Cash                                                $ 5,173,440   $ 3,365,842
  Accounts receivable, net of allowance for
    doubtful accounts of $4,600 and $8,104
    at December 31, 2004 and 2003, respectively           921,920     1,612,710
  Due from related parties                              1,366,789     3,599,133
  Inventories                                             354,206       513,432
  Prepaid expenses                                         69,667        55,308
                                                      -----------   -----------
     Total current assets                               7,886,022     9,146,425
                                                      -----------   -----------
BUILDINGS, EQUIPMENT AND AUTOMOBILES, net              17,107,229    18,002,661
                                                      -----------   -----------
OTHER ASSETS:
  Intangible asset, net                                 1,540,683     1,590,561
  Equipment held for sale                                 258,359       529,750
  Deposits                                                 33,680            --
  Deferred tax asset                                           --        31,718
  Other non-current assets                                235,745       369,075
  Due from related parties                              2,323,000            --
  Restaurant investment                                   847,000            --
                                                      -----------   -----------
     Total other assets                                 5,238,467     2,521,104
                                                      -----------   -----------
        Total assets                                  $30,231,718   $29,670,190
                                                      ===========   ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                    $   211,574   $   327,862
  Accounts payable - related party                             --        56,540
  Accrued liabilities                                     734,784       733,261
  Wage and benefits payable                               196,852       301,815
  Sales tax payable                                       889,351       873,208
  Income taxes payable                                    774,420     1,049,331
  Due to shareholders                                      58,715        89,044
  Due to prior owners of joint ventures                 4,932,273     4,932,273
  Notes payable                                            35,607        64,809
                                                      -----------   -----------
        Total current liabilities                       7,833,576     8,428,143
                                                      -----------   -----------
MINORITY INTEREST                                       2,024,000     1,843,198
                                                      -----------   -----------
SHAREHOLDERS' EQUITY:
  Common stock, no par value, 50,000,000
    shares authorized, 16,861,250 and
    16,506,250 shares issued and outstanding,
    respectively                                           10,078        10,078
  Paid-in-capital                                       5,575,188     5,115,222
  Statutory reserves                                   11,371,353    10,655,821
  Retained earnings                                     3,280,289     3,480,712
  Accumulated other comprehensive income                  137,234       137,016
                                                      -----------   -----------
     Total shareholders' equity                        20,374,142    19,398,849
                                                      -----------   -----------
       Total liabilities and shareholders' equity     $30,231,718   $29,670,190
                                                      ===========   ===========


         The accompanying notes are an integral part of this statement.


                                       60
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                          2004          2003
                                                      -----------   -----------

NET SALES                                             $11,216,720   $12,495,189

COST OF SALES                                           4,163,352     4,772,291
                                                      -----------   -----------
GROSS PROFIT                                            7,053,368     7,722,898

SELLING, GENERAL AND  ADMINISTRATIVE EXPENSES           5,080,471     4,371,566
                                                      -----------   -----------
INCOME FROM OPERATIONS                                  1,972,897     3,351,332
                                                      -----------   -----------
OTHER INCOME (EXPENSE):
  Interest income                                         147,326        25,023
  Other income (expense)                                 (383,133)     (485,582)
                                                      -----------   -----------
        Total other (expense), net                       (235,807)     (460,559)
                                                      -----------   -----------
INCOME FROM CONTINUING OPERATIONS BEFORE
  PROVISION FOR INCOME TAXES AND
  MINORITY INTEREST                                     1,737,090     2,890,773

PROVISION FOR INCOME TAXES                                865,137     1,155,961
                                                      -----------   -----------
INCOME BEFORE MINORITY INTEREST                           871,953     1,734,812

MINORITY INTEREST                                        (180,802)     (138,888)
                                                      -----------   -----------
NET INCOME                                                691,151     1,595,924

OTHER COMPREHENSIVE INCOME:
  Foreign currency translation adjustment                     218        66,421
                                                      -----------   -----------
COMPREHENSIVE INCOME                                  $   691,369   $ 1,662,345
                                                      ===========   ===========
EARNINGS PER SHARE, BASIC AND DILUTED                 $      0.04   $      0.10
                                                      ===========   ===========
WEIGHTED AVERAGE NUMBER OF SHARES                      16,672,140    16,506,250
                                                      ===========   ===========


         The accompanying notes are an integral part of this statement.


                                       61
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                                          Accumulated
                                                                                                             other
                                                                                                            compre-
                                     Number        Common         Paid-in      Statutory     Retained       hensive
                                    of shares      stock          capital      reserves      earnings       income         Totals
                                   ----------    -----------    -----------   -----------   -----------   -----------   -----------
<S>              <C>               <C>           <C>            <C>           <C>           <C>           <C>           <C>
BALANCE, January 1, 2003           16,506,250    $    10,078    $ 5,109,656   $ 9,630,799   $ 2,909,810   $    70,595   $17,730,938
  Net income                                                                                  1,595,924                   1,595,924
  Additions to paid-in-capital
    (land use right)                                                  5,566                                                   5,566
  Adjustment to statutory
    reserves                                                                    1,025,022     (1,025,022)                        --
  Foreign currency translation
    adjustments                                                                                                66,421        66,421
                                   ----------    -----------    -----------   -----------   -----------   -----------   -----------
BALANCE, December 31, 2003         16,506,250         10,078      5,115,222    10,655,821     3,480,712       137,016    19,398,849
  Net income                                                                                    691,151                     691,151
  Additions to paid-in-capital
    (land use right)                                                  5,566                                                   5,566
  Registered capital of Yi Wan
    Beijing                                                          12,100                                                  12,100
  Stock issued for future
    services                          325,000                       422,500                                                 422,500
  Deferred charge for future
    services                                                                                   (176,042)                   (176,042)
  Stock issued for consultant
    services                           30,000                        19,800                                                  19,800
  Adjustment to statutory
    reserves                                                                      715,532      (715,532)                         --
  Foreign currency translation
    adjustments                                                                                                   218           218
                                   ----------    -----------    -----------   -----------   -----------   -----------   -----------
BALANCE, December 31, 2004         16,861,250    $    10,078    $ 5,575,188   $11,371,353   $ 3,280,289   $   137,234   $20,374,142
                                   ==========    ===========    ===========   ===========   ===========   ===========   ===========
</TABLE>


         The accompanying notes are an integral part of this statement.


                                       62
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                          2004          2003
                                                      -----------   -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                          $   691,151   $ 1,595,924
  Adjustments to reconcile net income to cash
     provided by operating activities:
       Minority interest                                  180,802       138,888
       Depreciation                                     1,388,156     1,456,348
       Amortization                                        49,878        45,397
       Amortization of consulting services                246,458            --
       Loss on equipment disposals                        115,697       493,157
       Write down of equipment held for sale              202,344            --
       Land use right                                       5,566         5,566
       Deferred tax assets                                 31,718       150,326
       Non-cash stock issuance for consulting
         and legal fees                                    19,800            --
       Translation adjustment                                 218        66,421
       (Increase) decrease in assets:
         Accounts receivable                              690,790      (328,055)
         Due from related parties                         (90,656)   (1,912,629)
         Inventories                                      159,226        54,619
         Prepaid expenses                                 (14,359)      (10,482)
         Deposits                                         (33,680)           --
         Note receivable                                       --     1,217,579
         Other non-current assets                         159,950       (73,950)
       Increase (decrease) in liabilities
         Accounts payable                                (116,288)      (42,239)
         Accounts payable - related party                 (56,540)      (30,877)
         Accrued liabilities                                1,523       (30,048)
         Wages and benefits payable                      (104,963)       36,235
         Sales tax payable                                 16,143        (2,302)
         Income taxes payable                            (274,911)     (230,264)
                                                      -----------   -----------
     Net cash provided by operating activities          3,268,023     2,599,614
                                                      -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of equipment                          10,636         3,756
  Purchase of buildings, equipment and automobiles       (576,630)   (1,354,628)
  Restaurant investment                                  (847,000)           --
                                                      -----------   -----------
     Net cash used in investing activities             (1,412,994)   (1,350,872)
                                                      -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase to paid in capital (Yi Wan Beijing)             12,100            --
  (Payments to) borrowings from shareholders              (30,329)          244
  Repayments on notes payable                             (29,202)      (18,298)
                                                      -----------   -----------
     Net cash used in financing activities                (47,431)      (18,054)
                                                      -----------   -----------
INCREASE IN CASH                                        1,807,598     1,230,688

CASH, beginning of year                                 3,365,842     2,135,154
                                                      -----------   -----------
CASH, end of year                                     $ 5,173,440   $ 3,365,842
                                                      ===========   ===========

         The accompanying notes are an integral part of this statement.

                                       63
<PAGE>
                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND DESCRIPTION OF BUSINESS

Yi Wan Group,  Inc. was  incorporated  under the laws of the State of Florida in
the  United  States in May 1999.  Yi Wan  Group,  Inc.  is  authorized  to issue
50,000,000  shares of no par value common stock and 20,000,000  shares of no par
value  preferred  stock.  The  Company's  TELECOMMUNICATIONS,  HOTEL and QINYANG
subsidiaries are incorporated  under the laws of the People's  Republic of China
(PRC).

The Company's  subsidiaries are classified as Foreign Invested Enterprises (FIE)
in the PRC and are subject to the FIE laws of the PRC. The HOTEL and QINYANG are
Foreign Invested Enterprise Joint Ventures, known as FIEJV or Sino-foreign joint
venture, and  TELECOMMUNICATIONS is a Wholly Foreign Owned Enterprise company or
WFOE.  All three of these  companies are Chinese  registered  limited  liability
companies,  with legal  structures  similar to regular  corporations and limited
liability  companies  organized  under  state  laws in the  United  States.  The
respective Articles of Association for these FIE subsidiaries  provide a 30-year
term   for  the   HOTEL   and   QINYANG   companies   and  15   years   for  the
TELECOMMUNICATIONS.

