UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

FORM 10-QSB/A

(Mark One)
x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarter ended June 30, 2007

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from ________ to __________

Commission File Number: 000-30790

CHINA DIGITAL COMMUNICATION GROUP

(Exact name of small business issuer as specified in its charter)

Nevada	91-2132336
(State or other jurisdiction of incorporation or organization)	(IRS Employee Identification No.)

Number 2222. Jin Tian Road. An Lian Building 15th

Floor A-01 and A-02. Futian.

Shenzhen. China

(Address of principal executive offices)

86-755-2698-3767

(Issuer’s telephone number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x  No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

 The number of shares outstanding of each of the issuer’s classes of common equity, as of October 24, 2007 is 54,460,626 shares of common stock.  

CHINA DIGITAL COMMUNICATION GROUP

FORM 10-QSB

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis or Plan of Operation	17
Item 3. Controls and Procedures	21
PART II - OTHER INFORMATION	21
Item 1. Legal Proceedings	21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3. Defaults Upon Senior Securities	21
Item 4. Submission of Matters to a Vote of Security Holders	21
Item 5. Other Information	21
Item 6. Exhibits	22
SIGNATURES	23

Except as otherwise required by the context, all references in this report to “we”, “us”, “our”, “CHID”,”China Digital” or “Company” refer to the consolidated operations of China Digital Communication Group, a Nevada corporation, and its wholly owned subsidiaries.

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

JUNE 30, 2007

1

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

TABLE OF CONTENTS

Unaudited Condensed Consolidated Balance Sheet (Restated)	2
Unaudited Condensed Consolidated Statements of Operations (Restated)	3
Unaudited Condensed Consolidated Statements of Cash Flow	4
Notes to unaudited Condensed Consolidated Financial Statements	5-16

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

JUNE 30, 2007

(UNAUDITED)

ASSETS
Current Assets
Cash and cash equivalents	$	815,571
Accounts receivable, net		515,353
Inventory		479,602
Prepaid expenses		1,682
Other receivables		3,075,331
Total Current Assets		4,887,539
Property & equipment, net		1,062,652
Other Assets
Other assets		8,530
Intangible assets, net		2,970,164
Goodwill- restated		7,039,593
Total Other Assets		10,018,287
Total Assets	$	15,968,478
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	624,689
Loan payable		263,000
Loan payable to related party		174,600
Total Current Liabilities		1,062,290
Stockholders' Equity
Common stock, $.001 par value, 140,000,000
shares authorized, 54,460,626, issued and outstanding		54,460
Preferred stock, $.001 par value, 7,575,757
shares authorized, 7,575,757, issued and outstanding		7,576
Additional paid in capital		16,887,627
Statutory reserve- restated		289,931
Other comprehensive income-restated		632,709
Retained earnings-restated		(2,966,115	)
Total Stockholders' Equity		14,906,188
Total Liabilities and Stockholders' Equity	$	15,968,478

The accompanying notes are an integral part of these unaudited consolidated financial statements

2

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Month Periods Ended						Six Month Periods Ended
	June 30, 2007			June 30, 2006			June 30, 2007			June 30, 2006
Revenue, net	$	368,823		$	3,027,810		$	2,007,811		$	6,211,357
Cost of sales		635,645			2,119,460			1,796,629			4,328,727
Gross profit		(266,822	)		908,350			211,182			1,882,630
Operating Expenses
Selling expense		7,273			8,591			13,366			15,785
General and administrative expenses		778,556			416,777			1,050,284			664,779
Goodwill impairment		-			-			1,295,556			-
Total operating expenses		785,829			425,368			2,359,206			680,564
Income (loss) from operations		(1,052,651	)		482,982			(2,148,024	)		1,202,066
Other (Income) Expense
Interest income		-			(5,482	)		(1,670	)		(10,597	)
Miscellaneous expense		-			-			-			268
Interest expense		7,319			65,486			9,355			95,326
Total Other Expense		7,319			60,004			7,685			84,997
Income (loss) before income taxes		(1,059,970	)		422,978			(2,155,709	)		1,117,069
Provision for income taxes		(59,269	)		32,102			-			72,639
Income (loss) from continuing operations		(1,000,701	)		390,876			(2,155,709	)		1,044,430
Discontinued operations
Loss on disposal of subsidiary		(8,366	)		-			(35,635	)		-
Loss from discontinued operations		(37,578	)		-			(37,578	)		-
Net Income (loss)		(1,046,645	)		390,876			(2,228,922	)		1,044,430
Other comprehensive income
Foreign currency translation -restated		83,363			44,207			263,422			169,862
Comprehensive Income (Loss) -restated	$	(963,282	)	$	435,083		$	(1,965,500	)	$	1,214,292
Net income (loss) per share from continuing operations
Basic	$	(0.02	)	$	0.01		$	(0.04	)	$	0.02
Diluted	$	(0.02	)	$	0.01		$	(0.04	)	$	0.02
Net income (loss) per share from discontinued operations
Basic	$	(0.00	)	$	0.00		$	(0.00	)	$	0.00
Diluted	$	(0.00	)	$	0.00		$	(0.00	)	$	0.00
Weighted average number of shares outstanding:
Basic		54,460,626			54,460,626			54,460,626			54,460,626
Diluted		54,460,626			54,470,795			54,460,626			54,470,795

The accompanying notes are an integral part of these unaudited consolidated financial statements

3

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006

(UNAUDITED)

