Edgar Filing: CHINA MOBILITY SOLUTIONS, INC. (formerly Xin Net Corp.)

SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

FOR THE YEAR ENDED DECEMBER 31, 2004

General Form for Registration of Securities of Small Business Issuers
Commission file number 0-26559

CIK No. 0001082603

CHINA MOBILITY SOLUTIONS, INC.
----------------------------------
(Exact name of registrant as specified in this charter)

XIN NET CORP.
-----------------
(Former Name)

Florida 330-751560
---------- -------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

#900 - 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (604) 632-9638

Securities Registered to be Pursuant to Section 12(b) of the Act:

NONE

Securities Registered to be Pursuant to Section 12(g) of the Act

COMMON STOCK $.001 PAR VALUE

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 the filing
requirements for at least the past 90 days.

Yes [X] No [_]

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $475,309.

Transitional Small Business Disclosure Format:

Yes [_] No [X]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 31, 2004: $5,491,173 at $.51 per share.

Number of outstanding shares of the registrant's no par value common stock, as
of March 31, 2005: 15,826,670.

TABLE OF CONTENTS

PART I

Item 1. Description of Business

Item 2. Description of Properties

Item 3. Legal Proceedings

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

PART II

Item 5. Market for Common Stock and Related Stockholder Matters

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

Item 7. Financial Statements

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

Item 8A. Controls and procedures

Item 8B. Other Information

PART III

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

Item 10. Executive Compensation

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

Item 12. Certain Relationships and Related Transactions

Item 13. Exhibits

Item 14. Principal Accountant Fees and Services

Signature Page

PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a) General Description and Development of Business.

PREVIOUS HISTORY

On September 6, 1996, the Company was incorporated under the laws of the
State of Florida under the name of Placer Technologies, Inc. It conducted a
small public offering of 200,000 shares @ $.25 per share to achieve $50,000 in
capital. In December 1996 a Rule 15c2-11 filing resulted in trading approval on
the OTCBB.

The Company's initial primary service consisted of developing web home pages
for small businesses in USA. It generated minimal revenues in 1996.

On April 2, 1997, the Company acquired 100% interest of Infornet Investment
Limited ("Infornet"), a Hong Kong corporation. In August 1997 Infornet entered
into a joint venture agreement with Xin Hai Technology Development Ltd., ("Xin
Hai"), Xin Hai was an experienced internet-related services provider, but the
business suffered loses and was sold and discontinued in 2001.

On June 11, 1997, the Company purchased 100% interest of Infornet Investment
Corp., a British Columbia corporation. Infornet Investment Corp. is the
subsidiary which manages daily operations of the Company.

On July 24, 1998, the Company changed its name from Placer Technologies, Inc.
to Xin Net Corp.

In June 2004, the Company changes its name to China Mobility Solutions, Inc.
concurrent with a one for three reverse split.

CORPORATE OVERVIEW

China Mobility Solutions, Inc. structure showing its subsidiaries is as
follows, with the jurisdiction of incorporation of each subsidiary included in
parentheses:

China Mobility Solutions, Inc.
(Florida, USA)

Infornet Investment Corp. Infornet Investment Ltd.
(100% Owned) (100% Owned)
(BC., Canada) (Hong Kong)

Windsor Education Academy Inc.
(100% Owned)
(BC., Canada)

Xinbiz Corp. Xinbiz Ltd.
(British Virgin Islands) (Hong Kong)
(100% Owned) (Xinbiz Corp. 100% owned)
(Dormant) (Dormant)

The Company also incorporated Xinbiz Corp. (British Virgin Islands) on
January 14, 2000 and its subsidiary Xinbiz Ltd. (Hong Kong) on March 10, 2000.
Both of these companies are wholly owned subsidiaries. Xinbiz Corp. and Xinbiz
Ltd. do not have any operations.

Through our wholly owned subsidiary, Infornet Investment Ltd. (Hong Kong),
the Company formed a joint venture with Xin Hai Technology Development Ltd. for
upgrading telecommunication technology and services in the PRC. This evolved
into an internet-focused service provider and e-commerce solutions business,
which was subsequently sold in 2001.

The Company decided in May 2001 to focus its business in China on
domain name registration and web-hosting services, and to discontinue Internet
access provision services as soon as practicable. On June 22, 2001 the Company
entered into an agreement to sell its ISP assets (Xin Hai). The price for the
sale was $700,000 (USD) payable to in Renminbi at the official exchange rate. As
of December 31, 2003, $500,000 had been received for the transaction. A loss
provision of $200,000 was made against the balance of the sales price as the
Company has determined that the purchaser will not be able to pay the remaining
balance.

Since the Company started its Internet-related business in China, it
has seen rapid growth in Internet use in China; but it has also seen an equal if
not greater growth in companies entering this arena. As a result, the industry
experienced severely reduced operating margins and continued losses. Although
the Company was considered an early leader in the Domain Name Registration
field, due to the lack of adequate funding, future growth potential against many
competitiors was limited at best. The Company had struggled for several years to
break even and was hoping for some meaningful funding to grow, but the plan was
nullified when the funding failed to materialize. As China becomes more and more
open according to the terms of the WTO, the world's large well-funded companies
have been given access to the China market and seriously compromised the
Company's competitive position.

In February, 2003, the Company signed an agreement to sell the
Company's China assets (Domain name registration) to a subsidiary of Sino-i.com
Limited, a Hong Kong Stock Exchange listed company for a total consideration
of Rmb 20 million (approx. US$ 2.4 million). The Company has received all of the
purchase price, and the divestiture was completed in 2004.

Education Business

In 2002, the Company redirected its resources to the education and train
-ing field. In January 6, 2003, the Company announced the acquisition of Windsor
Education Academy Inc., a Richmond, British Columbia based school specializing
in English as a Second Language (ESL) courses to foreign students. Total consid-
eration was C$ 200,000 (about US$ 128,000). Windsor Education Academy Inc., a
Richmond, British Columbia based school offers English as a Second Language
(ESL) courses to foreign students. Windsor is government certified. The Company
will help Windsor to expand locally as well as internationally into China and
Southeast Asia. The Company will look for further companies in this market area
with the goal of introducing foreign accredited programs into the China market.

Education and Training

Windsor Academy has a campus in Richmond, British Columbia. They are equipped
with personal computers and the standard classroom fixtures.

China Mobility Solutions, Inc. currently maintains an office at: #900
- 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2 (telephone number is
1-604-632-9638).

Quicknet Acquisition in 2004

In 2004, the Company entered into a Definitive Agreement to acquire 51% of
a SMS provider in China, Beijing Quicknet Telecommunications Corp. Ltd. (Beijing
Quicknet), from non-affiliates through its Hong Kong subsidiary Infornet Invest-
ment LTD. In order to comply with current Chinese law, the Company will acquire
49% immediately upon closing and will retain the right to acquire the 2% as soon
as it is able to obtain Government approval or achieve a legal structure (under
Chinese law) which allows control of the 2% (thereby aggregating 51%).

The Company acquired 49% of Beijing Quicknet for a price of U$3,060,000
(three million and sixty thousand US dollars) in form of issuing 6,120,000 (six
million one hundred and twenty thousand) common shares of the Company's stock at
a deemed price of US$0.50 per share. The remaining 2% will be conveyed for
US$100 when either of the following is completed to the satisfaction of the
Company (1) the appropriate government ministry in China approving the transfer
of the 2%, or (2) an acceptable legal mechanism for the transfer of the 2% owner
-ship is arranged. Furthermore, the Company has the option to acquire the remain
-ing 49% of Beijing Quicknet within 2 years from the Closing Date. If the
Company exercises the option to purchase the remaining 49% of Beijing Quicknet
within first year from the Closing Date, the purchase price will be US$4,000,000
(four million US dollars); if the Company exercises the option to purchase the
remaining 49% of Beijing Quicknet within the second year from the Closing Date,
the purchase price will be US$5,000,000 (five million US dollars). The purchase
price will be in the form of a combination of cash and the issuance of common
shares of the Company.

The Company has the right to appoint all of the directors of Beijing Quicknet.

Discontinued Internet Services

Up until late 2002, the Company business was focused on domain name registra-
tion, webhosting and web design services under the ChinaDNS banner. It operated
the website www.chinadns.com, the first in the PRC to offer online site registra
-tion. In October 1999, ChinaDNS was approved as an Official Agent of Network
Solutions, Inc.

Due to the continued loss on operations ($254,035 in 2002). In 2003, the Company
entered into an Agreement to sell the domain name registration business to China
Enterprise an ASP for about $2,400,000, which sale was completed in 2004. We are
treating the DNS business as discontinued operations at this time, as China
Enterprise is in full control of the assets.

CURRENT BUSINESS

Mobile Solutions for businesses in China

The Company is focusing on providing mobile solutions to many diverse
corporations across China. With its rapidly growing client base, the Company
hopes to become one of the largest providers of mobile business solutions in
China. The first product launched is mobile marketing solution for enterprises.

Education and Training

The Company is currently offering English as a Second Language (ESL) and related
courses through Windsor Education Academy in the Richmond campus. The Company
owns 100% of Windsor, a B.C. company.

MARKETING

Windsor Education Academy uses the printed media as well as recruitment
agents to attract students. Word of mouth is also an important endorsement.
Windsor is also a British Columbia Provincial Government endorsed ESL provider,
receiving students from government programs, where the fee is paid by the
government. Windsor is continuously working to improve its recognition for
quality and service with the British Columbia Provincial Government.

News Advertising Service

On July 3, 2003, the Company acquired 51% of Dawa Business Group Inc.
("Dawa") in exchange for 49% of our subsidiary, Windsor Education Academy
Inc. ("Windsor"). The Company closed its Dawa operations abandoned any
interest in Dawa and received back its 49% of Windsor Education Academy, Inc.

PRODUCTS, SERVICES, MARKETS, METHODS OF DISTRIBUTION

Mobile Solutions for Quicknet in China

(1) Product and service:

The first mobile solution launched by the Company is mobile marketing.
Mobile marketing is the use of the mobile medium as a communications
and entertainment channel between a brand and an end-user. Mobile
marketing is the only personal channel enabling spontaneous, direct,
interactive and/or targeted communications, any time, any place. Mobile
marketing can be used in a wide variety of ways:

o For customer acquisition
o For customer retention
o For loyalty building
o As a sales promotion tool
o To support product launches
o To raise brand awareness
o For internal communications
o As a redemption / coupon tool
o For direct marketing
o As an effective business to business communications vehicle
o As an additional revenue stream
o To be able to offer time / location specific offers
o As a channel for delivering ring tones and logos

As China has over 334 million mobile phone subscribers by the end of 2004, and
management believes there will be more demand from the enterprises to utilize
mobile phones as a new media for their marketing.

(2) Method of distribution and Marketing: Mobile Solutions

The Company will use four outlets to approach the market for its mobile business
solutions: agents, mobile carriers, in-house sales staffs and sales support
branches.

Education and Training

(1) Educational Product and Service

Windsor provides ESL (English as a Secondary Langugage) and related courses in
Canada. In a recent study conducted by the OECD (Organization of Economic Co-
operation and Development) and the UNESCO (United Nations Educational Scientific
and Cultural Organization) titled "Financing Education - Investments and
Returns", attributed education as a key ingredient in a country's economic
growth. The study also examined sources of funding and found that 44% of educa-
tional expenditure for China came from private sources compared to an OECD
average of 12%. Our first acquisition, Windsor is government certified. The
Company will help Windsor to expand locally as well as internationally into
China and Southeast Asia. The Company will look for further companies that fit
this profile with the goal of introducing foreign accredited programs into the
China market. For the past several years, supplementary education had become a
multi-billion dollar business in China, the most popular being Foreign Schools,
English Training, Data Processing, Accounting and a variety of other programs.
Started several years ago, this trend is still ascending and with the integra-
tion of China into the world community as well as the growth in personal dispos-
able income, we expect the growth to continue for a substantial period of time.