The  People's  Republic  of China  (PRC)  regulations  prohibit  direct  foreign
ownership of business entities providing food and restaurant services in the PRC
in which certain  licenses are required for the provision of such services.  The
Company and its subsidiaries are foreign or foreign invested  enterprises  under
PRC law and accordingly are ineligible for a license to operate  restaurants and
food services. In order to expand the Company's restaurant and food services and
still be in  compliance  with  these  regulations,  in July  2004,  the  Company
established  YI WAN BEIJING  Hotel  Management  Co.,  Ltd. (YI WAN  BEIJING),  a
variable  interest entity,  through two designated  shareholders  (Mr. Cheng Wan
Ming is the  Company's  president and Chairman of the Board and Mr. Chen Wanqing
is a member of the Board of  Directors  of the Company) who are PRC citizens and
legally own YI WAN BEIJING  ("Yi Wan Beijing  Interest  Holders") to operate the
restaurant  business.  Pursuant  to  an  Equity  Trust  Agreement,  the  Company
transferred RMB 100,000 to the YI WAN BEIJING (the" Equity  Interests") in trust
for the benefit of the Company.  The Yi Wan Beijing Interest Holders have agreed
to not sell,  pledge,  hypothecate,  encumber or otherwise dispose of the Equity
Interests.  Any such  transfer  will  result  in a breach  of the  Equity  Trust
Agreement and the Yi Wan Beijing  Interest  Holders will be required to transfer
the Equity Interest to distribute any and all dividends,  distributions or other
payments received from YI WAN BEIJING with respect to the Equity Interest to the
Company.  Finally,  the Yi Wan  Beijing  Interest  Holders  granted  irrevocable
proxies to two  directors of the Company to their  ownership  interest in YI WAN
BEIJING.  The  irrevocable  proxies  further  provide that if such two directors
cease to be employees of the Company,  the Yi Wan Beijing Interest Holders agree
to  immediately  terminate  the  proxy  and to grant a proxy to  another  person
designated by the Company.  Yi Wan Group, Inc. is the primary  beneficiary of YI
WAN BEIJING  business  operations  and  qualifies to be  consolidated  under FIN
46(R).

                                       64
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

THE REPORTING ENTITY

The financial statements of Yi Wan Group, Inc. and subsidiaries  (referred to as
the  Company  or YWG in  the  accompanying  financial  statements)  reflect  the
activities  and  financial  transactions  of  its  subsidiaries  and a  variable
interest entity, which are as follows:

                                                                      Percentage
                    Subsidiaries                                      Ownership
-----------------------------------------------------------           ----------

Shun De Yi Wan Communication Equipment
  Plant Co., Ltd. (TELECOMMUNICATIONS)                                   100%
Jiao Zuo Yi Wan Hotel Co., Ltd. (HOTEL)                                   90%
Qinyang Yi Wan Hotel Co., Ltd. (QINYANG)                                  80%

              Variable interest entity
----------------------------------------------------------
Yi Wan Beijing Hotel Management Co., Ltd. (YI WAN BEIJING)

BASIS OF PRESENTATION

The financial  statements represent the activities of Yi Wan Group, Inc. and its
subsidiaries and variable interest entity. The consolidated financial statements
of YWG  include  its  subsidiaries  HOTEL,  TELECOMMUNICATIONS,  QINYANG and its
variable interest entity, YI WAN BEIJING. All significant inter-company accounts
and transactions have been eliminated in the consolidation.

RECLASSIFICATIONS

Certain  comparative  amounts have been reclassified to conform with the current
year's presentation.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  of the United States of America  requires  management to
make  estimates  and  assumptions  that  affect  the  amounts  reported  in  the
consolidated  financial  statements and accompanying notes.  Management believes
that the estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates.

FOREIGN CURRENCY TRANSLATION

The reporting currency of YWG is US dollar.  The Company's foreign  subsidiaries
use their local currency,  Renminbi,  as their functional  currency.  Results of
operations  and cash flow are  translated at average  exchange  rates during the
period,  and assets and liabilities are translated at the end of period exchange
rates.  Translation  adjustments  resulting  from this  process are  included in


                                       65
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

FOREIGN CURRENCY TRANSLATION, (CONTINUED)

accumulated other comprehensive income in the statement of shareholders' equity.
Transaction  gains and losses  that arise from  exchange  rate  fluctuations  on
transactions  denominated in a currency  other than the functional  currency are
included  in the  results of  operations  as  incurred.  These  amounts  are not
material to the financial statements.

REVENUE RECOGNITION

The HOTEL's,  QINYANG's and YI WAN BEIJING's  revenues are  recognized  when the
rooms are  occupied  or when the guests  utilize  the  services of the hotel and
restaurant.

The  TELECOMMUNICATIONS  recognizes  its  revenue  when the risk of loss for the
product sold passes to the  customers,  which is when goods are installed at the
customers'  premises and testing of the product is completed and accepted by the
customers.

RESEARCH AND DEVELOPMENT

Research  and  development  costs are  expensed as incurred  and are included in
selling,  general and administrative  expenses in the accompanying  consolidated
financial  statements.  Research  and  development  costs  primarily  consist of
efforts to develop new products for TELECOMMUNICATIONS.

ADVERTISING COSTS

Advertising costs are expensed as incurred and are included in selling,  general
and  administrative   expenses  in  the  accompanying   consolidated   financial
statements.

NATURE OF OPERATIONS AND CONCENTRATION OF RISK

The HOTEL is a four-star  rated hotel  located in the center of downtown of Jiao
Zuo City,  He Nan  Province,  People's  Republic of China.  The  Hotel's  income
sources include income from rooms, restaurants,  sauna, and nightclub. The Hotel
is a  sino-foreign  joint  venture  established  under the laws of the  People's
Republic of China on December 25, 1996. The expiration date of the joint venture
is December 18, 2027.  The term can be extended or terminated  prior to the date
of expiration if  unanimously  decided by the board of directors and approved by
the  original  examination  and  approval  authority.  The board of directors is
controlled  by YWG,  with YWG  electing  six of the  seven  board  members.  The
operational, management and corporate governance decisions of the board are by a
simple  majority,  except for the revision of the Articles of  Association,  the
increase or assignment of the registered  capital,  the business  combination of
the joint venture and, with certain  limitations  the  termination  of the joint
venture, which require a unanimous vote.


                                       66
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

NATURE OF OPERATIONS AND CONCENTRATION OF RISK, (CONTINUED)

The  TELECOMMUNICATIONS is an electronic equipment  manufacturer located in Shun
De City, Guang Dong Province,  in the People's  Republic of China. The Company's
income sources include income from the manufacturing of communication  equipment
systems.  The Company is a solely foreign funded company  established  under the
laws of the People's  Republic of China on June 22, 2000. The expiration date of
this  agreement and business  license is June 22, 2015. The joint venture may be
terminated  prior to the date of expiration if unanimously  decided by the board
of directors and approved by the original  examination  and approval  authority.
YWG, owning 100% of the equity interests of this company,  controls the board of
directors.  In October  2004,  management  decided to  reevaluate  the  business
strategies of the TELECOMMUNICATIONS.  Meanwhile,  TELECOMMUNICATIONS  downsized
its  operational  work force and placed a hold on purchasing and  manufacturing.
Production  is expected to continue  once  management  decides on a new business
plan.

The  QINYANG  is a four  star  rated  hotel  located  in Qin Yang  City,  He Nan
Province,  People's  Republic of China.  The QINYANG's  income  sources  include
income from rooms,  restaurants and sauna.  The QINYANG is a sino-foreign  joint
venture established under the laws of the People's Republic of China on June 12,
2002. The expiration date of the joint venture is June 11, 2032. The term can be
extended or terminated prior to the date of expiration if unanimously decided by
the board of directors  and approved by the  original  examination  and approval
authority.  The board of directors is  controlled by YWG, with YWG electing four
of the five board members. The operational,  management and corporate governance
decisions of the board are by a simple majority,  except for the revision of the
Articles of Association,  the increase or assignment of the registered  capital,
the business  combination of the joint venture and, with certain limitations the
termination of the joint venture, which require a unanimous vote.

YI WAN BEIJING is a restaurant  management company  established on July 22, 2004
through two designated  shareholders of Yi Wan Group,  Inc. Yi Wan Group,  Inc.,
owning  100%  of  the  equity  interests  of YI  WAN  BEIJING,  is  the  primary
beneficiary  of  this  company's   business   operations  and  qualifies  to  be
consolidated under FIN 46R. The restaurant managed by YI WAN BEIJING serves Hong
Kong style fast foods and is located in the city of Beijing,  People's  Republic
of China.  The expiration date of the business license of YI WAN BEIJING is July
22, 2024.

BUILDINGS, EQUIPMENT AND AUTOMOBILES

Buildings,  equipment,  and  automobiles  are recorded at cost.  Depreciation is
computed using the  straight-line  method over the estimated useful lives of the
assets.  Depreciation  expense  for the years ended  December  31, 2004 and 2003
amounted to $1,388,156 and $1,456,348  respectively.  Estimated  useful lives of
the assets are as follows:


                                       67
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

BUILDINGS, EQUIPMENT AND AUTOMOBILES, (CONTINUED)


                                              Estimated Useful Life
                                              ---------------------

Buildings and improvements                          20 years
Machinery and equipment                             10 years
Computer, office equipment and furniture             5 years
Automobiles                                          5 years

Maintenance,  repairs and minor  renewals  are  charged  directly to expenses as
incurred.   Major  additions  and  betterment  to  property  and  equipment  are
capitalized.

Long-term  assets of the  Company  are  reviewed  annually  as to whether  their
carrying value has become impaired.  The Company considers assets to be impaired
if the  carrying  value  exceeds the future  projected  cash flows from  related
operations.  The  Company  also  re-evaluates  the  periods of  amortization  to
determine whether subsequent events and circumstances  warrant revised estimates
of useful lives. As of December 31, 2004, the Company expects these assets to be
fully recoverable.

Buildings, equipment and automobiles consist of the following at December 31:

                                           2004          2003
                                       -----------   -----------

Buildings and improvements             $22,008,539   $21,603,579
Furniture and equipment                  5,031,988     4,968,773
Automobiles                                246,724       303,234
Construction in progress                    69,504        49,681
                                       -----------   -----------
    Totals                              27,356,755    26,925,267

Less accumulated depreciation           10,249,526     8,922,606
                                       -----------   -----------
  Buildings, equipment and
    automobiles, net                   $17,107,229   $18,002,661
                                       ===========   ===========


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In  January  2003,  the FASB  issued  Interpretation  No. 46,  CONSOLIDATION  OF
VARIABLE INTEREST ENTITIES,  AN INTERPRETATION OF ARB NO. 51 (FIN No. 46), which
requires the  consolidation of certain variable interest  entities,  as defined.
FIN No. 46 is effective immediately for variable interest entities created after
January 31,  2003,  and on July 1, 2003 for  investments  in  variable  interest


                                       68
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, (CONTINUED)

entities  acquired  before February 1, 2003;  however,  disclosures are required
currently if a company  expects to consolidate any variable  interest  entities.
The Company has adopted the consolidation and disclosure  requirements of FIN 46
to  include  YI WAN  BEIJING,  a  variable  interest  entity,  on its  financial
statements in 2004.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  instruments and Hedging  Activities"  ("SFAS No. 149"). SFAS No. 149
amends  and  clarifies   financial   accounting  and  reporting  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts  and for  hedging  activities  under  SFAS  No.  133  "Accounting  for
Derivative  Instruments and Hedging  Activities."  SFAS No. 149 is effective for
contracts  entered  into or  modified  after  June  30,  2003  and  for  hedging
relationships designated after June 30, 2003. The adoption of this statement did
not  have a  significant  impact  on  the  financial  condition  or  results  of
operations of the Company.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity." SFAS No. 150
changes the accounting for certain  financial  instruments  that, under previous
guidance,  issuers could account for as equity. FASB No. 150 requires that those
instruments  entered  into or modified  after May 31,  2002,  and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003. The adoption of this  statement is not expected to have a material  impact
on the financial condition or results of operations of the Company.

