We are a wireless communications coverage solutions provider in the PRC. We principally provide integrated wireless coverage solutions through our national sales and services network to our customers in the PRC. Our wireless coverage solutions business is comprised of research, development and application of wireless communications technology. In addition to sales of our internally designed wireless communications equipment including repeaters, antennas and radio frequency accessories, we also provide project design, project management, installation, maintenance and other after-sales services in accordance with our customers’ requirements. Our wireless coverage solutions are designed to expand and enhance the coverage of mobile telecommunications networks so as to improve the quality of reception for mobile phone users. These solutions are used in a variety of indoor and outdoor environments such as hotels, residential estates, office buildings, airports, exhibition centers, underground stations, highways and tunnels. Since the establishment of Telestone in 1997, we have gradually developed business relationships with both China Mobile Communications Corporation (“China Mobile”) and China Unicom Limited (“China Unicom”), the two largest wireless communications providers in the PRC. During the fiscal years ended December 31, 2001, 2002 and 2003 and the 6 months ended June 30, 2004, sales made by Telestone to China Mobile were $1,690,670, $3,643,000, $1,757,000 and $2,304,000, respectively, accounting for 19, 31, 10 and 31, of our revenue, for these periods, respectively. Sales to China Unicom during the same periods were $4,972,588, $6,865,000, $14,785,000 and $4,793,000, accounting for 56, 58, 85 and 64 of our revenue, respectively. We are committed to the research and development of wireless communications related technology and we maintain an extensive research and development center in the PRC. Over 90 of our technology is developed in-house at our research and development center where we employ a highly trained and respected staff of engineers and scientists focused on invention and further advances in wireless communications technology. Our research and development technology is licensed to a third party production center, owned by Shijiazhuang Spectrum Digital Communication Co., Ltd., which is located near our in-house research and development center. We are parties to a Memorandum of Cooperation with Shijiazhuang Spectrum Digital Communication Co., Ltd. which governs the relationship between us. The production center manufactures our products, per our research and development specifications, for resale and delivery by us to our customers. We have been recognized by various domestic and international agencies and boards. For example, in August 2002, our quality control system was endorsed with the ISO9001certificate. We have offices in provinces across the PRC providing sales, project survey and design, project management, installation and maintenance services. We believe that this extensive sales and services network enhances our ability to expand our existing customer base in the PRC and enables us to provide timely response to customers’ inquiries as well as technical and maintenance services when our customers so require. We do not focus our sales efforts on any one particular region and are therefore not dependent upon any region or province of the PRC for a material portion of our revenues. Our Business Strategies Our overall objective is to strengthen our position as a leading wireless coverage solutions provider in the PRC. We intend to achieve this objective by implementing the following strategies: Enhancement of total solutions capabilities. We intend to strengthen our profitability and market position by further enhancing our ability to offer integrated wireless coverage solutions tailored to our customers’ requirements in a timely, flexible and cost efficient manner at competitive prices. Further penetration of market share with existing customers in the PRC. We believe that the key growth driver for our business is PRC mobile operators’ continuous demand for network construction, upgrading and optimization. In view of the growing number of mobile subscribers in the PRC, the PRC government’s policy of developing the southwestern and northwestern regions of the PRC and the emergence of 3G in the PRC, we believe that we will benefit from a further expansion of our business relationships with China Mobile and China Unicom through increasing our market share in provinces we currently serve and establishing our presence in other provinces in the PRC. We currently maintain a national license from the PRC Ministry of Information Industry which grants us access to the nationwide telecommunications systems integration industry. We believe that the enrichment of our product mix and the expansion of our wireless coverage products and services portfolio will further enhance our ability to meet customers’ changing needs and requirements and enable us to expand our relationship with China Mobile and China Unicom as well as other providers. Exploration of potential new markets. In view of the continual de-regulation of the PRC telecommunications sector, we intend to expand our business by targeting potential new mobile operators in the PRC. Authorized – 30,000,000 shares as of June 30, 2004 and 10,000 shares as of December 31, 2003 and 2002 Issued and outstanding – 24,010,000 shares as of June 30, 2004 and 10,000 shares as of December 31, 2003 and 2002