(2) Method of Distribution and Marketing: Education

The Company will use the printed media as well as recruitment agents to
attract students for its education business. Word of mouth is also an important
endorsement. Windsor is also a British Columbia Provincial Government endorsed
ESL provider, receiving students from government programs, where the fee is paid
by the government. Windsor is continuously working to improve its recognition
for quality and service with the British Columbia Provincial Government.

EMPLOYEES OF SUBSIDIARIES

At the end of December 31, 2004, QuickNet had approximately 83
employees. About 27% are technical supports, 26% are sales and marketing, 17%
are R&D and the rest are administrative personnel. The actual number of
employees changed during the year and will change according to the expansion of
the Company in the future.

At the end of December 31, 2004, Windsor had approximately eleven
employees, consisting of eight full and part time teachers and three
administrative personnel. The key to success is the ability to attract students
either publicly or privately funded. The number of employees will change as the
student body changes and there is no collectively bargaining unit at the
academy.

DEPENDENCE ON CLIENT BASE

For the mobile solutions business, we have sign contracts with a number of
clients for varying types of marketing. The Company is replying on its agents,
mobile carriers, in house sales staffs and sales supporting branches as well as
media and other marketing channels to increase its client base.

For the Education Services, there are about 100 students. Windsor is
relying on the printed media, word of mouth, recruiting agents and other
marketing channels to increase the number of students.

Backlog of Orders: None.

Government Contracts: Windsor Education received a number of ESL students
from the Provincial Government of British Columbia under government programs,
but there is no commitment beyond the individual student's referral and
subsidiary. All government programs involving Windsor ended March 31, 2005.

COMPETITIVE CONDITIONS

Mobile Solutions
----------------

The Chinese economy has been among the fastest growing in the world for the past
several years. China's economy withstood the effect of SARS and grew 9.1% in
2003. Growth matches that level in 2004 as well. China has one of the largest
and fastest-growing telecom markets in the world, with the mobile phone sector
in particular having become the world's number one with more than 334 million by
the end of 2004. Mobile solutions, which use mobile phone as a new media, has
created a large market in China. There are two types of markets in this field:
the individual market and the corporate market. Competition on individual market
is fiercer than the corporate market since the individual market is much
saturated thus become less lucrative. Beijing an early bird in corporate market
and possessed by nearly 500,000 corporate data base from previous operation, the
Company will have more growth potential than if the Company targeted the highly
competitive consumer mobile market.

Education Services
------------------

In Windsor's business, the supplementary education and training market is
very fragmented, there are very few large ones and numerous small schools,
established mostly in larger cities worldwide. There are several keys to a
school's success, such as, quality of its curriculum and graduates, teachers and
facilities, certifications and diplomas offered, location and accessibility,
marketing and advertising, variety of programs offered, etc. The Company is
striving to improve on all fronts as well as expanding through acquisitions and
into the mainland China market.

CHINA MOBILITY SPONSORED RESEARCH AND DEVELOPMENT

None.

COMPLIANCE WITH RELATED LAWS AND REGULATIONS

In China, the Company relies on the advice of Chinese legal counsel to
maintain compliance with all laws, rules, and regulations in China. The telecom
industry is subject to extensive government regulation, which regulations have
been changing rapidly, and there is no assurance that the Company will not be
adversely impacted by such regulations in the future.

On the Education Services side, Windsor Education Academy Inc. is governed
by the Laws of the Province of British Columbia, Canada. The Company is fully
licensed to conduct its business in the Province. The Company is unable to
assess or predict at this time what effect the regulations or legislation could
have on its activities in the future.

(a) Local regulation

The Company cannot determine to what extent its future operations and
earnings may be affected by new legislation, new regulations or changes in
existing regulations on a local level in Canada.

(b) National regulation

The Company cannot determine to what extent its future operations and
earnings may be affected by new legislation, new regulations or changes in
existing regulations on a national level.

The value of the Company investments in PRC may be adversely affected by
significant political, economic and social uncertainties in the PRC. Any changes
in the policies by the government of the PRC could adversely affect the Company
by, among other factors, changes in laws, regulations or the interpretation
thereof, confiscatory taxation, restrictions on currency conversion, the
expropriation or nationalization of private enterprises, or political
relationships with other countries.

Parent:

China Mobility Solutions, Inc., a Florida corporation

Subsidiaries:

INFORNET INVESTMENT CORP., a British Columbia corporation (100%)
INFORNET INVESTMENT LTD., a Hong Kong corporation (100%)
XIN BIZ Corp (100% owned BVI Corp.) (Dormant)
XIN BIZ Limited (a Hong Kong Corp) (100% owned subsidiary of XIN BIZ Corp.)
(Dormant)
WINDSOR EDUCATION ACADEMY, INC. (100% owned British Columbia Corp.)

The Company is a minority shareholder of THE LINK GROUP, INC. (formerly
called World Envirotech, Inc.) See Company 2003 Financial Statement, Note 6.

The Company, through Infornet (Hong Kong) is the holder of 49% of Beijing
Quicknet.

BUSINESS SEGMENTS

During the year, the Company had revenues in two segments:

Mobile marketing services $1,871,960
Tuition fees 298,806

The cost of revenue in each segment was:

Mobile marketing services $ 412,222
Tuition fees 61,013

The gross profit from each of the business segments was:

Mobile marketing services $1,459,738
Tuition fees 237,793
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Total $1,697,531
==========

Note:

The Company agreed to acquire 51% of a SMS provider in China, Beijing
Quicknet Telecommunications Corp. Ltd. (Beijing Quicknet), from non-affiliates.
In order to comply with current Chinese law, the Company acquired 49% immediate-
ly upon closing and retains the right to acquire the 2% as soon as it is able to
obtain Government approval or achieve a legal structure (under Chinese law)
which allows control of the 2% (thereby aggregating 51%).

The Company has the right to appoint all of the directors of Beijing Quicknet
after the closing.

ITEM 2. DESCRIPTION OF PROPERTIES

China Mobility Solutions, Inc. currently maintains a leased office at: #900
- 789 West Pender Street, Vancouver, B.C. Canada V6C 1H2 (telephone number is
1-604-632-9638). It also has a leased an office, as part of the joint venture,
in Beijing at Room 1858, New Century Office Tower, No. 6, Southern Road Capital
Gym, Beijing 100044, China. Windsor Academy currently rents spaces at 7900
Alderbridge Way, Unit 100, Richmond, BC, Canada.

(a) Real Estate: None

(b) Computers and Office Equipment: $13,438

ITEM 3. LEGAL PROCEEDINGS

On Feb.7, 2005, China Mobility Solutions, Inc. was sued by Sino-I Tech-
nology Limited for $88,270 for breach of warranty and a claim under a guarantee.

Our lawyer has submitted a Notice of Motion to the plaintiff's lawyer on
March 7, 2005 and is seeking an extension of response date. The Company intends
to vigorously defend the suit.

No director, officer or affiliate of China Mobility Solutions, Inc., and no
owner of record or beneficial owner of more than 5.0% of the securities of the
Company, or any associate of any such director, officer or security holder is a
party adverse to the Company or has a material interest adverse to it in
reference to pending litigation.

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

The following matters were submitted during the fiscal year covered by this
report to a vote of security holders of China Mobility Solutions, Inc., through
the solicitation of proxies:

1. To change the Company's name to China Mobility Solutions, Inc.

2. To authorize a reverse split of the Company's common stock on a one
for five basis.

The items were approved by a majority of the shares issued and outstanding
as of the date of the proxy.

PART II

ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) The Company common stock is traded on the Bulletin Board under the trad-
ing symbol CHMS. The following table sets forth high and low bid prices of the
its common stock for years ended December 31, 2003 and December 31, 2004 as
follows:

Bid (U.S. $)

HIGH LOW
---- ---

2004
----
First Quarter .27 .10
Second Quarter 1.01 .09
Third Quarter .65 .16
Fourth Quarter .68 .18

2003
----
First Quarter 0.34 0.04
Second Quarter 0.29 0.04
Third Quarter 0.29 0.10
Fourth Quarter 0.20 0.09

The Company shares trade on the Over the Counter Bulletin Board. Quotations,
if made, represent only prices between dealers and do not include retail
markups, markdowns or commissions and accordingly, may not represent actual
transactions.

Because of recent changes in the rules and regulations governing the trading
of small issuers securities, the Company's securities are presently classified
as "Penny Stock," which classification places significant restrictions upon
broker-dealers desiring to make a market in these securities. It has been
difficult for management to interest any broker-dealers in our securities and it
is anticipated that these difficulties will continue until the Company is able
to obtain a listing on NASDAQ at which time market makers may trade its
securities without complying with the stringent requirements. The existence of
market quotations should not be considered evidence of the "established public
trading market." The public trading market is presently limited as to number of
market markers in Company stock and the number of states within which its stock
is permitted to be traded.

(b) As of December 31, 2004, China Mobility Solutions, Inc. had
approximately 5,000 shareholders of record of the common stock.

(c) No dividends on outstanding common stock have ever been paid. The Company
does presently have any plans regarding payment of dividends in the foreseeable
future.

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

The information presented here should be read in conjunction with China
Mobility Solution's consolidated financial statements and related notes.

EXECUTIVE SUMMARY

In early 2004, the Company acquired 49% of a mobile solution provider in
China, Beijing Quicknet Telecommunications Corp. Ltd. (Beijing Quicknet), from
non-affiliates and has options to acquire the other 51%. In 2004, the Company
has changed its name to China Mobility Solutions Inc. On June 30, 2004, the
Company has entered into agreement to dispose its ownership in Dawa Business
Group Inc. and regain 100% ownership of Windsor Education Academy Inc. The
Company has shifted its focus from solely education to mobile solution industry
for enterprises in China. China is the world fastest-growing telecom market.
China is the world's number one cellular market, with over 320 million mobile
phone users already surpassing the U.S. subscriber base of less than 170
million, as reported by the Cellular Telecommunications & Internet Association.
The Chinese SMS market alone accounts for 1/3rd of the world's traffic. SMS
means sending and receiving brief text messages via mobile phones. SMS can be
used for everything from promotional marketing to mobile banking. The Company's
mobile marketing solution is targeted to enterprises to market through SMS to
mobile phone users.

WORKING CAPITAL NEEDS

On the Mobile Solution Services side, the working capital needs arise
primarily from: the need for capital to acquire the rest of the ownership of
Quicknet in; expanding existing capacity of Quicknet services, to open more
offices in other major cities, to launch new value-added services, to acquire
other companies that will complement the services offered by us.

On the education services side, the Company will use the working capital to
explore the local market, launch new courses, set up new market campaign, sign
up with Universities to offer courses in order to get University credits, sign
up with more agents, both domestic and international agents and provide some
marketing materials and financial support to those agents.

FUTURE STRATEGY

The Company accumulated nearly 500,000 corporate leads from its previous domain
name registration and web hosting services in China. Acquisition of an interest
in Beijing Quicknet gives the Company an opportunity to capitalize in this
rapidly growing market, and it also gives the chance for Beijing Quicknet to
solicit these corporate leads to attempt to generate more revenue. Quicknet
plans to grow organically by launching more products, but may also grow by
acquiring other companies that will complement services offered by us.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash capital of $5,380,622 at year-end 2004. The Company has no
other capital resources other than the ability to use its common stock to
achieve additional capital raising. Other than cash capital, its other assets
would be illiquid.