In  March  2004,   the  FASB  issued  EITF  Issue  No.  03-1,   THE  MEANING  OF
OTHER-THAN-TEMPORARY IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS. EITF
03-1 includes new guidance for  evaluating  and recording  impairment  losses on
debt  and  equity  investments,  as  well  as new  disclosure  requirements  for
investments that are deemed to be temporarily impaired.

In September 2004, the FASB issued Staff Position EITF 03-1-1,  which delays the
effective date until  additional  guidance is issued for the  application of the
recognition and measurement provisions of EITF 03-1 to investments in securities
that are impaired; however, the disclosure requirements are effective for annual
periods  ending  after June 15,  2004.  Although  the Company  will  continue to
evaluate the  application of EITF 03-1,  management  does not currently  believe
adoption  will have a material  impact on the  Company's  financial  position or
results of operations.

In November 2004, the FASB issued SFAS No. 151, INVENTORY COSTS, an amendment of
ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43, Chapter
4, Inventory  Pricing,  to clarify the  accounting for abnormal  amounts of idle
facility  expense,  freight,  handling costs,  and wasted  material  (spoilage).
Paragraph 5 of ARB No. 43,  Chapter 4,  previously  stated that  "...under  some
circumstances,  items such as idle facility expense,  excessive spoilage, double


                                       69
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, (CONTINUED)

freight,  and  re-handling  costs may be so abnormal as to require  treatment as
current period  charges..." SFAS No. 151 requires that those items be recognized
as current-period  charges  regardless of whether they meet the criterion of "so
abnormal."  In  addition,  this  statement  requires  that  allocation  of fixed
production  overhead to the costs of conversion be based on the normal  capacity
of the production facilities.

The provisions of SFAS 151 shall be applied  prospectively and are effective for
inventory costs incurred during fiscal years beginning after June 15, 2005, with
earlier  application  permitted for inventory costs incurred during fiscal years
beginning  after the date this Statement was issued.  The Company's  adoption of
SFAS  No.  151 is not  currently  expected  to  have a  material  impact  on the
Company's financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123(R) (revised  2004),  "Share-Based
Payment",  which amends FASB  Statement No. 123 and will be effective for public
companies  for interim or annual  periods  beginning  after June 15,  2005.  The
revised  standard  requires,  among  other  things  that  compensation  cost for
employee  stock  options be measured at fair value on the grant date and charged
to expense over the employee's  requisite service period for the option.  Due to
the absence of observable market prices for employee stock options, the standard
indicates that the fair value of most stock options will be determined  using an
option-pricing model. The Company's adoption of SFAS No. 123(R) is not currently
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

In December 2004, the FASB issued SFAS No. 153, EXCHANGES OF NONMONETARY ASSETS,
AN  AMENDMENT  OF APB  OPINION  NO.  29. The  guidance  in APB  Opinion  No. 29,
ACCOUNTING  FOR  NONMONETARY  TRANSACTIONS,  is  based  on  the  principle  that
exchanges of  nonmonetary  assets should be measured  based on the fair value of
assets  exchanged.  The  guidance in that  Opinion,  however,  included  certain
exceptions to that principle.  This Statement amends Opinion 29 to eliminate the
exception for  nonmonetary  exchanges of similar  productive  assets that do not
have commercial  substance.  A nonmonetary  exchange has commercial substance if
the future cash flows of the entity are  expected to change  significantly  as a
result of the  exchange.  SFAS No. 153 is effective  for  nonmonetary  exchanges
occurring  in fiscal  periods  beginning  after  June 15,  2005.  The  Company's
adoption  of SFAS No.  153 is not  expected  to have a  material  impact  on the
Company's financial position or results of operations.

CASH AND CONCENTRATIONS AND RISKS

Cash  includes  cash on hand and demand  deposits  in accounts  maintained  with
state-owned  banks  within  the  People's  Republic  of  China.  Total  cash  in
state-owned  banks at December  31, 2004 and 2003  amounted  to  $5,095,153  and
$3,365,842,  respectively of which no deposits are covered by insurance. YWG has
not  experienced  any losses in such  accounts and believes it is not exposed to
any risks on its cash in bank accounts.


                                       70
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

INVENTORIES

Inventories  are  stated  at the lower of cost or  market  using  the  first-in,
first-out basis and consist of the following at December 31:

                                        2004       2003
                                      --------   --------

HOTEL and QINYANG inventories         $206,473   $210,728
YI WAN BEIJING inventories               2,634         --
TELECOMMUNICATIONS inventories         145,099    302,704
                                      --------   --------
    Total inventories                 $354,206   $513,432
                                      ========   ========


The HOTEL,  QINYANG,  and YI WAN BEIJING  inventories  consist of food products,
alcohol, beverages and supplies.

The TELECOMMUNICATIONS inventories consist of the following at December 31:

                                        2004       2003
                                      --------   --------

Raw materials                         $ 60,426   $ 80,583
Work in process                         39,527    103,339
Finished goods                          45,146    118,782
                                      --------   --------
    Total inventories                 $145,099   $302,704
                                      ========   ========


INTANGIBLE ASSETS

All land in the People's Republic of China is owned by the government and cannot
be sold to any individual or company.  However, the government grants the user a
"land use right" (the Right) to use the land.  The HOTEL has purchased the Right
to use the land for 40 years  from the  government  for a fee in the  amount  of
$1,570,000.  The HOTEL's Right (Land Use  Certificate)  is registered  under the
name of one of the joint venture  partners,  Shunde  Shunao  Industry & Commerce
Company, Ltd. The HOTEL is in the process of applying for the name change of the
Right, which has not been finalized as of the date of this report.

QINYANG has obtained its land use rights from its 20% joint venture partner as a
capital  contribution in the amount of approximately  $228,000 and purchased the
other Right for the amount of approximately  $88,000. The Rights to use the land
are for 30 years.


                                       71
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

INTANGIBLE ASSETS, (CONTINUED)

The Rights for both hotels have been  classified as an  intangible  asset on the
accompanying   financial   statements   and  are  being   amortized   using  the
straight-line  method over the life of the Rights.  Amortization expense for the
years  ended  December  31,  2004 and 2003  amounted  to  $49,878  and  $45,397,
respectively.

In March 1995, one of the  shareholders  of YWG purchased the land use right for
50 years where the TELECOMMUNICATIONS' operating facilities are located. Neither
the  title  nor the Right has been  transferred  to  TELECOMMUNICATIONS,  nor is
TELECOMMUNICATIONS  being  charged  for using the land.  However,  the owner has
assigned the Right to  TELECOMMUNICATIONS  for the remaining years. The original
cost of the land use right  amounted to $277,800 and is being  recognized  as an
expense  annually and as a capital  contribution.  The Right is being  amortized
over 50 years and the  expense for the years  ended  December  31, 2004 and 2003
amounted to $5,566 and $5,566, respectively.

INCOME TAXES

YWG uses the asset and  liability  method  which  requires  the  recognition  of
deferred  income  tax  liabilities  and  assets  for  the  expected  future  tax
consequences  of temporary  differences  between  income tax basis and financial
reporting basis of assets and liabilities. Provision for income taxes consist of
taxes  currently due plus  deferred  taxes.  There were no deferred  items as of
December  31, 2004 and a deferred  tax asset of $31,718 as at December  31, 2003
related to expenses deducted for financial  statements  purposes but not for tax
purposes.

The HOTEL is considered as a foreign  investment joint venture by the government
and  receives  special  income  tax  treatment.  The HOTEL is subject to central
government  income tax at a rate of 30% and a 3%  provincial  government  income
tax. The HOTEL is exempt from central and provincial government income tax for a
period of two years (years ended December 31, 1997 and 1998);  followed by a 50%
reduction in the central and  provincial  government  income tax for a period of
three years (years ended December 31, 1999, 2000 and 2001).  Starting from 2002,
the HOTEL is being  taxed at full tax rates (30% for central  government  income
tax and 3% for provincial government).

The  TELECOMMUNICATIONS  and QINYANG are subject to a central  government income
tax at a rate of 30% and 3% provincial government income tax.

YI WAN BEIJING is also subject to a central  government  income tax at a rate of
30% and 3% provincial government income tax.

The provision for income taxes at December 31 consisted of the following:


                                       72
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

INCOME TAXES, (CONTINUED)

                                          2004         2003
                                       ----------   ----------

Provision for China Income Tax         $  786,488   $  914,214
Provision for China Local Tax              78,649       91,421
Deferred taxes                                 --      150,326
                                       ----------   ----------
    Total provision for income taxes   $  865,137   $1,155,961
                                       ==========   ==========


Certain revenues of the HOTEL,  TELECOMMUNICATIONS,  QINYANG, and YI WAN BEIJING
operations  are subject to sales and cultural taxes ranging from 3% to 10%. This
tax is shown as a reduction of sales.

The  following  table  reconciles  the U.S.  statutory  rates  to the  Company's
effective tax rate:

                                          2004         2003
                                       ----------   ----------

U.S. Statutory rates                           34%          34%
Foreign income not recognized in U.S.         (34)         (34)
China Income taxes                             33           33
                                       ----------   ----------
      Effective tax rate                       33%          33%
                                       ==========   ==========


EARNINGS PER SHARE

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 128,
"Earnings Per Share" (SFAS 128). SFAS 128 requires the  presentation of earnings
per share (EPS) as Basic EPS and Diluted EPS. There are no  differences  between
Basic and Diluted EPS at December 31, 2004 and 2003. The weighted average number
of shares used to calculate EPS for years ended  December 31, 2004  (16,672,140)
and 2003 (16,506,250) reflect only the shares outstanding for those periods.

Weighted  average  number of  shares  outstanding  as of  December  31,  2004 is
computed as follows:


                                       73
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - GENERAL  INFORMATION  AND SUMMARY OF SIGNIFICANT  ACCOUNTING  POLICIES,
(CONTINUED)

EARNINGS PER SHARE, (CONTINUED)

                Dates                     Shares               Weighted -
             Outstanding               Outstanding   Days   Average Shares
-----------------------------------    -----------   ----   ---------------
Year - 2004
-----------------------------------
January 1 - December 31                 16,506,250    365     6,024,781,250
June 30 - December 31                      325,000    184        59,800,000
December 7  - December 31                   30,000     25           750,000
                                                     ----   ---------------
Totals                                                365     6,085,331,250
                                                     ====   ===============

Weighted-average shares - Year 2004                              16,672,140
                                                            ===============


MINORITY INTEREST

Minority  interest  represents  the outside  shareholders'  10% ownership of the
common  stock of Jiao Zuo Yi Wan Hotel Co., Ltd. and 20% of the common  stock of
Qinyang Yi Wan Hotel Co., Ltd.