At the fiscal year-end it had $5,466,574 in current assets and current
liabilities of $2,452,522.

The cash capital at the end of the period of $5,380,622 will be used to fund
continuing operations. The sale of the ChinaDNS assets have provided more than
US$2 million in working capital, ande the continuing operations have provided
more than U$1.9 million in working capital in 2004.

The Company has revenues from its mobile marketing services Beijing QuickNet and
tuition fees from: Windsor Education Academy ("Windsor") and at this time.
However capital from private placements, borrowing against assets and/or from
warrants being exercised by warrant holders, may be required to fund future
operations. The Series "A" and Series "B" warrants of the Company expired on
March 31, 2005. There were 1,155,000 options outstanding at December 31, 2004 at
the option price of $0.30 per share.

Changes in Financial Condition:

At December 31, 2004, the Company's assets were $6,447,030 compared to
$6,320,612 at December 31, 2003. The current assets totaled $5,466,574 at 2004
year-end compared to $5,869,782 at 2003 year-end. The sale of the China Internet
business "ChinaDNS" has been completed; ChinaDNS' assets of $2,533,838 were
disposed. The current continuing operations had brought in $2,170,766 revenue by
December 31, 2004, compared to $280,723 in year 2003. There is deferred revenue
of $2,111,698 at December 31, 2004 compared to $28,354 in 2003. Net cash
provided by continuing operations was $1,924,019 at December 31, 2004. The
Company had $ 5,380,622 in cash by the year-end compared to $3,303,591 a year
ago. These changes were caused mainly by the acquisition of Beijing QuickNet, a
mobile solution provider in China in June 2004. Total liabilities at year-end
2004 were $2,452,522 compared to $5,870,451 at 2003 year-end. Deferred revenue
has been increased because of the acquisition of QuickNet; disposition of
ChinaDNS and completion of the disposition of ISP business.

The Company issued 6,120,000 common shares on June 23, 2004 to acquire QuickNet.
The Company completed a reverse stock split of 3:1 on June 24, 2004. Total
outstanding common shares as of December 31, 2004 were 15,826,670.

Need for Additional Financing:

The Company believes it has sufficient capital to meet its short-term cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. But it will have to seek
loans or equity placements to cover longer term cash needs to continue
operations and expansion.

No commitments to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to the Company to allow it to cover operations expenses.

If future revenue declines, or operations are unprofitable, it will be forced to
develop another line of business, or to finance its operations through the sale
of assets it has, or enter into the sale of stock for additional capital, none
of which may be feasible when needed. The Company has no specific management
ability, nor financial resources or plans to enter any other business as of this
date.

From the aspect of whether it can continue toward the business goal of
maintaining and expanding the businesses in Canada and develop new business of
internet services in China, it may use all of its available capital.

The effects of inflation have not had a material impact on its operation, nor is
it expected to in the immediate future.

Although the Company is unaware of any major seasonal aspect that would have a
material effect on the financial condition or results of operation, the first
quarter of each fiscal year is always a financial concern. It is not uncommon
for companies to shut down their operation or operate on a skeletal crew during
the Chinese New Year holiday. Therefore in effect, the first quarter really has
only two months for generating revenue.

Market Risk:

The Company does not hold any derivatives or investments that are subject to
market risk. The carrying values of any financial instruments, approximate fair
value as of those dates because of the relatively short-term maturity of these
instruments which eliminates any potential market risk associated with such
instruments.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 2003.

Revenues. The Company achieved revenues of $2,170,766 in 2004 in contrast to
$280,723 in 2003 in the form of net sales of mobile marketing services and
tuition fee from its subsidiaries: QuickNet and Windsor. The Gross profit in
2004 is $1,697,531 compared to $146,383 in 2003. A significant contributor to
the increase in revenues and gross profit is the acquisition of QuickNet in June
2004.

Operating Expenses. The Company incurred operating expenses of $1,939,747 in
2004 compared to operating expenses of $337,093 in 2003 due to the acquisition
of QuickNet. Salaries and advertising accounts for over 65% of operating
expenses. The Company has invested in the Link Group, Inc. on December 20, 2001
and January 18, 2002. As of December 31, 2004, the Link Group, Inc.'s financial
statements were not sufficiently timely for the Company to apply the equity
method and Link Group, Inc.'s shares were ceased trading over nine months.
Therefore, the Company recorded an impairment of $172,250 on these shares.

Loss from continuing operations. Loss from continuing operations for 2004 was
($258,772) compared to the 2003 operating loss of ($207,996). The Company
recorded an impairment on Link Group, Inc.'s shares for $172,250.

Net Income. Net Income available to Common Stockholders is $3,018,672 in the
contrast to a Net Loss of $314,277 in 2003. This is caused by extraordinary gain
on disposal of internet-related operations of $3,319,098 (China DNS).

Earnings per share. Earnings per share is $0.20 in 2004 compared to a loss per
share of ($0.02) in 2003. Positive earnings per share were attributable to the
extraordinary gain. Operating earnings in 2004 were negative at ($.016) per
share compared to a loss of ($.02) per share in 2003

Future Trends:

In the Mobile Solution Service business, the Company cannot assure that any
profit on revenues can be maintained in the future, because it may have to
continue, through its joint venture business, to advertise and promote its
services and develop additional value-added services in order to preserve or
increase its market share. In spite of taking measures to control expenses,
operating losses may continue. If the Company acquires additional capital, for
example through sale of stock in private placements or through investors
exercising warrants, it may be able to advertise and promote its services more
aggressively and expand its business more rapidly.

On the Education Services side, we have operated for 2 years now; the
competition is very fierce in the market. The Canadian government has tightened
its budget on English training for new immigrants, which leads to reduced
government funding for Windsor, this will have negative effects to the revenue
of Windsor Education Academy. Canadian government also adopted more strict
system to choose schools that can be funded by the government and every school
needs to re-register with the government. The Government supported ELSA courses
held in Windsor Education Academy ended by Mar. 31, 2005.

Need for Additional Financing:

From the aspect of whether it can continue toward the business goal of maintain
-ing and expanding the business in Canada and expanding new business of SMS
services in China, it may use all of its available capital without generating a
profit.

The effects of inflation have not had a material impact on its operation, nor is
it expected to in the immediate future.

Recent Accounting Pronouncements:

The FASB issued the following pronouncements, none of which are expected to have
a significant affect on the financial statements:

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 requires companies to record
liabilities for costs associated with exit or disposal activities to be
recognized only when the liability is incurred instead of at the date of
commitment to an exit or disposal activity. Adoption of this standard is
effective for exit or disposal activities that are initiated after December 31,
2002. The adoption of this standard will not have a material impact on the
Company's financial statements.

In October 2002, the FASB issued SFAS No. 147 - "Acquisitions of Certain
Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9," which applies to the acquisition of all or part of a
financial institution, except for a transaction between two or more mutual
enterprises. SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. This statement is effective for
acquisitions for which the date of acquisition is on or after October 1, 2002,
and is not applicable to the Company.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, amending FASB No. 123, and "Accounting
for Stock-Based Compensation". This statement amends Statement No. 123 to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 amends APB Opinion No. 28 "Interim Financial
Reporting" to require disclosure about those effects in interim financial
information. The Company will adopt the disclosure provisions and the amendment
to APB No. 28 are effective for interim periods beginning after December 15,
2002.

In November 2002, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-21 "Revenue Arrangements with Multiple Deliverables". EITF No.
00-21 provides guidance on how to account for arrangements that involve the
delivery or performance of multiple products, services and rights to use assets.
The provisions of EITF No. 00-21 will apply to revenue arrangements entered into
in the fiscal periods beginning after June 15, 2003. The Company is currently
evaluating the impact EITF No. 00-21 will have on its financial position and
results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51". FIN46 requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN46 is effective for all
new interest entities created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the provisions
of FIN46 must be applied for the first interim or annual period beginning after
June 15, 2003. Management is currently evaluating the effect that the adoption
of FIN46 will have on its results of operations and financial condition.
Adequate disclosure has been made for all off balance sheet arrangements that it
is reasonably possible to consolidate under FIN46.

The American Institute of Certified Public Accountants has issued an exposure
draft SOP "Accounting for Certain Costs and Activities Related to Property,
Plant and Equipment ("PP&E")". This proposed SOP applies to all non-government
entities that acquire, construct or replace tangible property, plant and
equipment including lessors and lessees. A significant element of the SOP
requires that entities use component accounting retroactively for all PP&E
assets to the extent future component replacement will be capitalized. At
adoption, entities would have to option to apply component accounting
retroactively for all PP&E assets, to the extent applicable, or to apply
component accounting as an entity incurs capitalizable costs that replace all or
a portion of PP&E. The Company cannot evaluate the ultimate impact of this
exposure draft until it becomes final.

ITEM 7. FINANCIAL STATEMENTS

The response to this item is included as a separate exhibit to this report.
Please see pages F-1 through F-16.

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

On December 22, 2004, the Board of Directors of China Mobility Solutions,
Inc. ("China Mobility") approved a change in auditors. The Board of Directors
approved the dismissal of Clancy and Co., P.L.L.C. ("Clancy and Co., P.L.L.C.")
as China Mobility's independent public accountants and the selection of Moen and
Company as their replacement.

Clancy and Co., P.L.L.C.'s reports on the consolidated financial statements
of China Mobility and its subsidiaries for the two most recent fiscal years
ended December 31, 2003 and 2002 did not contain any adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.

During China Mobility's two most recent fiscal years ended December 31,
2003 and 2002 and the subsequent interim period through December 22, 2004, there
were no disagreements between China Mobility and Clancy and Co., P.L.L.C. on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to Clancy and
Co., P.L.L.C.'s satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their reports on China
Mobility's consolidated financial statements for such years; and there were no
reportable events as described in Item 304(a)(1)(iv) of Regulation S-K. China
Mobility provided Clancy and Co., P.L.L.C. with a copy of the foregoing
disclosures. Attached as Exhibit 16 is a copy of Clancy and Co., P.L.L.C.'s
letter, dated January 4, 2005, stating its agreement with such statements.

In addition, during China Mobility's two most recent fiscal years ended
December 31, 2003 and 2002 and the subsequent interim periods through December
22, 2004, China Mobility did not consult with Moen and Company with respect to
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
China Mobility's financial statements, or any other matters or reportable events
as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.

ITEM 8A. CONTROLS AND PROCEEDURES

The management of the company has evaluated the effectiveness of the
issuer's disclosure controls and procedures as of December 31, 2004 (evaluation
date) and have concluded that the disclosure controls and procedures are
adequate and effective based upon their evaluation as of the evaluation date.

There were no significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
most recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.

ITEM 8B. OTHER INFORMATION

None.

PART III

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

(a) The following table furnishes the information concerning Company
directors and officers as of the date of this report. The directors of the
Registrant are elected every year and serve until their successors are elected
and qualify.

NAME AGE TITLE TERM

Xiao-qing Du 34 President Annual
and Director

Ernest Cheung 54 Director and Secretary Annual

The following table sets forth the portion of their time the directors devote
to the Company:

Ernest Cheung 20% Angela Du 100%

The term of office for each director is one (1) year, or until his/her
successor is elected at the Company annual meeting and is qualified. The term of
office for each of the officers is at the pleasure of the Board of Directors.

(b) Identification of Certain Significant Employees.

Strategic matters and critical decisions are handled by Company directors
and executive officers: Xiao-qing Du and Ernest Cheung. Day-to-day management is
delegated to Xiao-qing (Angela) Du partly in China and partly in Canada and Xin
Wei in China. Wei is an employee of the wholly-owned subsidiary, Infornet
Investment Corp. Xin Wei occupies the position of President of the Chinese
subsidiary on strategies, planning, business development.

(d) Business Experience.

The following is a brief account of the business experience during the past
five years of each of the Company directors and executive officers, including
principal occupations and employment during that period and the name and
principal business of any corporation or other organization in which such
occupation and employment were carried on.

XIAO-QING (ANGELA) DU, President and Director, age 34. She has been
President and Director of our company from 2003 to date. She received a Bachelor
of Science in International Finance in 1992 from East China Normal University.
She received a Master of Science in Finance and Management Science in 1996 from
the University of Saskatchewan Canada. She was Business Manager of China
Machinery & Equipment I/E Corp. (CMEC) from 1992 to 1994. She is now President
of Infornet Investment CORP., the Company's wholly owned subsidiary in Canada
since 1997. She was President of China Mobility from 1997 to 1999. She ran the
operations in China of the DNS and web hosting business.

ERNEST CHEUNG, Secretary and Director, age 54, has been Secretary of the
company since May 1998. He received a B.A. in Math in 1973 from University of
Waterloo Ontario. He received an MBA in Finance and Marketing from Queen's
University, Ontario in 1975. From 1991 to 1993 he was Vice President of Midland
Walwyn Capital, Inc. of Toronto, Canada, now known as Merrill Lynch Canada. From
1992 until 1995 he served as Vice President and Director of Tele Pacific
International Communications Corp. He has also served as President for Richco
Investors, Inc. since 1995. He has been a director of the Company since 1996. He
is currently a Director of Agro International Holdings, Inc. since 1997, Spur
Ventures, Inc. since 1997, Richco Investors, Inc. since 1995 and Drucker
Industries, Inc. since 1997. In 2000, he became President and a Director of
China NetTV Holdings, Inc. In 2002, he became a Director of The Link Group, Inc.
(Formerly World Envirotech, Inc.).

Mr. Cheung is or has been an officer or director in the following public
companies:

Name of Issuer Symbol Market Position From To Business
-------------- ------ ------ -------- ---- -- --------

Agro International Holdings Inc. AOH CDNX President Jan-97 Current Agriculture
China NetTV Holdings Inc.* CTVH OTCBB President May-00 2003 Set-Top Box Technology
Drucker, Inc.*. DKIN OTCBB Secretary Apr-97 2003 Oil & Gas
ITI World Investment Group Inc. IWI.A CDNX Jun-98 Current Beverage Distribution
NetNation Communications Inc. NNCI Nasdaq Small Cap. Apr-99 Current Domain Name
Registration
Richco Investors Inc. YRU.A CDNX President May-95 Current Financial, Management,
Capital Market Services
Spur Ventures Inc. SVU CDNX Mar-97 Current Fertilizer
The Link Group Inc.* LNKG OTCBB Secretary Dec-01 Current Internet Surveillance
China Mobility Solutions, Inc.* CHMS OTCBB Secretary Mar-97 Current China Internet

* Reporting Companies in US

He has held a Canadian Securities license but is currently inactive. He
has been a Director and Secretary of Registrant since January 1997.

(e) Committees of the Board of Directors

The Board of Directors does not have a nominating committee. Therefore, the
selection of persons or election to the Board of Directors was neither
independently made nor negotiated at arm's length.

Compensation Committee. The Company established a Compensation Committee on
October 5, 1999, which consists of two directors, Angela Du and Ernest Cheung.
The Compensation Committee will be responsible for reviewing general policy
matters relating to compensation and benefits of directors and officers,
determining the total compensation of its officers and directors.

Audit Committee. On August 31, 1999, the Board of Directors established an
Audit Committee, which consists of two directors, Angela Du and Ernest Cheung.
The Audit Committee will be charged with recommending the engagement of
independent accountants to audit Company financial statements, discussing the
scope and results of the audit with the independent accountants, reviewing the
functions of Company management and independent accountants pertaining to its
financial statements and performing other related duties and functions as are
deemed appropriate by the Audit Committee and the Board of Directors.

Qualified Financial Expert. Ernest Cheung is a qualified financial
expert as a chartered accountant and an MBA with twenty years' experience in
public companies.

(f) Resolution of conflicts of interest

As mentioned earlier, some officers and directors will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of Company business conflict with the demands of
their other business and investment activities. Such conflict may require that
the Company attempt to employ additional personnel. There is no assurance that
the services of such persons will be available or that they can be obtained upon
terms favorable to the Company.

There is no procedure in place which would allow Company officers or
directors to resolve potential conflicts in an arms-length fashion. Accordingly,
they will be required to use their discretion to resolve them in a manner which
they consider appropriate.

Code of Ethics. The Company has not adopted a Code of Ethics.

ITEM 10. EXECUTIVE COMPENSATION

(a) Officers' Compensation

Compensation paid by the Company for all services provided up to December 31,
2004, (1) to each of the executive officers and (2) to all officers as a group.

SUMMARY COMPENSATION TABLE OF EXECUTIVES
Cash Compensation Security Grants
----------------------------------------------------------------------------------------------------------

Name and Year Salary Bonus Annual Restricted Securities Long Term LTIP All Other
Principal Compensation Stock Underlying Compensation/ Payments Compensation
/Other($) Awards Options/ Options
Position SARs(#)
(SHARES)
----------------------------------------------------------------------------------------------------------
Xiao-qing Du 2001 32,084 0 0 0 0 0 0 0
President of 2002 4,809 0 0 0 0 0 0 0
Infornet (CDN)
Subsidiary 2003 0 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0 330,000(2)
-------------------------------------------------------------------------------------------------------------
Ernest Cheung 2001 0 0 24,000 0 0 0 0 0
Secretary(1) 2002 0 0 24,000 0 0 0 0 0
(CDN)
2003 0 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0 165,000(2)
-------------------------------------------------------------------------------------------------------------
Officers as 2001 32,084 0 24,000 0 0 0 0 0
A Group 2002 4,809 0 24,000 0 0 0 0 0
(CDN) (CDN)
2003 0 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0 495,000
-------------------------------------------------------------------------------------------------------------

(1) Ernest Cheung received 16,667 options to buy 16,667 shares at $3.90 per
share, plus Richco Investors, Inc. of which Mr. Cheung is an officer and
director, and Mr. Tsakok is an officer and director, received 128,333 units for
services in structuring the private placement. Mr. Tsakok has resigned as an
oficer and Director of the Company.

(2) Options at $.30 per share expiring August 1, 2007.

There have been no Option/SAR grants or exercises in the last fiscal year
reportable under Reg. S-B, 402(c) or (d).

(b) Directors' Compensation

Directors who are also officers of China Mobility Solutions, Inc. receive
no cash compensation for services as a director. However, the directors will be
reimbursed for out-of-pocket expenses incurred in connection with attendance at
board and committee meetings. The Company has granted options to directors under
its Stock Incentive Plan subsequently adopted.

SUMMARY COMPENSATION TABLE OF DIRECTORS
(To December 31, 2003)
Cash Compensation Security Grants
-------------------------------------------------------------------------------------------------------------

Name and Year Annual Meeting Consulting Number Securities LTIP All Other
Principal retainer Fees ($) Fees/Other of Underlying Payments Compensation
Position Fees ($) Fees($) Shares (#) Options/SARs(#)
(SHARES)
------------------------------------------------------------------------------------------------------------
Xiao-qing Du, 2001 0 0 0 0 0 0 0
Director 2002 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
(*)2004 0 0 0 0 0 0 0
-------------------------------------------------------------------------------------------------------------
Ernest Cheung, 2001 0 0 0 0 0 0 0
Director 2002 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
(*)2004 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------
Maurice Tsakok 2001 0 0 24,000 CDN 0 0 0 0
Director(1) 2002 0 0 24,000 CDN 0 0 0 0
(Resigned 2003 0 0 0 0 0 0 0
2004) 2004 0 0 0 0 0 0 0
-----------------------------------------------------------------------------------------------------------
Directors as a 2001 0 0 84,000 CDN 0 0 0 0
group 2002 0 0 54,000 CDN 0 0 0 0
2003 0 0 0 0 0 0 0
2004 0 0 0 0 0 0 0
------------------------------------------------------------------------------------------------------------

(1) On July 15, 2004, Maurice Tsakok resigned as the director of the Company.

* See Executive Compensation Table.

There have been no Option/SAR grants or exercises in the last fiscal year
reportable under Reg. S-B, 402(c) or (d).

Termination of Employment and Change of Control Arrangements:

None.

Stock purchase options: (Note all of these options are subject to the 1 for 3
reverse split effectuated in 2004. This would reduce the options by a factor of
3 and increase the exercise price by a factor of 3.)

On November 12, 1999 the Company granted options to purchase shares at
$1.30 per share to entities/persons who contributed to the Company in 1999,
which are unexpired, as follows:

(a) 262,000 options to Gemsco Management Ltd., beneficially Maurice
Tsakok, for designing and implementing the Company's corporate
website, advising on technological matters, researching the technology
sector and for services as a director;
(b) 262,000 options to Farmind Link Corp. for their role as advisor on
strategic issues, technology market trends, and financial and capital
market issues;
(c) 262,000 options to Sinhoy Management Ltd., beneficially Marc Hung, for
their contributions to the general management of our company, investor
relations, technological matters and for services as a director;
(d) 212,000 options to Lancaster Pacific Investment, Ltd. for their
contributions in the areas of regulatory matters, Chinese market
conditions and strategies aimed at penetrating that market;
(e) 50,000 options to Ernest Cheung for services rendered as secretary and
director;
(f) 20,000 options to Yonderiche International Consultants Ltd. for
services rendered in matters regarding Chinese government policies and
regulations; and

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors, and greater than ten percent stockholders are
required by regulation to furnish to the Company copies of all Section 16 forms
they file. Disclosure is not contained herein regarding Section 16 filings.

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

Section 13(d) of the Securities Exchange Act of 1934, as amended (The
"Exchange Act"), requires persons who own more than 5% of a registered class of
the its equity securities, to file Schedules of ownership and changes in
ownership of Company equity securities with the Securities and Exchange
Commission.

(a) Beneficial owners of five percent (5%) or greater, of Company common
stock: The following sets forth information with respect to ownership by holders
of more than five percent (5%) of its common stock known by the Company based
upon 15,826,670 shares outstanding at December 31, 2004, and in the event of
exercise of all options for our stock.

Title of Name and Address Amount of Percent of If
Class of Beneficial Owner Beneficial Interest Class options
exercised*
-------------------------------------------------------------------------------------------------------------------

Common Xiao-qing Du
Stock Ste. 900-789 West Pender St. 1,250,000 7.9% 7.6%
Vancouver, BC V6C 1H2 (2)(9)
Common Richco Investors, Inc. 1,137,999 7.2% 6.9%
Stock Ste. 830-789 West Pender St. (1)(3)(4)(7)
Vancouver, BC V6C 1H2
Common Ernest Cheung 1,446,333 9.1% 8.8%
Stock Ste. 830-789 West Pender St. (1)(3)(6)(7)(9)
Vancouver, BC V6C 1H2
Common Maurice Tsakok 1,225,333 7.7% 7.4%
Stock Ste. 830-789 West Pender St. (1)(3)(5)
Vancouver, BC V6C 1H2
Common QuickNet Partners 2,040,000 12.9% 12.4%
#1859 New Century Office Tower
Beijing China

Includes options exercisable within 30 days.