NOTE 2 - NOTES PAYABLE

Notes payable represents amounts due to construction  contractors.  They are due
on demand,  normally within one year. Notes payable at December 31, consisted of
the following:

                                          2004         2003
                                       ----------   ----------
Notes payable to various
  vendors, unsecured, due on
  demand, no interest                  $   35,607   $   64,809
                                       ==========   ==========


NOTE 3 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid  amounted to  $1,108,494  and  $1,235,899  for the years ended
December 31, 2004 and 2003, respectively. No interest expense payments were made
for the years ended December 31, 2004 and 2003.

NON CASH TRANSACTION

The  Company  issued  325,000  shares of common  stock  valued at  $422,500  for
consulting  services and issued  30,000 shares of common stock valued at $19,800
as further described in Note 13.


                                       74
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - ACCOUNTS RECEIVABLE AND CREDIT RISK

YWG's  business  operations  are  conducted  mainly in the People's  Republic of
China. During the normal course of business, YWG extends unsecured credit to its
customers.  Management  reviews its accounts  receivable  on a regular  basis to
determine if the bad debt allowance is adequate at each year-end.

NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards No. 107, as amended,  "Disclosures
about Fair Value of  Financial  Instruments,"  requires the  disclosure  of fair
value information for certain assets and liabilities for which it is practicable
to estimate  that value.  The  Company's  financial  instruments  include  cash,
accounts receivable,  other receivables,  accounts payable,  accrued liabilities
and other payables.

The Company considers the carrying amount of cash,  accounts  receivable,  other
receivables,  accounts  payable,  accrued  liabilities  and  other  payables  to
approximate  their fair values  because of the short  period of time between the
origination of such instruments and their expected realization and their current
market rate of interest.

NOTE 6 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The  following  is a  description  of  the  various  individuals  and  companies
discussed in the footnotes and their relationship to the Company.

Shun'ao Industry and Commerce Company  (Shun'ao) - a company  established  under
the laws of PRC owns 10% of HOTEL, and is owned 41.7% by Cheng Wan Ming.

Marco Wan Da  Construction  (Marco) - a  company  established  under the laws of
Macao, is owned 51% by Wu Zeming and 49% by Cheng Manli.

City of Qin Yang Local Government - owns 20% of QINYANG

Cheng Wan Ming - individual - president,  owns 61.1% of YWG and 41.7% of Shun'ao
Industry and Commerce Company.

Wu  Zeming -  individual  -  director,  owns 6.3% of YWG and 51% of Marco Wan Da
Construction.

Cheng Manli -  individual  - director,  owns 2.6% of YWG and 49% of Marco Wan Da
Construction.

DUE FROM RELATED PARTIES

The Company classified as due from related parties at December 31, 2004 and 2003
amounted to  $3,689,789  and  $3,599,133,  respectively.  The detail of due from
related parties is as follows:


                                       75
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, (CONTINUED)

DUE FROM RELATED PARTIES, (CONTINUED)

                                                2004         2003
                                             ----------   ----------

     Shun'ao Industry and Commerce Company   $  158,210   $  118,900
     Marco Wan Da Construction                3,471,079    3,480,233
     City of Qin Yang Local Government           60,500           --
                                             ----------   ----------
          Total                               3,689,789    3,599,133
     Less current portion                     1,366,789    3,599,133
                                             ----------   ----------
     Non-current portion                     $2,323,000   $       --
                                             ==========   ==========

A portion of the  receivables  from  Shun'ao  and Marco are  generated  from the
Company making cash advances to purchase  supplies,  inventories and other goods
on behalf of Shun'ao and Marco.  These  transactions are re-occurring in nature.
Due to there  short term nature the  Company  does not charge  interest on these
receivables and they are included in the current portion of the receivable.

The receivable from the City of Qin Yang Local  Government is generated from the
Company making  various cash advances and the allocation of various  expenses to
the City of Qin Yang.  Due to the short term nature the Company  does not charge
interest on this  receivable  and it is  included in the current  portion of the
receivable.

During 2003, the Company advanced Marco $2,323,000 to pay for general  operating
expenses.  The Company  expected to be repaid this amount during 2004, thus this
amount was  classified  as a current  asset and no interest was being charged on
this amount.  As of December  31,  2004,  the Company has not been repaid and is
currently  negotiating  with Marco for  repayment of the funds.  The Company has
reclassified this amount as non-current since no payment terms or interest terms
have been determined.

NOTE 7 - PENSION CONTRIBUTION

Regulations  in the People's  Republic of China  require YWG to  contribute to a
defined contribution retirement plan for all permanent employees.  All permanent
employees  are  entitled to an annual  pension  equal to their  basic  salary at
retirement.  The HOTEL and  TELECOMMUNICATIONS pay an annual contribution of 34%
and 20%,  respectively,  of the city's  standard salary of their employees to an
insurance  company,  which is  responsible  for the  entire  pension  obligation
payable to the retired  employees.  There were no contributions  for the QINYANG
and YI WAN BEIJING employees due to their  non-permanent  status.  For the years
ended December 31, 2004 and 2003, YWG made pension  contributions  in the amount
of $78,452 and $44,201, respectively.


                                       76
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - OTHER NON-CURRENT ASSETS

Other non-current  assets represents cash advances to officers and employees for
cash based business transactions incurred for the payments of operating expenses
and purchases from various vendors.

NOTE 9 - RESTAURANT INVESTMENT

The restaurant investment of $847,000 represents funds advanced from HOTEL to an
individual,  on behalf of the Company,  to set up a luxury restaurant located in
Zhenzhou City, the Capital of Henan Province of P.R.China. The People's Republic
of China  (PRC)  regulations  prohibit  direct  foreign  ownership  of  business
entities  providing  food and  restaurant  services in the PRC in which  certain
licenses are required for the  provision of such  services.  The Company and its
subsidiaries  are  foreign or  foreign  invested  enterprises  under PRC law and
accordingly  are  ineligible  for a  license  to  operate  restaurants  and food
services.  In order to expand the  Company's  restaurant  and food  services and
still be in  compliance  with these  regulations,  the Company will  establish a
variable  interest  entity  with  the same  structure  of YI WAN  BEIJING  Hotel
Management  Co., Ltd. (YI WAN  BEIJING),  a variable  interest  entity which was
established in 2004.

NOTE 10 - DISTRIBUTION  OF INCOME,  STATUTORY  RESERVES AND RESTRICTED  RETAINED
EARNINGS

The laws and regulations of the People's Republic of China require that before a
sino-foreign  cooperative joint venture  enterprise  distributes  profits to its
partners,  it must first  satisfy  all tax  liabilities,  provide  for losses in
previous years and make allocations, in proportions determined at the discretion
of the board of directors,  after the statutory reserve.  The statutory reserves
included enterprise fund, employee benefits and general reserve.  The enterprise
fund may be used to acquire  fixed assets or to increase the working  capital in
order to expend the  production  and  operation of the joint  venture;  employee
benefit  reserve is restricted to the payment of bonus and welfare for employees
and the general reserve may be used as a provisional  financial  cushion against
the possible  losses of a joint venture.  The minimum  percentage to be reserved
for the  general  reserve  is 10%.  The  board  of  directors  decides  upon the
percentage to be reserved for the employee benefit reserve.  There is no minimum
provision required for enterprise fund.

Consolidated  statutory  reserves  at  December  31,  2004 and 2003  amounted to
$11,371,353 and $10,655,821,  respectively.  No other dividends or distributions
were declared to the owners for the years ended December 31, 2004 and 2003.

The Chinese  government  restricts  distributions of registered  capital and the
additional  investment amounts required by the Chinese joint ventures.  Approval
by the Chinese  government  must be  obtained  before  distributions  from these
amounts  can be  returned  to their  owners.  There are no  restricted  retained
earnings on the accompanying balance sheets at December 31, 2004 and 2003.


                                       77
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - DUE TO PRIOR OWNERS OF JOINT VENTURES

Shun'ao and Marco were the partners in the original  joint  ventures  from which
YWG acquired  its equity  interests  in the three FIE Chinese  subsidiaries.  At
December 31, 2004 and 2003,  Shun'ao and Marco were owed the  following  amounts
for  their  respective  equity  interests  and  for  the  return  of  additional
investments in the old joint ventures.  All amounts due to prior owners of joint
ventures are non-interest bearing and have no fixed repayment terms.

                                                       2004         2003
                                                    ----------   ----------
Payment due for acquisition of HOTEL:
  Payable to Shun'ao                                $1,811,529   $1,811,529
  Payable to Marco                                     905,764      905,764
                                                    ----------   ----------
                                                     2,717,293    2,717,293
Payment due to Shun'ao for acquisition of QINYANG    2,040,989    2,040,989
Payment due to Shun'ao for return of investment        173,991      173,991
                                                    ----------   ----------
  Totals                                            $4,932,273   $4,932,273
                                                    ==========   ==========

NOTE 12 - HOTEL BOWLING OPERATIONS CEASED

The HOTEL  ceased its  bowling  operations  at the end of  September  2003.  The
Company has sold a portion of the  equipment  in 2004 and 2003 and  recognized a
loss of $59,440 and $493,157 on the portions  sold,  respectively.  In addition,
management  of  the  HOTEL  wrote  down  the  remaining   bowling  equipment  by
approximately  $202,000  in 2004.  Management  of the  HOTEL is  continuing  the
process of finding a suitable  buyer for the  remaining  equipment  and believes
that the current  carrying value is not greater than its expected  selling price
less costs to sell. As of December 31, 2004 and 2003,  the carrying value of the
equipment held for sale is $258,359 and $529,750, respectively.

NOTE 13 - YI WAN BEIJING OPERATIONS

The People's  Republic of China  ("PRC")  regulations  prohibit  direct  foreign
ownership of business entities providing food and restaurant services in the PRC
which  certain  licenses are required for the  provision of such  services.  The
Company and its subsidiaries are foreign or foreign invested  enterprises  under
PRC law and accordingly are ineligible for a license to operate  restaurants and
food services.  In order to expand our restaurant and food services and still be
in compliance with these regulations,  in July 2004, the Company  established YI
WAN BEIJING Restaurants  Management Ltd. ("YI WAN BEIJING"), a variable interest
entity  through two persons who are PRC citizens and who each legally  owned 50%
of YI WAN BEIJING ("YI WAN BEIJING Interest  Holders") to operate our restaurant
business.  Pursuant to an Equity Trust Agreement,  we transferred RMB$100,000 to
the YI WAN BEIJING Interest Holders which was used to form and capitalize YI WAN
BEIJING.  The Equity Trust Agreement  provides that the Trustees are to hold the
equity  interest in YI WAN BEIJING  (the  "Equity  Interests")  in trust for the
benefit of Yi Wan Group, Inc. The YI WAN BEIJING Interest Holders have agreed to
not sell,  pledge,  hypothecate,  encumber  or  otherwise  dispose of the Equity

                                       78
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - YI WAN BEIJING OPERATIONS, (CONTINUED)

Interests.  Any such  transfer  will  result  in a breach  of the  Equity  Trust
Agreement and the YI WAN BEIJING  Interest  Holders will be required to transfer
the Equity Interest to the Company.  Further the YI WAN BEIJING Interest Holders
have agreed to promptly distribute any and all dividends, distributions or other
payments received from YI WAN BEIJING with respect to the Equity Interest to the

Company.  Finally,  the YI WAN  BEIJING  Interest  Holders  granted  irrevocable
proxies to two  directors of the Company to exercise  all voting  rights such YI
WAN BEIJING Interest Holders have with respect to their ownership interest in YI
WAN BEIJING. The irrevocable proxies further provides that if such two directors
cease to be an employee of the  Company,  the YI WAN  BEIJING  Interest  Holders
agree to immediately  terminate the proxy and to grant a proxy to another person
designated by the Company.