(b) The following sets forth information with respect to the Company common
stock beneficially owned by each Officer and Director, and by all Directors and
Officers as a group, at December 31, 2004, and in the event of exercise of all
options for our stock held by such listed holders and their affiliates or bene-
ficial owners.
****
Title of Name and Address Amount of Percent of All
Class of Beneficial Owner Beneficial Interest Class warrants
exercised**
---------------------------------------------------------------------------------------------------------------
Common Xiao-qing Du (Director) 1,250,000 7.9% 7.6%
Stock Ste. 900-789 West Pender St. (2)(8)
Vancouver, B.C. V6C 1H2
Common Ernest Cheung 1,446,333 9.1% 7.3%
Stock (Secretary & Director) (1)(3)(4)(5)(6)(8)
(Including Richco Investors)
Common Maurice Tsakok 1,225,333 7.7% 6.2%
Stock (Including Richco Investors) (1)(3)(4)(5)(6)(8)

Total for officers and directors as a group 2,696,333 16.4 13.3

(1) Richco Investors, Inc., owns 1,137,999 shares after the reverse
split. Messrs. Cheung and Tsakok are officers, directors and beneficial
owners of Richco Investors Inc. For purposes of this table, the shares
owned by Richco are deemed owned by Mr.Cheung and Mr. Tsakok,
beneficially and individually. Mr. Cheung received 165,000 options in
2004.

(2) As an officer Ms. Du received 330,000 options in 2004.

(3) Ernest Cheung has 16,667 options (after the reverse split) to purchase
shares at $3.90 and 165,000 options at $.30.

(4) Maurice Tsakok has 87,333 options after the reverse split to purchase
shares at $3.90.

(5) Ernest Cheung is President of Development Fund II of Nova Scotia, Inc.
which owns 63,333 common shares after the reverse split.

(6) Includes all shares of Richco Investors, Inc., Ernest Cheung, Maurice
Tsakok, and Development Fund II of Nova Scotia since there is common
control.

(7) Assumes exercise of all warrants and options within 60 days pursuant to
Rule 13(d)3(d)(i).

(8) QuickNet Partners owns 2,040,000 common shares after the reverse split
for the acquisition.

(9) XiaoQing Du owns 330,000 post reverse split options at the exercise
price of $0.30; Ernest Cheung owns 165,000 post reverse split options at
the exercise price of $0.30.

*If all warrants for units are exercised. **If all warrants and options for
shares are exercised.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Options: In 2004, the Company's directors were granted 495,000 options to
purchase shares at $0.30. All of the options are outstanding as of December 31,
2004. Angela Due received 330,000 options and Ernest Cheumg received 165,000
options.

ITEM 13. EXHIBITS

3.6 Articles of Amendment Incorporated by Reference as previously filed in an
8-K dated June 25, 2005
10.11 Share Purchase Agreement (Incorporated by reference)
Previously filed 8K 12/24/01
10.1 Investment Banking Agreement (Incorporated by reference)
Previously filed 8K 11/28/01
10.1 Share Exchange Agreement (Incorporated by reference)
Previously filed 8K 10/03/01
3.2 Amended Bylaws (Incorporated by reference)
Previously filed 8K 8/15/01
10.1 Letter of Intent (Incorporated by reference)
Previously filed 8K 8/03/01
10.1 Assets Transfer Agreement (Incorporated by reference)
Previously filed 8K 7/12/01
31.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

General. Clancy & Co., PLLC. ("C&C") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services is compatible with maintaining C&C's
independence.

Audit Fees. C&C billed the Company for the following professional
services: audit of the annual financial statement of the Company for the fiscal
year ended December 31, 2002 and quarterly review $31,230. C&C billed the
Company $23,053 for the 2004 audit and 2004 quarterly reviews.

There were no audit related fees in 2003 or 2004. There were no tax fees
in 2003 or 2004.

The Company's Board acts as the audit committee and had no
"pre-approval policies and procedures" in effect for the auditors' engagement
for the audit year 2003 and 2002.

All audit work was performed by the auditors' full time employees.

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 13, 2005
CHINA MOBILITY SOLUTIONS, INC.

by: /s/ Xiao-qing Du
----------------------------
Xiao-qing Du, President

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

President, Director and April 13, 2005
/s/ Xiao-qing Du Principal Accounting Officer
------------------
Xiao-qing Du

Secretary, Director and April 13, 2005
/s/ Ernest Cheung Principal Financial Officer
-----------------
Ernest Cheung

MOEN AND COMPANY
CHARTERED ACCOUNTANTS

Member: Securities Commission Building
Canadian Institute of Chartered Accountants PO Box 10129, Pacific Centre
Institute of Chartered Accountants of British Columbia Suite 1400 - 701 West Georgia Street
Institute of Management Accountants (USA) (From 1965)
Vancouver, British Columbia
Registered with: Canada V7Y 1C6
Public Company Accounting Oversight Board (USA) (PCAOB)
Canadian Public Accountability Board (CPAB) Telephone: (604) 662-8899
Canada - British Columbia Public Practice Licence Fax: (604) 662-8809
Email: moenca@telus.net
------------------------------------------------------------------------ --------------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Directors of
China Mobility Solutions, Inc.

We have audited the accompanying consolidated balance sheet of China Mobility
Solutions, Inc. as of December 31, 2004, and the related consolidated statements
of operations, retained earnings, cash flows and changes in stockholders' equity
for the year ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
financial statements of China Mobility Solutions, Inc. as of December 31, 2003
were audited by other auditors whose report, dated April 23, 2004, expressed an
unqualified opinion on those statements, except for an additional paragraph
concerning going concern disclosure.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluation the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of China Mobility
Solutions, Inc. as of December 31, 2004, and the results of its operations and
its cash flows for the year then ended in conformity with U.S. generally
accepted accounting principles.

/s/ Moen and Company
"Moen and Company"
Vancouver, British Columbia, Canada
Chartered Accountants
April 6, 2005

F-1

CHINA MOBILITY SOLUTIONS, INC.
(formerly China Mobility Solutions, Inc.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
Stated in U.S. dollars

2004 2003
-----------------------------------------------------------------------------------------------------------------------------
(Audited) (Audited)
ASSETS

Current Assets
Cash and Cash Equivalents $ 5,380,622 $ 3,303,591
Accounts receivable, net of allowance of $nil (2003: $58,678) 34,560 1,107
Prepaid Expenses and Other Current Assets 33,070 31,246
Amount due from related parties 18,322 -
Assets to be disposed of - 2,533,838

-----------------------------------------------------------------------------------------------------------------------------
Total Current Assets 5,466,574 5,869,782

Investment (Note 4) 1 253,524
Property and Equipment, Net (Note 5) 6,549 9,870
Goodwill 973,906 187,436

-----------------------------------------------------------------------------------------------------------------------------
Total Assets $ 6,447,030 $ 6,320,612
=============================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts Payable and Other Accrued Liabilities $ 340,824 $ 141,542
Deferred Revenue 2,111,698 28,354
Liabilities to be disposed of - 3,284,355
Security deposit from Sino-i.com Ltd. - 2,416,200
-----------------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,452,522 5,870,451
-----------------------------------------------------------------------------------------------------------------------------

Minority Interest 32,791 38,147
-----------------------------------------------------------------------------------------------------------------------------

Stockholders' Equity
Common Stock : $0.001 Par Value
Authorized : 50,000,000 common shares
Issued and Outstanding : 15,826,670 common shares (2003: 13,786,670)
Par Value 15,827 13,787
Additional Paid In Capital 8,770,378 8,221,618
Accumulated Deficit (4,640,956) (7,659,628)
Accumulated Other Comprehensive Loss (183,532) (163,763)

-----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 3,961,717 412,014
-----------------------------------------------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity $ 6,447,030 $ 6,320,612
=============================================================================================================================

(The accompanying notes are an integral part of these financial statements)

F-2

CHINA MOBILITY SOLUTIONS, INC.
(formerly China Mobility Solutions, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Stated in U.S. dollars

2004 2003
----------------------------------------------------------------------------------------------------
(Audited) (Audited)
Revenue
Mobile marketing services $ 1,871,960 $ -
Tuition fee 298,806 280,723
----------------------------------------------------------------------------------------------------
Total Revenue 2,170,766 280,723
----------------------------------------------------------------------------------------------------
Cost of revenue
Mobile marketing services 412,222 -
Tuition fees 61,013 134,340
----------------------------------------------------------------------------------------------------
473,235 134,340
----------------------------------------------------------------------------------------------------

Gross profit 1,697,531 146,383
----------------------------------------------------------------------------------------------------

Expenses
Advertising and promotion 541,142 16,048
Consulting and professional 116,784 118,052
Depreciation 2,071 7,394
Foreign exchange loss (gain) (24,029) (14,032)
General and administrative 110,116 58,219
Rent 296,920 68,966
Salaries, wages and sub-contract 724,493 82,446
Impairment on marketable securities 172,250 -
----------------------------------------------------------------------------------------------------
Total Expenses 1,939,747 337,093
----------------------------------------------------------------------------------------------------

Operating Loss (242,216) (190,710)

Other Income and Expenses
Interest income 82,602 15,066
Other income 10,272 7,678
Equity loss in undistributed earnings of investee company (81,273) (66,076)
----------------------------------------------------------------------------------------------------
11,601 (43,332)
----------------------------------------------------------------------------------------------------
Loss before minority interest and
discontinued operations (230,615) (234,042)

Minority interest (28,157) 26,046

----------------------------------------------------------------------------------------------------
Loss from Continuing Operations (258,772) (207,996)
----------------------------------------------------------------------------------------------------

Discontinued operations
Loss from Assets held for sale - (322,987)
Gain on disposal of ISP operations - 206,653
Gain on disposal of internet-related operations (Note 6) 3,319,098 -
Loss on disposal of business press operations (Note 7) (41,292) -
Income (loss) from discontinued operations (Note 7) (362) 10,053
----------------------------------------------------------------------------------------------------
3,277,444 (106,281)

Net Income (Loss) Available to Common Stockholders $ 3,018,672 $ (314,277)
====================================================================================================

Earnings (loss) per share attributable to common stockholders:
Earnings (loss) from continuing operations $ (0.02) $ (0.01)
Earnings (loss) from discontinued operations 0.22 (0.01)
----------------------------------------------------------------------------------------------------
Total basic and diluted $ 0.20 $ (0.02)
====================================================================================================

Weighted average number of common shares outstanding:
Basic and diluted 14,856,834 13,786,670
====================================================================================================

(The accompanying notes are an integral part of these financial statements)

F-3

CHINA MOBILITY SOLUTIONS, INC.
(formerly China Mobility Solutions, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Stated in U.S. dollars

Capital Stock Accumulated
Additional Other
Common Paid In Accumulated Comprehensive
Shares Par Value Capital Total Deficit Loss Total
------------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002 41,360,010 $ 41,360 $8,194,045 $8,235,405 $ (7,345,351) $ (148,659) $ 741,395

Net loss for year ended December
31, 2003 (314,277) (314,277)

Foreign Currency Translation
Adjustments (15,104) (15,104)

Issuance of common stock for
acquisition of Quicknet on June
23, 2004 6,120,000 6,120 544,680 550,800 550,800

Reverse stock split 3:1 on June
24, 2004 (31,653,340) (31,653) 31,653 - -

Net income for year ended December
31, 2004 3,018,672 3,018,672

Foreign Currency Translation Adjustments (19,769) (19,769)