NOTE 14 - COMMITMENTS AND CONTINGENCIES

YI WAN BEIJING leases its facilities under long term,  non-cancelable  operating
lease agreements  expiring  through January 2010. The facilities  include spaces
for the restaurant and housing for employees. The non-cancelable operating lease
agreements provide that the Company pays certain operating  expenses  applicable
to the leased premises.

Total rent expense for the year ended December 31, 2004 amounted to $73,319.  As
of December 31, 2004, the future  minimum  annual lease payments  required under
the operating leases for the next five years are as follows:

         Year Ending December 31,
                  2005                           $ 127,711
                  2006                             127,711
                  2007                             127,711
                  2008                             127,711
                  2009                             127,711
               Thereafter                           10,643


NOTE 15 - CONSULTANT STOCK PLAN

On December 6, 2004, the Company adopted a Consultant Stock Plan. The purpose of
this plan is to attract,  retain and motivate eligible persons whose current and
potential  contributions are important to the success of the Company by offering
them an opportunity to participate in the Company's future  performance  through
awards of stock. A total of 500,000 shares of common stock have been  registered
with the Securities and Exchange Commission under this plan.

On  December  7,  2004,  the  Company  issued  30,000  shares  to   non-employee
consultants at US$0.66 per share.  The total shares were valued at $19,800,  the
closing price of the stock at the date the shares were issued.


                                       79
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - CONSULTANT STOCK PLAN, (CONTINUED)

The Company accounts for its employee stock option grants in accordance with the
fair value  provisions of Statement of Financial  Accounting  Standards No. 123,
"Accounting  for  Stock-Based  Compensation"  (SFAS 123). SFAS 123 established a
fair-value-based  method  of  accounting  for  stock-based  compensation  plans.
Pursuant to the transition  provisions of SFAS 148,  "Accounting for Stock-Based
Compensation  - Transition and  Disclosure"  (SFAS 148), the Company has elected
the  modified  prospective  method  and will  apply  the fair  value  method  of
accounting to all equity instruments issued to employees.

Compensation  expense  related  to stock  options  granted to  non-employees  is
accounted for under Statement of Financial  Accounting Standards No. (SFAS) 123,
"Accounting for Stock-Based Compensation" and Emerging Issues Task Force ( EITF)
96-18,  "Accounting  for  Equity  Instruments  that are  Issued  to  Other  than
Employees for Acquiring,  or in conjunction  with Selling,  Goods, or Services,"
which require  entities to recognize an expense,  based on the fair value of the
related  awards.   As  of  December  31,  2004,  total  stock   compensation  to
non-employees has amounted to $266,258.

NOTE 16 - STOCK ISSUANCE

The Company has entered  into two  consulting  agreements  with  individuals  to
provide business and financial consulting services.  These agreements expire May
31, 2005 and June 15,  2005.  The Company has agreed to issue a total of 325,000
shares of no par value common stock pursuant to a Form S-8 in exchange for their
services.  The 325,000  shares of common  stock have been  recorded at $1.30 per
share or $422,500  based upon the trading  price of the shares at June 30, 2004.
The  Company  has  recorded  a deferred  charge to  shareholders'  equity  which
represents  the  future  consulting  services  to be  rendered.  The  Company is
amortizing the consulting  services over one year using the straight line method
which amounted to $246,458 for the period ending  December 31, 2004. The 325,000
shares of common stock were issued to the consultants in July 2004.

On December 7, 2004,  the Company issued 30,000 shares to a consultant for legal
services rendered under the Consultant Stock Plan for 2004. The 30,000 shares of
common  stock have been  recorded  at $0.66 per share or $19,800  based upon the
trading  price of the  shares  at the time of  issuance.  The  Company  recorded
$19,800 expense at December 7, 2004.

NOTE 17 - SEGMENT INFORMATION

The Company  aligned its business into the following four  reportable  operating
segments:  restaurant,  lodging,  entertainment and telecommunication equipment.
YWG  evaluates  the  performance  of its segments  based  primarily on operating
profit before corporate expenses and depreciation and amortization.  As a result
of the changes discussed above, historical amounts previously reported have been
restated to conform to the Company's current operating segment presentation. The
following table presents  revenues and other  financial  information by business
segment for the year ended December 31:


                                       80
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17 - SEGMENT INFORMATION, (CONTINUED)

<TABLE>
<CAPTION>
                                                HOTEL
                           ---------------------------------------------------                  Yi Wan      Inter-
                                                     Entertain-                  Telecommu-    Beijing      segment
                            Restaurant    Lodging       ment        Subtotals     nication    restaurant  elimination      Totals
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
<S>                        <C>          <C>          <C>          <C>           <C>           <C>         <C>           <C>
2004
----
Net sales                  $ 5,348,445  $ 2,445,390  $ 1,936,510  $  9,730,345  $ 1,341,454   $  144,921  $             $11,216,720
Cost of sales                2,700,018      170,165      274,266     3,144,449      929,194       89,709                  4,163,352
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
Gross profit                 2,648,427    2,275,225    1,662,244     6,585,896      412,260       55,212                  7,053,368
Operating expenses             676,708      345,067      561,858     1,583,633      339,464      147,538                  2,070,635
Depreciation and
  amortization                                                       1,298,863      137,525        1,646      246,458     1,684,492
Unallocated expenses                                                   990,679                    56,734                  1,047,413
Corporate expenses                                                                                            277,931       277,931
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
Income from operations     $ 1,971,719  $ 1,930,158  $ 1,100,386     2,712,721      (64,729)    (150,706)    (524,389)    1,972,897
                           ===========  ===========  ===========
Interest income                                                        130,157       17,008          161                    147,326
Other income (expense)                                                (316,023)     (14,091)     (53,019)                  (383,133)
Provision for income tax                                              (865,137)                                            (865,137)
                                                                  ------------  -----------   ----------  -----------   -----------
Income before minority
  interest                                                         $ 1,661,718  $   (61,812)  $ (203,564) $  (524,389)  $   871,953
                                                                  ============  ===========   ==========  ===========   ===========

Total assets                                                       $26,572,863  $ 6,129,409   $  160,484  $(2,631,038)  $30,231,718
                                                                  ============  ===========   ==========  ===========   ===========
</TABLE>


                                       81
<PAGE>

                       YI WAN GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17 - SEGMENT INFORMATION, (CONTINUED)

<TABLE>
<CAPTION>
                                                HOTEL
                           ---------------------------------------------------                  Yi Wan      Inter-
                                                     Entertain-                  Telecommu-    Beijing      segment
                            Restaurant    Lodging       ment        Subtotals     nication    restaurant  elimination      Totals
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
<S>                        <C>          <C>          <C>          <C>           <C>           <C>         <C>           <C>
2003
----
Net sales                  $ 4,974,215  $ 2,439,298  $ 1,803,063  $  9,216,576  $ 3,278,613   $           $             $12,495,189
Cost of sales                2,538,327      179,923      220,913     2,939,163    1,833,128                               4,772,291
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
Gross profit                 2,435,888    2,259,375    1,582,150     6,277,413    1,445,485                               7,722,898
Operating expenses             619,177      336,487      372,356     1,328,020      650,028                               1,978,048
Depreciation and
    amortization                                                     1,313,896       21,975                               1,335,871
Unallocated expenses                                                 1,057,647                                            1,057,647
Corporate expenses
                           -----------  -----------  -----------  ------------  -----------   ----------  -----------   -----------
Income from operations     $ 1,816,711  $ 1,922,888  $ 1,209,794     2,577,850      773,482                               3,351,332
                           ===========  ===========  ===========
Interest income                                                         13,991       11,032                                  25,023
Other income (expense)                                                (485,582)          --                                (485,582)
Provision for income tax                                              (866,591)    (289,370)                             (1,155,961)
                                                                  ------------  -----------   ----------  -----------   -----------
Income before minority
     interest                                                      $ 1,239,668   $  495,144   $           $             $ 1,734,812
                                                                  ============  ===========   ==========  ===========   ===========

Total assets                                                       $24,667,327   $6,837,457   $           $(1,834,594)  $29,670,190
                                                                  ============  ===========   ==========  ===========   ===========
</TABLE>


                                       82
<PAGE>

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

There have been no  disagreements  with  accountants on accounting and financial
disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

With the  participation  of management,  our Chief  Executive  Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within the 90
days  preceding  the  filing  date  of  this  annual  report.  Based  upon  this
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that our  disclosure  controls and  procedures  are  effective in ensuring  that
material information required to be disclosed is included in the reports that we
file with the Securities and Exchange Commission.

There  were no  significant  changes  in our  internal  control  over  financial
reporting to the  knowledge  of our  management,  or in other  factors that have
materially affected or are reasonably likely to materially affect these internal
controls over financial reporting subsequent to the evaluation date.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

The names and ages of Yi Wan Group's  executive  officers  and  directors  as of
March 31, 2005, are as follows:

<TABLE>
<CAPTION>
                                                                                  Current Term
       Name           Age              Position                   Held Since       To Expire
-------------------   ---    -------------------------------    --------------    ------------
<S>                   <C>    <C>                                <C>               <C>
Cheng Wan Ming        44     Chairman of the Board and             May 1999       March 2008
                             President
You Yingliu           64     Director and Vice-President           May 1999       March 2008
Luo Guanying          59     Director and Vice-President           May 1999       March 2008
Liang Xiaogen         58     Director                              May 1999       March 2008
Wu Zeming             53     Chief Financial Officer, Chief        May 1999       March 2008
                             Accounting Officer and Director
Cheng Manli           42     Director                              May 1999       March 2008
Cen Minhong           43     Director                              May 1999       March 2008
Cheng Wanqing         36     Director                              May 1999       March 2008
Cheng Deqiang         72     Director                              May 1999       March 2008
</TABLE>

The names and ages of Jiaozuo Yi Wan Hotel's executive officers and directors as
of March 31, 2005, are as follows:


                                       83
<PAGE>
<TABLE>
<CAPTION>
                                                                                  Current Term
       Name           Age              Position                   Held Since       To Expire
-------------------   ---    -------------------------------    --------------    ------------
<S>                   <C>    <C>                                <C>               <C>
Cheng Wan Ming        44     Chairman of the Board and          December 1996     January 2006
                             President
Chen Hong             40     Vice-Chairman of Board             January 2003      January 2006
Wu Zeming             53     Director                           December 1996     January 2006
You Yingliu           64     Director                           December 1996     January 2006
Cen Minhong           43     Director                           December 1996     January 2006
Cheng Manli           42     Director                           December 1996     January 2006
He Lei                38     Director                           December 1996     January 2006
</TABLE>


The names and ages of our  telecommunications  company's  executive officers and
directors as of March 31, 2005, are as follows:

<TABLE>
<CAPTION>
                                                                                  Current Term
       Name           Age              Position                   Held Since       To Expire
-------------------   ---    -------------------------------    --------------    ------------
<S>                   <C>    <C>                                <C>               <C>
Cheng Wan Ming        44     Chairman of the Board and          September 1993    March 2006
                             President
Wu Zeming             53     Vice-Chairman of Board             September 1993    March 2006
You Yingliu           64     Director                           September 1993    March 2006
Luo Guanying          59     Director                           September 1993    March 2006
He Lei                38     Director                           April 2000        March 2006
</TABLE>


The names and ages of Qinyang Yi Wan Hotel's executive officers and directors as
of March 31, 2005, are as follows:

<TABLE>
<CAPTION>
                                                                                  Current Term
       Name           Age              Position                   Held Since       To Expire
-------------------   ---    -------------------------------    --------------    ------------
<S>                   <C>    <C>                                <C>               <C>
Cheng Wan Ming        44     Chairman of the Board              March 2001        March 2007
Guo Ruxing            43     Vice-Chairman of the Board         March 2001        March 2007
Huang Peng            30     Director and General Manager       January 2004      January 2007
You Yingliu           64     Director                           January 2004      January 2007
Chen Hong             40     Director                           March 2001        March 2007
</TABLE>


Mr.  Cheng Wan Ming has been our  President  and  Chairman of the Board from May
1999 until present.  Mr. Cheng Wan Ming is also  responsible  for our accounting
and financial  reporting.  From September 1993 to April 2000, Mr. Wan Ming was a
member  of the  Board  of  Directors  and  President  of our  Telecommunications
company. Since May 2000, Mr. Wan Ming has served as the Chairman of the Board of
Directors and President of our  telecommunications  company. Mr. Wan Ming joined


                                       84
<PAGE>

our Jiaozuo Yi Wan hotel company in December 1996 and has served as its Chairman
of the Board of Directors and President  from December 1996 until  present.  Mr.
Wan Ming joined our former agriculture company in January 1997 and served as its
Chairman of the Board and President  from January 1997 until 2002.  Mr. Wan Ming
joined  our  Qinyang  Yi Wan hotel  company  in March 2001 and has served as its
Chairman of the Board of Directors and President  from March 2001 until present.
Before  September  1993,  Mr. Wan Ming was  President  of Shun'ao  Industry  and
Commerce Company, in Guangdong Province. Mr. Wan Ming received a bachelor degree
from Foshan  Junior  College in  Guangdong  province.  Mr. Cheng Wan Ming is the
husband of Ms.  Cen  Minhong.  Mr.  Cheng Wan Ming is the  brother of Mr.  Cheng
Wanqing and Ms. Cheng Manli.

Mr. You Yingliu has been our  Director  and Vice  President  from May 1999 until
present.  He joined our  telecommunications  company in  September  1993.  Since
September  1993,  Mr.  Yingliu  has been a  Director  of our  telecommunications
company.  Mr. Yingliu joined our hotel company in December 1996. Since then, Mr.
Yingliu  has been a  Director  of our hotel  company.  Since  July 12 2004,  Mr.
Yingliu has been a  Vice-General  Manager of Jiaozuo Yi Wan hotel.  Mr.  Yingliu
joined our former  agriculture  company in January  1997.  From  January 1997 to
2002, Mr. Yingliu was a Director and  Vice-President  of our former  agriculture
company.  Since January 2004,  Mr. Yingliu has been a Director of our Qinyang Yi
Wan hotel.

Ms.  Luo  Guanying  has  been  a  member  of  our  Board  of  Directors   and  a
Vice-President  since May 1999.  Ms.  Guanying has been a member of the Board of
Directors of our telecommunications  company since September 1993. From December
1996  until  January  2000,  Ms.  Guanying  served  as a member  of the Board of
Directors of our hotel  company.  Ms.  Guanying also served as a Director of our
former  agriculture  company from January 1997 until January 2000. Ms.  Guanying
also is presently a Vice-President  of Shun'ao Industry & Commerce  Company,  in
Guangdong  province,  a position she has held since April 1993. Ms. Luo Guanying
is the wife of Mr. Liang Xiaogen.

Mr. Liang Xiaogen has been a member of our Board of Directors since May 1999. He
served as a Director of our  telecommunications  company from  September 1993 to
April 2000.  From December 1996 until January 2000, Mr. Xiaogen also served as a
Director of our  Jiaozuo Yi Wan hotel  company.  In January  1997,  Mr.  Xiaogen
became a Director of our former agriculture  company and served in that capacity
until  January  2000.  Mr.  Xiaogen  has been the  President  of Shun de Zhiyuan
Developing Company, in Guangdong province,  since March 1991. Mr. Xiaogen is the
husband of Ms. Luo Guanying.

Mr. Wu Zeming has been our Chief Financial Officer and Chief Accounting  Officer
and a member of our Board of Directors since May 1999. He served as the Chairman
of the Board of Directors and Vice President of our  telecommunications  company
from  September  1993 until April 2000.  Since May 2000, Mr. Zeming has been the
Vice-Chairman of our telecommunications company. Since December 1996, Mr. Zeming
has been a Director of our Jiaozuo hotel company.  Mr. Zeming has also served as
a Director of our former  agriculture  company from  January  1997 to 2002.  Mr.
Zeming  has  also  been  the  Chairman  of  the  Board  of  Directors  of Wan Da
Construction  Inc., of Macao,  since June 1991. Mr. Zeming is the husband of Ms.
Cheng Manli.

Ms. Cheng Manli has been a member of our Board of Directors  since May 1999. Ms.
Manli has been the Representative of the Macao Office of our  telecommunications
company since January 1999.  She served as a Director of our  telecommunications
company from  September  1993 until April 2000. Ms. Manli has been a Director of


                                       85
<PAGE>

our Jiaozuo Yi Wan hotel  company  since  December  1996.  Ms.  Manli was also a
Director of our former agriculture company from January 1997 to 2002. Since June
1991, Ms. Manli has been a Director of Wan Da  Construction  Inc. of Macao.  Ms.
Manli is the wife of Mr. Wu Zeming. She is also the sister of Mr. Cheng Wan Ming
and Mr. Cheng Wanqing.

Ms. Cen Minhong has been a member of our Board of Directors  since May 1999. Ms.
Cen  Minhong  has  been  the  Director  of  the  Administrative  Office  of  our
telecommunications  company  since March  2000.  She served as a Director of our
telecommunications company from September 1993 until April 2000. Ms. Minhong has
also been a Director of our hotel company since  December  1996. Ms. Minhong was
also a Director of our former agriculture  company from January 1997 until 2002.
Ms. Minhong is the wife of Mr. Cheng Wan Ming.

Mr. Cheng Wanqing has been a member of our Board of Directors since May 1999. He
served as a director of our telecommunications company from September 1993 until
April 2000.  From December 1996 until January 2000, Mr. Wanqing also served as a
Director of our hotel  company.  Mr.  Wanqing served as a director of our former
agriculture company from January 1997 until January 2000. From April 1993 to the
present,  Mr.  Wanqing  has been  Vice-President  of Shunao  Industry & Commerce
Company.  Mr.  Cheng  Wanqing  received a bachelor  degree  from the  Television
Broadcasting College, in Guangdong province. Mr. Cheng Wanqing is the brother of
Mr. Cheng Wan Ming and Ms. Cheng Manli.

Mr. Cheng  Deqiang has been a member of our Board of  Directors  since May 1999.
From  August  1953 to May 1993,  Mr.  Deqiang  was a  department  manager of the
Agriculture Bureau of Shun de City,  Guangdong  province.  From June 1993 to the
present,  Mr.  Deqiang has been  Vice-President  of Shun'ao  Industry & Commerce
Company, in Guangdong Province.  Mr. Deqiang received a bachelor degree from the
Zhongkai Agriculture School in Guangdong province.  Mr. Deqiang is the father of
Mr. Cheng Wan Ming, Mr. Cheng Wanqing, and Ms. Cheng Manli.

Ms. He Lei has been a Director of our hotel company since January 2000.  Ms. Lei
was also a Director of our former  agriculture  company  from January 2000 until
2002. Ms. Lei has been a director of our telecommunications  company since April
2000. Previously, from July 1995 until August 1997, Ms. Lei was a manager of the
Gang'ao Entrust Investment Co., Ltd., a financial and investment consulting firm
located in Beijing, P.R.China.  Beijing office. Since September 1997 Ms. Lei has
also been a manager  of  Beijing  Zhongyou  Huashang  Trading  Company.  Ms. Lei
received a bachelor degree from the Renmin University of China.

Mr.  Chen Hong has been a manager  of our  Jiaozuo  Yi Wan hotel  company  since
August  1996.  In January  2003,  Mr. Chen Hong became the Vice  Chairman of the
Board of  Directors  and the Vice  General  Manager of our  Jiaozuo Yi Wan hotel
company.  In March 2001, Mr. Chen Hong became the Director of our Qinyang Yi Wan
Hotel company. Previously, between November 1989 and May 1996, Mr. Chen Hong was
a department  manager of the Tengfei Hotel of Jiaozuo City, Henan province.  Mr.
Chen Hong received a bachelor degree from Jiaozuo University in Henan province.

Mr. Huang Peng has been a manager of our Jiaozuo Yi Wan hotel company since July
1997. In January 2004, Mr. Huang Peng became the Director and General Manager of
our Qinyang Yi Wan hotel company. Previously,  between August 1994 and May 1997,
Mr. Huang Peng was a department  manager of Yueshan  Branch  Office of Zhengzhou
Railway Bureau,  Henan province.  Mr. Huang Peng received a bachelor degree from
Henan Normal School.


                                       86
<PAGE>

Mr.  Guo Ruxing has been the Vice  Chairman  of the Board of our  Qinyang Yi Wan
hotel company since March 2001.  Previously,  between June 1993 and August 1998,
Mr. Guo  Ruxing was a  department  manager of the  Government  Office of Qinyang
City, Henan province. Mr. Guo Ruxing has been the General Manager of the Qinyang
Yi Wan hotel since  September  1998. Mr. Guo Ruxing  received a bachelor  degree
from Henan Yuxi Agriculture School.