------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2004 15,826,670 $ 15,827 $8,770,378 $8,786,205 $ (4,640,956) $ (183,532) $ 3,961,717
====================================================================================================================================

(The accompanying notes are an integral part of these financial statements)

F-4

CHINA MOBILITY SOLUTIONS, INC.
(formerly China Mobility Solutions, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
Stated in U.S. dollars

2004 2003
------------------------------------------------------------------------------------------------------
(Audited) (Audited)

Cash flows from operating activities
Net income (loss) $ 3,018,672 $ (314,277)
Less: loss from assets held for sale - 322,987
Less: loss from discontinued operations 362 (10,053)
Adjustments to reconcile net loss to net cash
Provided by (Used in) operating activities
Depreciation and amortization 2,071 7,394
Foreign Currency Translation adjustments (19,769) (15,104)
Minority interest 28,157 (26,046)
Impairment on marketable securities 172,250 -
Gain on disposal of ISP operations - (206,653)
Gain on disposal of internet-related operations (3,319,098) -
Loss on disposal of business press operations 41,292 -
Equity loss of The Link Group, Inc. 81,273 66,076

Changes in assets and liabilities
(Increase) Decrease in accounts receivable 57,107 (1,107)
(Increase) Decrease in prepaid expenses and other current assets 9,174 (8,824)
Increase in amount due from related parties (18,322) -
Increase (Decrease) in accounts payable (75,848) 32,498
Increase (Decrease) in deferred revenue 468,649 (9,371)
Increase in security deposits - 2,416,200
------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 445,970 2,253,720
------------------------------------------------------------------------------------------------------

Cash flows from investing activities
Purchases of property and equipment - (10,661)
Reduction in investment - 1,266
Cash acquired from acquisition of Quicknet 1,477,355 -
------------------------------------------------------------------------------------------------------
Net cash flows provided by (used in) investing activities 1,477,355 (9,395)
------------------------------------------------------------------------------------------------------

Effect of exchange rate changes on cash 694 -

Net cash provided by continuing operations 1,924,019 2,244,325
Net cash provided by assets held for sale 152,381 98,751
Net cash provided by discontinued operations 631 3,382
------------------------------------------------------------------------------------------------------

Increase in cash and cash equivalents 2,077,031 2,346,458

Cash and cash equivalents - beginning of year 3,303,591 957,133

------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $5,380,622 $ 3,303,591
======================================================================================================

Supplemental Information :
Cash paid for :
Interest $ 69 $ 6,565
Income taxes - 10,978

Non-cash investment :
Issuance of 6,120,000 common shares for the acquisition of Quicknet $ 550,800 $ -

(The accompanying notes are an integral part of these financial statements)

F-5

CHINA MOBILITY SOLUTIONS, INC.
(formerly China Mobility Solutions, Inc.)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

China Mobility Solutions, Inc. ("the Company"), previously known as Xin Net
Corp., was incorporated under the laws of the State of Florida on September 12,
1996, with an authorized capital of 50,000,000 shares of $0.001 par value common
stock. The Company's principal business activities include providing
mobile/wireless communication; in particular, Short Message Services ("SMS") and
education and training courses for foreign students.

Prior to June 2003, the Company provided internet-related services, including
domain name registration, web-hosting and other value-added services, such as
e-commerce and advertising in several major cities in the Peoples Republic of
China ("PRC"). Due to the lack of funding and high competition in the market,
the Company signed an agreement to sell its internet-related services in the PRC
(see Note 6 for details).

Summary of Significant Accounting Policies

Principles of consolidation - The accompanying consolidated financial statements
include the accounts of the Company and its wholly-owned and majority-owned
subsidiaries as outlined in Note 2. All significant inter-company transactions
and balances have been eliminated on consolidation.

Accounting method - The Company's financial statements are prepared using the
accrual method of accounting.

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

Concentration of credit risk - The Company maintains Renminbi cash balances in
banks of the People's Republic of China and U.S. Dollar cash balances in
Canadian and Hong Kong banks, that are not insured. Revenues were derived in
geographic locations outside the United States. The ELSA program of Windsor
accounts for 53% of the total tuition fees and 7.3% of the total revenue of the
Company. The SMS of Quicknet accounts for 86.2% of the total revenue of the
Company.

Cash and cash equivalents - Cash equivalents consists of time deposits with
original maturities of three months or less.

Investments - The Company determines the appropriate classification of
marketable debt and equity securities at the time of purchase and reevaluates
such designation as of each balance sheet date. All marketable debt securities
are classified as held-to-maturity and are carried at amortized cost, which
approximates fair value.

Accounts receivable and allowance for doubtful accounts - Accounts receivable
are recorded net of allowances for doubtful accounts and reserves for returns.
In the normal course of business, the Company extends credit to customers that
satisfy predefined credit criteria. The Company is required to estimate the
collectability of its receivables. Reserves for returns are based on historical
return rates and sales patterns. Allowances for doubtful accounts are
established through the evaluation of accounts receivable agings and prior
collection experience to estimate the ultimate realization of these receivables.

F-6

Property and equipment - Property and equipment, stated at cost, is depreciated
under the straight-line method over their estimated useful lives, ranging from
three to seven years.

Goodwill - Goodwill is the excess of the acquisition cost of businesses over the
fair value of the identifiable net assets (tangible and intangible) acquired.
Goodwill acquired has to be evaluated for impairment at the beginning of year
2002 and on an annual basis going forward according to Statement of Financial
Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets".
The standard requires a two-step process to be performed to analyze whether or
not goodwill has been impaired. Step one requires that the fair value be
compared to book value. If the fair value is higher than the book value, no
impairment is indicated and there is no need to perform the second step of the
process. If the fair value is lower than the book value, step two must be
evaluated. Step two requires a hypothetical purchase price allocation analysis
to be done to reflect a current book value of goodwill. The current value is
then compared to the carrying value of goodwill. If the current fair value is
lower than the carrying value, an impairment must be recorded. Annually, the
goodwill is tested for impairment in the fourth quarter.

Long-lived assets - The Company records impairment losses on long-lived assets
used in operation when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount.

Revenue recognition - The Company's revenues for 2004 consisted of revenues from
SMS, education and training services. In accordance with S.E.C. Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements," the Company
recognizes revenue when the following criteria are met: persuasive evidence that
an arrangement exists; delivery has occurred or services have been rendered; the
price to the customer is fixed or determinable; and collectability is reasonably
assured. If all of the above criteria have been met, revenues are principally
recognized upon shipment of products or when services have been rendered.
Revenues derived from SMS, education and training is recognized as the services
are performed. Amounts received from customers in advance of revenue recognition
are deferred and classified on the balance sheet as "deferred revenue."

The Company's revenues for 2003, which are included in discontinued operations,
consisted of revenues from commercial printing. Revenues derived from commercial
printing are recognized when the job has been completed and is delivered to the
customer.

Cost recognition - Cost of service includes direct costs to produce products and
provide services.

Deferred revenue and deferred cost - Deferred revenue for 2004 consists
primarily of SMS, education and training revenue received prior to the services
being performed.

Deferred revenue for 2003, which is included as a component of "Liabilities to
be disposed of" consists of prepaid domain name registration fees. End users
receive certain elements of the Company's revenues over a period of time. As a
result, the Company's revenue recognized represents the fair value of these
elements over the product's life cycle. Deferred cost for 2003, which is
included as a component of "Assets to be disposed of" consists of amounts paid
to various registrars for domain name registration fees and are deferred on the
same basis as revenue.

Capitalized software costs - The Company accounts for the development cost of
software intended for sale in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, "Accounting for Costs of Computer Software to be
Sold, Leased or Otherwise Marketed." SFAS No. 86 requires product development
costs to be charged to expense as incurred until technological feasibility is
attained. Technological feasibility is attained when the Company's software has
completed system testing and has been determined viable for its intended use.
Accordingly, the Company did not capitalize any development costs during the
period. Total costs expensed during the periods presented were approximately
$55,577 for 2004 and $250,000 for 2003.

F-7

Advertising costs - Advertising costs are expensed as incurred. Total
advertising costs charged to operations amounted to $538,949 for 2004 and
$16,822 for 2003. Total advertising costs included in discontinued operations
amounted to $2,193 for 2004 and $155,075 for 2003.

Income taxes - The Company accounts for income taxes under the provisions of
SFAS No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income
tax assets and liabilities are computed for differences between the financial
statements and tax bases of assets and liabilities that will result in taxable
or deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary, to reduce
deferred income tax assets to the amount expected to be realized.

Foreign currency translations - The assets and liabilities of the Company's
foreign operations are generally translated into U.S. dollars at current
exchange rates, and revenues and expenses are translated at average exchange
rates for the year. Resulting foreign currency translation adjustments are
reflected as a separate component of stockholders' equity. Transaction gains and
losses that arise from exchange rate fluctuations on transactions denominated in
a currency other than the functional currency, except those transactions which
operate as a hedge of an identifiable foreign currency commitment or as a hedge
of a foreign currency investment position, are included in the results of
operations as incurred.

Fair value of financial instruments - For certain of the Company's financial
instruments, including cash and cash equivalents, prepaid expenses and other
current assets, accounts payable and other accrued liabilities, and deferred
revenues, the carrying amounts approximate fair value due to their short
maturities.

Business segment information - The Company discloses information about its
reportable segments in accordance with SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company's reportable segments are
geographic areas. The accounting policies of the operating segments are the same
as those for the Company.

Earnings per share - Basic earnings or loss per share are based on the weighted
average number of common shares outstanding. Diluted earnings or loss per share
is based on the weighted average number of common shares outstanding and
dilutive common stock equivalents. Basic earnings/loss per share is computed by
dividing income/loss (numerator) applicable to common stockholders by the
weighted average number of common shares outstanding (denominator) for the
period. All earnings or loss per share amounts in the financial statements are
basic earnings or loss per share, as defined by SFAS No. 128, "Earnings Per
Share." Diluted earnings or loss per share does not differ materially from basic
earnings or loss per share for all periods presented. Convertible securities
that could potentially dilute basic earnings per share in the future such as
options and warrants are not included in the computation of diluted earnings per
share because to do so would be antidilutive. All per share and per share
information are adjusted retroactively to reflect stock splits and changes in
par value.

Stock-based compensation - The Company accounts for stock-based compensation
using the intrinsic value method prescribed in Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Compensation
cost for stock options, if any, is measured as the excess of the quoted market
price of the Company's stock at the date of grant over the amount an employee
must pay to acquire the stock. SFAS No.123, "Accounting for Stock-Based
Compensation," established accounting and disclosure requirements using a
fair-value-based method of accounting for stock-based employee compensation
plans. The Company has elected to remain on its current method of accounting as
described above, and has adopted the disclosure requirements of SFAS No. 123. In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, amending FASB No. 123, and "Accounting
for Stock-Based Compensation". This statement amends Statement No. 123 to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 amends APB Opinion No. 28 "Interim Financial
Reporting" to require disclosure about those effects in interim financial
information. The Company adopts the disclosure provisions and the amendment to
APB No. 28 effective for interim periods beginning after December 15, 2002.