AUDIT COMMITTEE FINANCIAL EXPERT

We do not have an audit committee financial expert. We were not able to identify
a suitable  nominee and our management is currently  diligently  pursuing such a
candidate.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the  Securities  Exchange Act of 1934 requires our officers and
directors,  and persons who own more than ten percent of a  registered  class of
our equity  securities,  to file reports of  ownership  and changes in ownership
with  the  Securities   and  Exchange   Commission.   Officers,   directors  and
greater-than-ten-percent  shareholders are required by SEC regulation to furnish
us with  copies of all  Section  16(a)  forms they file.  Based  solely upon our
review of any such  reports  furnished  to us, we believe  that  during the year
ended December 31, 2004, such persons made all required filings.

CODE OF ETHICS

We have  adopted  a code of  ethics  that  applies  to our  principal  executive
officer,  principal  financial officer or persons  performing similar functions.
Our code of ethics is  exhibited  to this annual  report on Form 10-K as Exhibit
14.1.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth summary  information  concerning the compensation
received for services  rendered  during the years ended December 31, 2004,  2003
and 2002 by our  President/Chairman  of the  Board,  Cheng  Wan  Ming.  No other
executive  officers received aggregate  compensation  during our last two fiscal
years which exceeded, or would exceed on an annualized basis, $100,000.



                                       87
<PAGE>

Summary Compensation Chart

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                    Annual Compensation             Long-term compensation
                               ---------------------------    ----------------------------------
                                                                       Awards           Payouts
--------------------    ----   ---------------------------    -----------------------   -------    ---------
Name & Position         Year   Salary *     Bonus    Other    Restricted   Securities    LTIP      All other
                               (US$)         ($)      ($)     stock        underlying   payouts    compens-
                                                              awards ($)   options        ($)      ation ($)
                                                                           /SARS ($)
--------------------    ----   ---------------------------    -----------------------   -------    ---------
<S>                     <C>    <C>          <C>      <C>      <C>          <C>          <C>        <C>
Cheng Wan Ming,         2004   $11,595        0        0          0            0           0           0
Chairman/President             (Hotel
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                               0              0        0          0            0           0           0
                               (Commu-
                               nication
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                               0              0        0          0            0           0           0
                               (Yi Wan
                               Beijing
                               Hotel Mgmt.
                               Ltd.)
                               ---------------------------    -----------------------   -------    ---------
                        2003   $11,595      0          0          0            0           0           0
                               (Hotel
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                               0            0          0          0            0           0           0
                               (Commu-
                               ication
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                        2002   $11,595      0          0          0            0           0           0
                               (Hotel
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                               $3,333       0          0          0            0           0           0
                               (Agricul-
                               ture
                               Division)
                               ---------------------------    -----------------------   -------    ---------
                               0            0          0          0            0           0           0
                               (Commu-
                               ication
                               Division)
------------------------------------------------------------------------------------------------------------
</TABLE>
*The  salary  that  Cheng  Wan Ming  received  from our  Hotel  and  Agriculture
Divisions reflects payment by these Divisions.

                                       88
<PAGE>

Our  officers  and  directors,  including  Cheng Wan Ming,  did not  receive any
monetary or security  compensation  from us during 2004.  The only  compensation
that our  officers  and  directors  received  during  2004  was  from our  hotel
subsidiaries, as reflected above. The only compensation that any of our officers
or directors  received during 2004 was from our hotel  subsidiaries.  The amount
received  by Cheng Wan Ming (the only  officer or  director  whose  compensation
exceeded  $100,000  during  the last two fiscal  years)  from each  division  is
reflected above.

OPTIONS/SAR GRANTS

No options or SAR grants were  granted to the named  executive  officers  during
fiscal year ended December 31, 2004.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END

None.

LONG TERM INCENTIVE PLAN ("LTIP") AWARDS

None.

PENSION PLAN

None.

China's mandatory pension system for its urban labor force is a defined-benefit,
pay-as-you-go  system for persons  identified  as "older  workers" and retirees.
"Older  workers" are those who retired prior to the period  between  October and
December 1997, which was the implementation of State Counsel Decision Number 26,
the mandatory  pension  system.  In August 1997,  China State  Council  Decision
adopted this unified,  publicly  managed system covering all urban workers.  The
defined  system  for  younger  workers  is  designed  to  be  multi-pillar  with
individual accounts, consisting of: (1) a basic benefit which is a pay-as-you-go
system entitling retirees to a defined-benefit of 20% of the last year's average
provincial,  municipal or otherwise local monthly wage; (2) individual  accounts
entitling retirees to a monthly annuity equal to 1/120 of the account's notional
accumulation, plus and indexation factor, (3) voluntary supplementary individual
accounts entitling retirees to a phased-withdrawal.  This Decision set forth the
general parameters for  contributions,  fund accruals,  service  recognition for
those who have contributed under both the old and new system,  and benefits.  In
addition, the Decision provides some basis for regional variation.

The Decision mandates one of three benefits  according to when the worker begins
contributing to the system:  (a) the so called "older men" are those who retired
prior to the  implementation  of the Decision between October and December 1997;
these  workers   retain  the  locally   determined   level  of   defined-benefit
entitlements  they had been  receiving;  (b)  "middle  men" are  those who began
contributing prior to the Decision, but who retire afterwards;  such workers are
entitled to the better of the defined-benefit  formula applied to "older men" in
their community or the sum of the basic benefit, individual account distribution
and an accrual factor  applicable to the years of service prior to the Decision;
and (c) "young men" are those who began contributing after the implementation of
the  Decision;  these  individuals  are  entitled  only to the sum of the  basic
benefit and individual account distribution.


                                       89
<PAGE>

The State  Counsel  Decision  and  measures to adopt  municipal  and  provincial
pooling  represent  important  steps  towards  gradually  reducing  the unfunded
liability of the pension system.

Under the hotel division,  all of the hotel's  employees who began  contributing
after the implementation of the system are entitled only to the sum of the basic
benefit  and  individual  account  distribution.  This  system  sets out general
parameters for contributions,  fund accruals,  and service recognition for those
who have  contributed  under both old and new systems and benefits but left some
basis for regional  variation.  As regulated by the local government,  our hotel
and  telecommunications  divisions  pay  annual  contributions  of 34% and  20%,
respectively,  of the City's standard salary, for all of its eligible employees,
to an insurance  company who is responsible  for the entire  pension  obligation
payable to the retired employees.

COMPENSATION OF DIRECTORS

No Director receives any cash compensation for their service as a Director.  All
directors are reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties to us.

EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

All of the above  individuals  have  employment  agreements  with the  entity or
entities for which they work. The terms of all  employment  agreements are until
February 2006. Salaries are renegotiated each year.

Our  telecommunications  and hotel subsidiaries each have employment  agreements
with our  President,  Mr.  Cheng Wan Ming.  The  employment  agreement  with the
telecommunications  subsidiary  provides  that Mr.  Cheng Wan Ming  serve as its
President from September 1, 2004 to September 1, 2007. The employment  agreement
with the Jiaozuo Yi Wan hotel subsidiary  provides that Mr. Cheng Wan Ming serve
as its President  from December 15, 1999 to December 15, 2005.  Each  employment
agreement provides that monthly salary shall be determined  corresponding to the
position and level of work responsibility within the respective  corporation and
that Mr.  Cheng Wan Ming will be eligible  for bonus  payments  according to the
provisions of the respective  corporation's  performance and bonus program.  The
employment  agreement with the Qinyang Yi Wan hotel subsidiary provides that Mr.
Cheng Wan Ming serve as its President from March 1, 2004 to March 1, 2007.  Each
employment   agreement   provides  that  monthly   salary  shall  be  determined
corresponding  to the  position  and  level of work  responsibility  within  the
respective  corporation  and that Mr.  Cheng Wan Ming will be eligible for bonus
payments according to the provisions of the respective corporation's performance
and bonus program.

Our telecommunications subsidiary has an employment agreement with our Director,
Ms.  Luo  Guanying,  in her  capacity  as a Director  of our  telecommunications
subsidiary.  The employment  agreement provides that Ms. Guanying shall serve as
the  Director  of the  telecommunications  subsidiary  from  February 1, 2001 to
February 1, 2006. The employment  agreement further provides that monthly salary
shall  be   determined   corresponding   to  the  position  and  level  of  work
responsibility  within the  corporation  and that Ms. Guanying shall be eligible
for bonus payments according to the corporation's performance and bonus program.


                                       90
<PAGE>

Mr.  You  Yingliu  has an  employment  agreement  with our  Jiaozuo Yi Wan hotel
subsidiary.  The employment  agreement  provides that Mr. Yingliu shall serve as
Vice-General  Manager  from July 12, 2004 to July 12, 2007 under the same salary
and bonus provisions  described in Mr. Yingliu's  employment  agreement with our
former agriculture subsidiary.

REPORT ON REPRICINGS OF OPTIONS/SARS

None.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Our  officers  and  directors,  including  Cheng Wan Ming,  did not  receive any
monetary or equity  compensation from us during 2004. The only compensation that
our officers and directors received during 2004 was from our hotel subsidiaries,
as  reflected  in the  executive  compensation  table  above.  We do not  have a
compensation committee. Our board of directors and the board of directors of our
subsidiaries   determine  executive  officer  compensation.   The  officers  who
participated in the deliberations of our board of directors concerning executive
officer  compensation  are the  officers  who are also  members  of our board of
directors, namely Cheng Wan Ming, You Yingliu, Luo Guanying and Wu Zeming. There
are no officers on the board of directors of Qinyang Yi Wan Hotel.

PERFORMANCE GRAPH

Our stock did not start  trading  until the  latter  half of 2003.  As a result,
there is insufficient data for a performance graph.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATED STOCKHOLDER
         MATTERS

The following  table sets forth the ownership of our Common Stock as of the date
of this Form 10-K by:

     o    Each shareholder  known by us to own beneficially  more than 5% of our
          common stock;

     o    Each executive officer;

     o    Each director or nominee to become a director; and

     o    All directors and executive officers as a group.

This table is based upon  information  derived  from our stock  records.  Unless
otherwise  indicated  in the  footnotes  to this table and subject to  community
property laws where applicable,  we believe that each of the shareholders  named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially  owned.  Applicable  percentages are based upon
16,861,250 shares of common stock outstanding as of December 31, 2004.



                                       91
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

--------------   ----------------------------  --------------------  -----------
                                               Amount and Nature of  Percentage
Title of Class               Name              Beneficial Ownership   of Class
--------------   ----------------------------  --------------------  -----------
Common           Wise Ascent Investment        10,086,296               59.8%
                 Ltd. (1)                      (Direct/Indirect)
--------------   ----------------------------  --------------------  -----------
Common           Cheng Wan Ming (1)            10,086,296               59.8%
                                               (Direct/Indirect)
--------------   ----------------------------  --------------------  -----------
Common           Cen Minhong (1)               10,086,296               59.8%
                                               (Direct/Indirect)
--------------   ----------------------------  --------------------  -----------
Common           You Yingliu                   400,480                  2.4%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Wu Zeming,                    1,047,865                6.2%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Luo Guanying                  400,019                  2.4%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Chang Wanqing                 763,750                  4.5%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Cheng Deqiang                 763,750                  4.5%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Cheng Manli                   427,700                  2.5%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           Liang Xiaogen                 422,140                  2.5%
                                               (Direct)
--------------   ----------------------------  --------------------  -----------
Common           All Officers and Directors    14,312,000              84.9%
                 as a Group (9 Persons)
--------------   ----------------------------  --------------------  -----------

-----------------
(1)  2,579,397  shares of our common  stock is owned by Wise Ascent  Investments
Limited through its sole officer, director and shareholder,  Cheng Wan Ming, who
is also the  President,  Chairman  of the  Board of  Directors  and  controlling
shareholder of Yi Wan. Mr.Cheng Wan Ming is the husband of Ms. Cen Minhong.  Mr.
Cheng Wan Ming  directly  owns  5,414,224  shares;  his wife,  Ms. Cen  Minhong,
directly  owns  2,092,675  shares.  Collectively,  Mr.Cheng Wan Ming and Ms. Cen
Minhong, beneficially own 10,086,296 shares as reflected in the above table.

CHANGE IN CONTROL

We are not aware of any arrangements  which may result in a change in control of
our company. There are no pending or anticipated  arrangements that we are aware
of that may cause a change  in  control  of our  company.  We are not  currently
engaged in any activities or  arrangements  that we anticipate  will result in a
change in our control.


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<PAGE>

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTIES

The following is a description of the various individuals and companies that are
named below in Yi Wan Group, Inc.'s (the "Company") discussion regarding related
transactions:

Shun'ao Industry and Commerce Company ("Shun'ao") is a company established under
the laws of the PRC. Shun'ao owns 10% of the Company's Jiaozuo Yi Wan Hotel Co.,
Ltd. ("Jiaozuo"). Cheng Wan Ming owns 41.7% of Shun'ao.

Marco Wan Da Construction  ("Marco") is a company  established under the laws of
Macao.  Our  directors,  Wu Zeming and Cheng Manli,  have 51% and 49%  ownership
interests, respectively, of Marco.

The City of Qin Yang Local Government owns 20% of the Qinyang Yi Wan Hotel, Co.,
Ltd. ("Qinyang")

Cheng Wan Ming, our president, owns 61.1% of the Company and 41.7% of Shun'ao.

Wu Zeming, one of our directors, owns 6.3% of the Company and 51% of Marco.

Cheng Manli, one of our directors, owns 2.6% of the Company and 49% of Marco.

RELATED TRANSACTIONS

The Company  classified  as "due from related  parties" at December 31, 2004 and
2003 the amounts  $3,689,789 and  $3,599,133,  respectively.  The details of the
amounts "due from related parties" is as follows:

                                                  2004         2003
                                               ----------   ----------

     Shun'ao Industry and Commerce Company     $  158,210   $  118,900
     Marco Wan Da Construction                  3,471,079    3,480,233
     City of Qin Yang Local Government             60,500           --
                                               ----------   ----------
         Total                                  3,689,789    3,599,133
     Less current portion                       1,366,789    3,599,133
                                               ----------   ----------
     Non-current portion                       $2,323,000   $       --
                                               ==========   ==========

A portion of the  receivables  from  Shun'ao  and Marco are  generated  from the
Company making cash advances to purchase  supplies,  inventories and other goods
on behalf of the Company, Shun'ao and Marco. These transactions are re-occurring
in nature.  Due to their short term nature, the Company does not charge interest
on these  receivables  and they  are  included  in the  current  portion  of the
receivable.

The receivable from the City of Qin Yang Local  Government is generated from the
Company making  various cash advances and the allocation of various  expenses to
the City of Qin Yang.  Due to their  short term  nature,  the  Company  does not
charge  interest on this receivable and it is included in the current portion of
the receivable.


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<PAGE>

During 2003, the Company advanced Marco $2,323,000 to pay for general  operating
expenses.  The Company  expected to be repaid this amount during 2004, thus this
amount was  classified  as a current  asset and no interest was being charged on
this amount.  As of December  31,  2004,  the Company has not been repaid and is
currently  negotiating  with Marco for  repayment of the funds.  The Company has
reclassified this amount as non-current since no payment terms or interest terms
have been determined.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Total  annual  audit fees  billed for  professional  services  rendered by Moore
Stephens Wurth Frazer and Torbet,  LLP during the 2004 and 2003 fiscal years for
the audit of our annual  financial  statements  and the review of the  financial
statements  included in our quarterly  reports on Form 10-QSB,  or services that
are  normally  provided  by Moore  Stephens  Wurth  Frazer  and  Torbet,  LLP in
connection with statutory and regulatory filings or engagements for those fiscal
years, totaled $115,000 and $120,000, respectively.

TAX FEES

The  total  fees  billed  during  the 2004 and  2003 for  professional  services
rendered  by Moore  Stephens  Wurth  Frazer and Torbet,  LLP for tax  compliance
services  were $7,000 and $5,000,  respectively.  Specifically,  these  services
involved preparation of the consolidated tax returns.


                                    PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Exhibits

   3(i)   Articles of Incorporation of the Registrant*
   3(ii)  Bylaws of the Registrant*
   3.1    Jiaozuo Yi Wan Hotel Co., Ltd. Articles of Association*
   3.2    Shunde Yi Wan Communication Equipment Plant Co., Ltd. Articles of
          Association*
   4      Form of common stock Certificate of the Registrant*
  10.1    Form of Employment Agreement Jiaozuo Yi Wan Hotel Co., Ltd.*
  10.2    Form of Employment Agreement Shunde Yi Wan Communication Equipment
          Plant Co., Ltd.*
  10.3    Land Use Permits of Shunde Yi Wan Communication Equipment Plant Co.,
          Ltd.*
  10.4    Land Use Permits of Jiaozuo Yi Wan Hotel Co., Ltd.*
  10.5    Joint Venture Contract Jiaozuo Yi Wan Hotel Co., Ltd.*
  10.6    Agreement of Shunde Yi Wan Communication Equipment Plant Co., Ltd.*
  10.7    Agreement of Jiaozuo Yi Wan Maple Leaf High Technology Agriculture
          Development Ltd., Co. on the Transfer of Equity Shares**
  10.8    Agreement of Jiaozuo Yi Wan Hotel Co., Ltd. on the Transfer of
          Equity Shares**
  10.9    Transfer of Stock Rights and Property Rights Agreement of Jiaozuo Yi
          Wan Maple Leaf High Technology Agriculture Development Co., Ltd.***
  10.10   Qinyang Yi Wan Hotel Co., Ltd. Joint Venture Contract***
  10.11   Joint Venture Contract with Qinyang Hotel***


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<PAGE>

  10.12   Jiaozuo Foreign Trade and Economy Cooperation Bureau Reply about
          Building Qinyang Yi Wan Hotel Co., Ltd.***
  10.13   Agreement with Jiaozuo Yi Wan Maple Leaf High Technology Agricultural
          Development Co., Ltd.***
  10.14   Reply To The Transfer Of The Transfer Of The Stock Rights Of Jiaozuo
          Yi Wan Maple Leaf High Technology Agricultural Development
          Co., Ltd.***
  10.15   Consulting Agreement, dated as of April 15, 2004, between Yi Wan
          Group, Inc. and Stanley Wunderlich, an individual*****
  10.16   Consulting Agreement, dated as of June 15, 2004, between Yi Wan
          Group, Inc. and Yale Yu, an individual*****
  10.17   Equity Trust Agreement, dated July 30, 2004, Cheng Wan Qing, Cheng Wan
          Ming and Yi Wan Group******
  14.1    Code of Ethics
  21      List of Subsidiaries*
  23.1    Consent of Independent Registered Public Accounting Firm for Yi Wan
          Group, Inc.'s Audited Financial Statements December 31, 2003 and 2004
  31.1    Certification pursuant to Section 302 of the Sarbanes-Oxley Act
          of 2002
  31.2    Certification pursuant to Section 302 of the Sarbanes-Oxley Act
          of 2002
  32.1    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002
  99.1    Application for the Transfer of the Stock Rights of Jiaozuo Yi Wan
          Maple Leaf High Technology Agriculture Development Co., Ltd.****
  99.2    Reply to the Transfer of the Transfer of the Stock Rights of Jiaozuo
          Yi Wan Maple Leaf High Technology Agriculture Development
          Co., Ltd.****

----------------
* Denotes  previously  filed  exhibit,   filed  with  Form  10-12G/A  on
11/07/01, SEC File No. 000-33119, hereby incorporated by reference.

** Denotes previously filed exhibit,  filed with Form 10-12G/A on 5/21/02, SEC
File No. 000-33119

*** Denotes previously filed exhibit, filed with Form 10-K on 4/16/03, SEC File
No. 000-33119, hereby incorporated by reference.

**** Denotes previously filed exhibit, filed with Form 10-K on 3/30/04, SEC File
No. 000-33119, hereby incorporated by reference

***** Denotes previously filed exhibit, filed with Form S-8 on 6/30/04, SEC File
No. 000-33119, hereby incorporated by reference

****** Denotes previously filed exhibit,  filed with Form 10-Q on 11/14/04,  SEC
File No. 000-33119, hereby incorporated by reference


(b)  Reports on Form 8-K

None.


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<PAGE>

                                   SIGNATURES

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

Date: April 15, 2005              YI WAN GROUP, INC.
                                  (Registrant)

                                  By: /s/ Cheng Wan Ming
                                      ------------------------------------------
                                      Cheng Wan Ming
                                      President

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

       Signature                           Title                        Date
--------------------------    ----------------------------------   -------------

/s/ Cheng Wan Ming            Chairman of Board, President,          04/15/05
--------------------------    Chief Executive Officer
Cheng Wan Ming

/s/ Wu Zeming
--------------------------    Chief Financial Officer                04/15/05
Wu Zeming

/s/ You Yingliu
--------------------------    Director                               04/15/05
You Yingliu

/s/ Luo Guanying
--------------------------    Director                               04/15/05
Luo Guanying

/s/ Liang Xiaogen
--------------------------    Director                               04/15/05
Liang Xiaogen

/s/ Cheng Manli
--------------------------    Director                               04/15/05
Cheng Manli

/s/ Cen Minhong
--------------------------    Director                               04/15/05
Cen Minhong

/s/ Cheng Wanqing
--------------------------    Director                               04/15/05
Cheng Wanqing

/s/ Cheng Deqiang
--------------------------    Director                               04/15/05
Cheng Deqiang

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