Had compensation expense for the Company's stock-based compensation plans been
determined under FAS No. 123, based on the fair market value at the grant
dates, the Company's pro forma net loss and pro forma net loss per share would
have been reflected as follows at December 31:

F-8

2004 2003

Net income (loss)
As reported $3,018,672 $ (314,277)
Stock-based employee compensation cost, net tax (267,300) (122,758)
---------- -----------
Pro-forma $2,751,372 $ (437,035)
========== ===========

Los per share
As reported $ 0.20 $ (0.02)
====== ========
Pro-forma $ 0.19 $ (0.03)
====== ========

The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with weighted average assumptions for
grants as follows:

Risk free interest rate 3.65%
Expected life of options in years 1 to 3 years
Expected volatility 184%
Dividend per share $0.00

Comprehensive income - The Company has adopted SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. The Company
includes items of other comprehensive loss by their nature, such as foreign
currency translation adjustments, in a financial statement and displays the
accumulated balance of other comprehensive loss separately from accumulated
deficit in the equity section of the balance sheet. The Company discloses total
comprehensive loss, its components and accumulated balances on its statement of
stockholders' equity.

Capital structure - The Company discloses its capital structure in accordance
with SFAS No. 129, "Disclosure of Information about Capital Structure," which
established standards for disclosing information about an entity's capital
structure.

Related party transactions - A related party is generally defined as (i) any
person that holds 10% or more of the Company's securities and their immediate
families, (ii) the Company's management, (iii) someone that directly or
indirectly controls, is controlled by or is under common control with the
Company, or (iv) anyone who can significantly influence the financial and
operating decisions of the Company. A transaction is considered to be a related
party transaction when there is a transfer of resources or obligations between
related parties. (See Note 12)

Fair value of financial instruments - For certain of the Company's financial
instruments, including cash and cash equivalents, accounts receivable, prepaid
expenses, amount due from related parties, accounts payable and accrued
liabilities, and deferred revenue, the carrying amounts approximate fair value
due to their short maturities.

Reclassification of Prior Period - Certain prior period amounts have been
reclassified to conform to the current year presentation. These changes had no
effect on previously reported results of operations or total stockholders'
equity.

Recent Accounting Pronouncements - The Financial Accounting Standards issued the
following pronouncements during 2004, none of which are expected to have a
significant affect on the financial statements:

In March 2004, the EITF reached final consensus on EITF 03-6 which provides
additional guidance to determine whether a security is a participating security
and therefore subject to the two-class method under SFAS 128. The guidance in
EITF 03-6 clarifies the notion of what constitutes a participating security, and
is effective for fiscal periods (interim or annual) beginning after March 31,
2004. EITF 03-06 provides guidance in applying the two-class method of
calculating earnings per share for companies that have issued securities other
than common stock that contractually entitle the holder to participate in any
dividends declared and earnings of the company. The opinion defines what
constitutes a participating security and how to apply the two-class method of
calculating earnings per share to those securities. In addition, the consensus
in EITF 03-6 nullifies the guidance in EITF Topic No. D-95, "Effect of
Participating Convertible Securities on the Computation of Basic Earnings Per
Share", and requires the use of the two-class method to compute basic EPS by
companies with participating convertible securities. The adoption did not have
an impact on our calculation of earnings per share.

F-9

In April 2004, the EITF reached consensus on EITF Issue No. 03-6, "Participating
Securities and the Two Class Method under FASB Statement No. 128" ("EITF 03-6").
EITF 03-6 addresses a number of questions regarding the computation of earnings
per share by companies that have issued securities other than common stock that
contractually entitle the holder to participate in the dividends and earnings of
the company when, and if, it declares dividends on its common stock. EITF 03-6
also provides further guidance in applying the two-class method of calculating
earnings per share, clarifying what constitutes a participating security and how
to apply the two-class method of computing earnings per share once it is
determined that a security is participating, including how to allocate
undistributed earnings to such a security. EITF 03-6 is effective for fiscal
periods beginning after March 31, 2004 and requires retroactive restatement of
prior earning per share amounts. This statement does not affect the Company.

In June 2004, the FASB issued EITF Issue No. 02-14, "Whether an Investor Should
Apply the Equity Method of Accounting to Investments Other Than Common Stock."
EITF Issue No. 02-14 addresses whether the equity method of accounting applies
when an investor does not have an investment in voting common stock of an
investee but exercises significant influence through other means. EITF Issue No.
02-14 states that an investor should only apply the equity method of accounting
when it has investments in either common stock or in-substance common stock of a
corporation, provided that the investor has the ability to exercise significant
influence over the operating and financial policies of the investee. The
accounting provisions of EITF Issue No. 02-14 are effective for the reporting
period beginning after September 15, 2004. The Company is in the process of
determining the effect, if any, of the adoption of EITF Issue No. 02-14 will
have on the Company's financial position, results of operations, or cash flows.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4." The amendments made by SFAS No. 151 clarify that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current-period charges and require
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for inventory
costs incurred during fiscal years beginning after November 23, 2004. The
Company does not believe the adoption of SFAS No. 151 will have a material
impact on our financial position, results of operations or cash flows.

In December 2004, the FASB issued a revision of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
123R). SFAS 123R supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
those equity instruments. SFAS 123R does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
SFAS 123 as originally issued and EITF Issue No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services." SFAS 123R is effective for interim
reporting period that begins after June 15, 2005. The Company is in the process
of determining the effect of the adoption of SFAS 123R will have on its
financial position, results of operations, or cash flows.

In December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67,"
which discusses the accounting and reporting of real estate time-sharing
transactions. This Statement is effective for financial statements for fiscal
years beginning after June 15, 2005, and restatement of previously issued
financial statements is not permitted. This statement does not affect the
Company.

F-10

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
the assets exchanged and provided an exception to the basic measurement
principle (fair value) for exchanges of similar productive assets. That
exception required that some nonmonetary exchanges, although commercially
substantive, be recorded on a carryover basis. This Statement eliminates the
exception to fair value for exchanges of similar productive assets and replaces
it with a general exception for exchange transactions that do not have
commercial substance--that is, transactions that are not expected to result in
significant changes in the cash flows of the reporting entity. The provisions of
this Statement are effective for nonmonetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005, applied prospectively. This statement
does not affect the Company.

NOTE 2 - SUBSIDIARIES

The Company's wholly-owned subsidiaries are as follows:

(1) Infornet Investment Limited (a Hong Kong corporation) ("Infornet
HK") is a telecommunication and management network company
providing financial resources and expertise in telecommunication
projects. This subsidiary was originally incorporated as Micro
Express Limited and was acquired at no cost. The name was changed
to Infornet Investment Limited on July 18, 1997.
(2) Infornet Investment Corp., (a Canadian corporation) ("Infornet
Canada") is engaged in a similar line of business as that of the
Company. The Company issued 5,000,000 shares of common stock to
acquire this subsidiary for a total value of $65, representing
organizational costs and filing fees.
(3) Xinbiz (HK) Limited (a Hong Kong corporation) ("Xinbiz Ltd.") and
Xinbiz Corp. (a British Virgin Islands corporation) ("Xinbiz
Corp."). Both subsidiaries were inactive during 2004 and 2003.
(4) Windsor Education Academy Inc., (a Canadian Corporation)
("Windsor") is engaged in providing English as a secondary
language ("ESL") training program to foreign students.
(5) Beijing Quicknet Telecommunication Corporation (a People's
Republic of China ("PRC") corporation) ("Quicknet"). Quicknet is
engaged in the development of software for mobile/wireless
communication, in particular, that for Short Message Services
("SMS") (See Note 3).

NOTE 3 - ACQUISITION OF QUICKNET

On June 23, 2004, the Company completed the acquisition of a 49% equity interest
from the shareholders of a short message system ("SMS") provider, Beijing
Quicknet Telecommunication Corp. Ltd. ("Quicknet"), located in Beijing, China,
through the issuance 6,120,000 at a deemed price of $0.50 per share (2,040,000
post-reverse split at a market price of $0.27 per share for a total of $550,800)
shares of common stock of the Company. Due to the restrictions on foreign
ownership of telecommunication companies in China, 2% of the equity interest of
Quicknet is held by the management of Quicknet with Chinese citizenship and this
2% interest will be transferred back to the Company when the China government
removes the restrictions. The Company has gained 51% control of QuickNet through
a voting arrangement. The Company has an option to acquire the remaining 49%
equity interest in Quicknet within the first year from the closing date for
$4,000,000. The Company has another option to acquire this remaining 49% equity
interest in Quicknet within the second year from the closing date for
$5,000,000. As a general rule, the Company can pay these amounts by 50% in
shares of the common stock of the Company and 50% in cash. The final percentage
of shares versus cash can be negotiated between both parties.

Quicknet's financial information is incorporated into the consolidation of the
Company effective June 30, 2004, as the transactions that occurred between the
period from June 23, 2004 to June 30, 2004 were immaterial.

F-11

The value assigned to assets and liabilities acquired can be summarized as
follows:

Cash and short term investments $ 1,477,355
Accounts receivables 90,560
Prepaid expenses 10,998
Fixed assets, net 846,782
Goodwill (275,130)
Accounts payables and accrued liabilities (1,614,695)
Fair value of consideration - 2,040,000 ------------
common shares @ $0.27 per share $ 550,800
============

The following pro forma information is based on the assumption that the
acquisition took place as of beginning of the period (January 1, 2004), with
comparative information for the immediately preceding period as though the
acquisition had been completed at the beginning of that period:
[OBJECT OMITTED]
NOTE 4 - INVESTMENT IN THE LINK GROUP, INC. ("LINK")

Pursuant to a Share Exchange Agreement dated December 20, 2001, the Company paid
$200,000 cash for 3,882,700 shares of The Link Group, Inc. ("Link").

Pursuant to a Subscription Agreement dated January 18, 2002, the Company paid
$600,300 in a private placement of Link for 14,500,000 (pre-reverse one for four
split) common shares at $0.0414 per share, as well as 10,875,000 special
warrants convertible into 10,875,000 post-reverse one for four split common
shares on or before January 31, 2004 at no additional consideration. The Company
exercised the 10,875,000 special warrants on March 12, 2002. An option to
purchase an additional 7,500,000 post-reverse one for four split common shares
at $0.04 per share, or $300,000, until February 15, 2002, was also granted to
the Company, which was not exercised.

By an agreement dated January 21, 2002, Link agreed to purchase all of the
outstanding shares of Protectserve Pacific Ltd. ("PSP") through the issuance of
37,500,000 (post-reverse one for four split) common shares. Link has the right
to buy back its shares at $0.001 per share from these individuals if PSP's after
tax profit is less than Hong Kong $9 million dollars ("HKD") for the twelve
months ending December 31, 2002. The buy back formula is for every HKD $333,333
that PSP falls short of the HKD $9 million after tax profit, Link can buy back
one million (post-reverse one for four split) common shares from these
individuals.

On February 18, 2002, the shareholders of Link approved the reverse split of the
issued and outstanding common shares of Link at the ratio of one for four,
thereby making the Company's total Link shares held equal to 15,370,675 shares,
representing 28.8% of the total issued and outstanding shares of Link. On
October 14, 2002, Link cancelled 8,300,000 outstanding common shares as part of
the consideration of the disposition of its subsidiary company and thereafter
the Company's holding in Link correspondingly increases to 34.1%. On March 28,
2003, Link issued 3,000,000 common shares and cancelled 14,000,000 common shares
and thereafter the Company's holding in Link correspondingly changed to 24.8%.
On August 5, 2003, Link cancelled 22,200,000 shares pursuant to a repurchase
agreement and thereafter the Company's holding in Link correspondingly increased
to 38.6%. On October 17, 2003, Link issued 36,000,000 shares for the acquisition
of New Unicorn Holdings Ltd. and thereafter the Company's holding in Link
correspondingly decreased to 20.26%.

The Company accounts for its investment in Link on the equity basis, which is
carried at cost, adjusted for the Company's proportionate share of their
undistributed earnings or losses. As of December 31, 2004, the investee
company's financial statements were not sufficiently timely for the Company to
apply the equity method currently and Link's shares were ceased trading over
nine months. Therefore, the Management of the Company recorded an impairment of
$172,250 on these shares and left a nominal value of $1 for this investment to
Link.

2004 2003
Original cost of 15,370,675 shares of
The Link Group, Inc. $ 800,300 $ 800,300
Equity in undistributed earnings of ---------- ----------
investee company (628,049) (628,049)
Investment - at equity 172,251 $ 172,251
---------- ==========
Impairment on marketable securities $ 1
==========

F-12

NOTE 5 - PROPERTY AND EQUIPMENT

December 31,
----------------------------
2004 2003

Equipment $ 24,832 $ 24,832
Library 9,554 9,554
Furniture 9,975 9,975
--------- ---------
Total $ 44,361 $ 44,361
Less: Accumlated depreciation (37,812) (34,491)
--------- ---------
Net book value $ 6,549 $ 9,870
========= =========

Depreciation charged to continuing operations amounted to $2,071 for 2004 and
$7,394 for 2003. Depreciation included in discontinued operations amounted to
$397 for 2003 and $746 for 2003.

NOTE 6 - DISCONTINUED OPERATIONS - INTERNET-RELATED SERVICES

On February 26, 2003, the Company entered into an agreement to sell the
internet-related services provided in China to a subsidiary company of
Sino-i.com Ltd., the latter a company listed on the Hong Kong Stock Exchange,
for total consideration of RMB 20 million (approximately US$2,415,800). The
transaction is subject to shareholders approval. Pursuant to Florida law, the
Company was required to obtain shareholder approval for the sale of all or
substantially all of the assets for a Florida corporation. However, if the
assets do not represent all or substantially all of the business, the Board of
directors can approve it without shareholder approval, which it did by written
consent. Because there has been no operations or cash flows consolidated in the
financial statements since 2001, the Company has eliminated this component from
its ongoing operations and it does not have any significant continuing
involvement in the operations of the component.

The gain on disposal of the internet-related business, together with the related
assets and liabilities disposed of, is as follows:

Sales proceeds $ 2,415,800
Less: Current assets (1,992,665)
Capital asets (442,820)
Current liabilities 3,338,783
------------
Gain on disposal of internet-related business $ 3,319,098
============

The results of the discontinued internet-related services for year 2004 and 2003
are as follows:

2004 2003

Revenue $ - $ 2,372,554
Operating costs - (2,695,541)
------ ------------
Net profit (loss) $ - $ (322,987)
====== ============

NOTE 7 - DISPOSAL OF DAWA BUSINESS GROUP INC. ("DAWA")

On June 30, 2004, the Company entered into a Share Exchange Agreement (the "2004
Share Exchange Agreement") with Windsor Education Academy Inc. ("Windsor"), Dawa
Business Group Inc. ("Dawa") and 1041571 B.C. Ltd. ("1041571") whereby the
Company exchanged 102 shares, or 51%, of the issued and outstanding common stock
of Dawa to 1041571 in consideration for 98 shares, or 49%, of the issued and
outstanding common stock of Windsor.

The Company first acquired the 102 shares of common stock of Dawa pursuant to a
prior Share Exchange Agreement, dated July 3, 2003, (the "2003 Share Exchange
Agreement") between the Company, Windsor, Dawa and 1041571 whereby the Company
exchanged 98 shares, or 49%, of the issued and outstanding common stock of
Windsor to 1041571 in consideration for 102 shares, or 51%, of the issued and
outstanding common stock of Dawa. Prior to the 2003 Share Exchange Agreement,
Windsor was a wholly owned subsidiary of the Company.

At the close of the 2004 Share Exchange Agreement, the Company became the
beneficial owner of all of the issued and outstanding stock of Windsor and the
Company ceased to own any of the common stock of Dawa. The 2004 Share Exchange
Agreement did not involve any cash consideration.

F-13

The loss on disposal of Dawa, together with the related assets and liabilities
disposed of, is as follows:

Sales proceeds $ 26,862
Less: Current assets (61,987)
Fixed assets (1,617)
Goodwill (60,312)
Other assets (145)
Current liabilities 55,907
---------
Loss on disposal of Dawa $(41,292)
=========

The result of Dawa operations for the six months ended June 30, 2004 and the pro
forma results of operations for the six months ended June 30, 2003, which are
shown for comparison purposes assuming the Company acquired Dawa as of January
1, 2003, are as follows:

2004 2003

Revenue $ 213,205 $ 149,338
Operating costs (213,567) (145,149)
---------- ----------
Net profit (loss) $ (362) $ 3,189
========== ==========

NOTE 8 - INCOME TAXES

There are no current or deferred tax expenses for the years ended December 31,
2004 and 2003, due to the Company's loss position. The Company has fully
reserved for any benefits of these losses. The deferred tax consequences of
temporary differences in reporting items for financial statement and income tax
purposes are recognized, as appropriate. Realization of the future tax benefits
related to the deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating loss
carryforward period. Management has considered these factors in reaching its
conclusion as to the valuation allowance for financial reporting purposes. The
income tax effect of temporary differences comprising the deferred tax assets
and deferred tax liabilities on the accompanying consolidated balance sheets is
a result of the following:

2004 2003

Deferred tax assets $ 512,349 $ 424,366
Valuation allowance $(512,349) (424,366)
---------- ----------
Net deferred tax assets $ - $ -

The net change in the valuation allowance are principally the result of net
operating loss carryforwards. The Company has available net operating loss
carryforwards of approximately $1,506,909 for tax purposes to offset future
taxable income, which expire through 2024. All of the net operating loss
carryforwards were generated by the parent company. The Company does not file a
consolidated tax return because all of its subsidiaries are foreign
corporations. Pursuant to the Tax Reform Act of 1986, annual utilization of the
Company's net operating loss carryforwards may be limited if a cumulative change
in ownership of more than 50% is deemed to occur within any three-year period.
A reconciliation between the statutory federal income tax rate and the effective
income rate of income tax expense for the years ended December 31, 2004 and 2003
is as follows:

2004 2003

Statutory federal income tax rate -34.0% -34.0%
Valuation allowance 34.0% 34.0%
------ ------
Effective income tax rate 0.0% 0.0%
====== ======

F-14

NOTE 9 - SEGMENTS AND GEOGRAPHIC DATA

The Company's reportable segments are geographic areas and two operating
segments, the latter comprised of mobile communication and ESL education.
Summarized financial information concerning the Company's reportable segments is
shown in the following table. The "Other" column includes corporate related
items, and, as it relates to segment profit (loss), income and expense not
allocated to reportable segments.

A. By geographic areas China Canada Other Total

For the year ended December 31, 2004
------------------------------------

Revenue from continuing operations $ 1,871,960 $298,806 $ - $2,170,766
Operating profit (loss) 55,906 (22,060) (276,062) (242,216)
Total assets 6,362,416 75,925 8,689 6,447,030
Depreciation - 1,906 165 2,071
Interest income 82,588 14 - 82,602
Gain from discontinued operations 3,277,444 - - 3,277,444
Equity loss in undistributed earnings of
investee company - - (81,273) (81,273)
Investment in equity method investee - - 1 1

For the year ended December 31, 2003
------------------------------------

Revenue from continuing operations $ 1,871,960 $298,806 $ - $2,170,766
Operating profit (loss) 55,906 (22,060) (276,062) (242,216)
Total assets 6,362,416 75,925 8,689 6,447,030
Depreciation - 1,906 165 2,071
Interest income 82,588 14 - 82,602
Loss from discontinued operations 3,277,444 - - 3,277,444
Equity loss in undistributed earnings of
investee company - - (81,273) (81,273)
Investment in equity method investee - - 1 1

B. By operating segments Mobile ESL
communications education Other Total
For the year ended December 31, 2004
------------------------------------
Revenue from external customers $ 1,871,960 $ 298,806 $ - $ 2,170,766
Intersegment revenue - - - -
Interest revenue 82,588 14 - 82,602
Interest expense - - 69 69
Depreciation - 1,710 361 2,071
Segment operation profit (loss) 57,964 (11,230) (288,950) (242,216)
Segment assets 6,351,943 73,823 21,264 6,447,030
For the year ended December 31, 2003
------------------------------------
Revenue from external customers $ - $ 280,723 $ - $ 280,723
Intersegment revenue - - - -
Interest revenue - 12 15,054 15,066
Interest expense - - 6,565 6,565
Depreciation - 6,451 943 7,394
Segment operation profit (loss) - (63,208) (127,502) (190,710)
Segment assets - 46,439 6,274,173 6,320,612

F-15

NOTE 10 - COMMON STOCK, STOCK OPTIONS AND WARRANTS

Common Stock

On June 24, 2004, the Company carried out a 3 for 1 reverse stock-split. Figures
of prior periods have been retroactively restated to reflect the effect of the
reverse stock-split.

Stock Options

The Company granted 2,136,000 incentive stock options on November 12, 1999 to
certain directors, officers, employees and consultants of the Company who
contributed services to the Company. These stock options were expired on
November 12, 2004. On July 23, 2004, the Company granted incentive stock options
for 1,155,000 shares at a price of $0.30 per share exercisable up to August 1,
2007, to five directors. All the options were vested immediately. (See Note 12)

Options outstanding at December 31, 2004 were 1,155,000 with option price of
$0.30. No options were canceled, forfeited, or exercised during 2004. 2,136,000
stock options with an exercise price of $1.30 were expired during the year. The
weighted average exercise price of the options outstanding and exercisable is
$0.30 and the weighted average remaining contractual life is 2.6 years.

Warrants

On April 1, 2003, the Company extended its outstanding 5,884,990 (1,961,663
post-reverse split) Series "A" Share Purchase Warrants as follows:

(i) the exercise price of the Series "A" Share Purchase Warrants is
adjusted to $0.50 ($1.50 post-reverse split) each and their term
is extended to March 31, 2005: (Subsequently expired)
(ii) upon exercise of one Series "A" Share Purchase Warrants at $0.50
($1.50 post-reverse split), the holder will receive one common
share of the company and one Series "B" Share Purchase Warrant;
and
(iii) the exercise price of the Series "B" Share Purchase Warrants is
adjusted to $0.75 ($2.25 post-reverse split) each and their term
is extended to March 31, 2006;
(iv) upon exercise of one Series "B" Share Purchase Warrant at $0.75
($2.25 post-reverse split), the holder will receive one common
share of the Company.

As of December 31, 2004, there were 5,884,990 and 10 Series "A" and Series "B"
warrants outstanding respectively.

NOTE 11 - COMMITMENTS

Operating leases - The Company leases office space under various operating
leases expiring through May 2005. Total rent expense charged to operations
during 2004 and 2003 was $155,734 and $74,196, respectively. Future minimum
rental commitments are (approximately) as follows: (2005: $123,624)

NOTE 12 - RELATED PARTY TRANSACTIONS

Options - The Company's five directors were granted 1,155,000 options to
purchase shares at $0.30. All of the options are outstanding as of December 31,
2004.

Warrants - Richco Investors Inc. has 1,085,000 "A" warrants to purchase shares
of common stock and has 1,085,000 "B" warrants to purchase shares of common
stock. The Company's former President has 80,000 "A" warrants to purchase shares
of common stock and has 80,000 "B" warrants to purchase shares of common stock.
Another entity controlled by one of the directors of this Company has 190,000
"A" warrants and 190,000 "B" warrants. All of the warrants are outstanding as of
December 31, 2004, and subsequently expired (see Note 10).

F-16