	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	(2,228,922	)	$	1,044,430
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation		96,834			92,017
Amortization of intangible assets		175,159			166,458
Goodwill impairment		1,295,556			-
Loss on disposal of subsidiary		35,635			-
(Increase) / decrease in current assets:
Accounts receivables		1,120,969			(683,273	)
Inventory		(186,009	)		51,445
Other receivables		11,860			(947	)
Prepaid expense		14,664			(93,421	)
Deposits		(5,430	)		-
Increase/(Decrease) in current liabilities:
Accounts payable and accrued expenses		(377,979	)		83,360
Income tax payable		(74,306	)		(54,792	)
Deferred revenue		-			(79,494	)
Total Adjustments		2,106,953			(518,647	)
Net cash provided by (used in) operating activities from discontinuing operations		(121,969	)		525,783
Net cash provided by operating activities from continuing operations		2,075,506			-
Net cash provided by operating activities		1,953,537			525,783
CASH FLOWS FROM INVESTING ACTIVITIES
Advance for business acquisition		-			(3,000,000	)
Cash acquired in acquisition		-			701,169
Acquisition of property & equipment		(59,721	)		(3,284	)
Net cash used in investing activities from continuing operations		(59,721	)		(2,302,115	)
Net cash used in investing activities of entity disposed		(2,583,914	)		-
Net cash used in investing activities		(2,643,635	)		(2,302,115	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on loan payable		-			(249,240	)
Loan from related party		373,665			-
Proceed from loan payable		-			3,000,000
Net cash provided by financing activities from continuing operations		373,665			2,750,760
Effect of exchange rate changes on cash and cash equivalents		57,169			199,264
Net increase (decrease) in cash and cash equivalents		(259,264	)		1,173,692
Cash and cash equivalents, beginning balance		1,074,835			2,061,213
Cash and cash equivalents, ending balance	$	815,571		$	3,234,905
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments	$	59,642		$	56,738
Interest payments	$	9,355		$	26,342
Non cash transactions:
Issuance of shares in advance for purchase of business	$	-		$	9,620,000

The accompanying notes are an integral part of these unaudited consolidated financial statements

4

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note A - ORGANIZATION

China Digital Communication Group (the “Company”) was incorporated under the laws of the State of Nevada on March 27, 2001. On September 30, 2004, the Company entered into an Exchange Agreement with Billion Electronics Co., Ltd. (Billion). Billion owns all of the issued and outstanding shares of Shenzhen E’Jenie Science and Technology Company, Limited (E’Jenie). Billion, was incorporated under the laws of the British Virgin Islands on July 27, 2004. Shenzhen E’Jenie Science & Technology Company Limited, was legally established on July 8, 2002 under the laws of the Peoples’ Republic of China (PRC). On June 28, 2006, the Company finalized an Exchange Agreement with Galaxy View International, Ltd (Galaxy View). Galaxy View owns all of the issued and outstanding shares of Shenzhen Sono Digital Technologies Company Limited (Sono). Galaxy View was incorporated under the laws of the British Virgin Islands on August 22, 2005. Sono was legally established on May 29, 2001 under the laws of the Peoples’ Republic of China. When used in these notes, the terms “Company,” “we,” “our,” or “us” mean China Digital Communication Group and its Subsidiaries.

On September 30, 2004, the Company entered into an Exchange Agreement with Billion. Pursuant to the Exchange Agreement, the Company agreed to purchase all of the issued and outstanding shares of Billion for approximately $1,500,000 in cash and 4,566,210 shares of the Company’s common stock, or approximately 8.7% of the total issued and outstanding shares.

On June 28, 2006, the Company finalized an Exchange Agreement with Galaxy View International Ltd., the Company and the shareholders of Galaxy View (the “Shareholders”). Pursuant to the Exchange Agreement, the Company acquired 100% of Galaxy View in a cash and stock transaction valued at approximately $6,787,879. Under the terms of the Agreement, the Company paid to the Shareholders $3,000,000 million in cash and delivered 7,575,757 unregistered shares of China Digital preferred stock valued at approximately $3,787,879. The Company disposed off Galaxy View International, Ltd. on April 24, 2007 for $3,000,000.

Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Interim Financial Information

The accompanying unaudited consolidated financial statements have been prepared by China Digital, Inc., pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) Form 10-QSB and Item 310 of Regulation S-B, and generally accepted accounting principles for interim financial reporting. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-KSB. The results of the three and six months ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year ending December 31, 2007.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company’s functional currency is the Chinese Renminbi; however the accompanying consolidated financial statements have been translated and presented in United States Dollars ($).

5

Translation Adjustment

As of June 30, 2007, the accounts of E’Jenie and Sono were maintained, and its financial statements were expressed, in Chinese Yuan Renminbi (CNY). Such financial statements were translated into U.S. Dollars (USD) in accordance with Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation,” with the CNY as the functional currency. According to the Statement, all assets and liabilities were translated at the current exchange rate, stockholder’s equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with SFAS No. 130, “Reporting Comprehensive Income” as a component of shareholders’ equity.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make certain 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. Significant estimates include collectibility of accounts receivable, accounts payable, sales returns and recoverability of long-term assets.

Principles of Consolidation

The consolidated financial statements include the accounts of China Digital Communication Group and its wholly owned subsidiaries, collectively referred to within as the Company. All material intercompany accounts, transactions and profits have been eliminated in consolidation.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions. The Company has a diversified customer base, most of which are in China.

The Company controls credit risk related to accounts receivable through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.

6

Allowance for Doubtful Accounts

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Allowance for doubtful debts amounted to $532,252 as of June 30, 2007.

Inventory

Inventories are valued at the lower of cost (determined on a weighted average basis) or market. The Management compares the cost of inventories with the market value and allowance is made for writing down their inventories to market value, if lower. As of June 30, 2007, inventory consisted of raw material, work in progress and finished goods as follows:

Inventory
Raw Material	$	196,115
Work-in-process		6,525
Finished goods		276,962
	$	479,602

Property, Plant & Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Furniture and Fixtures	5 years
Equipment	5 years
Computer Hardware and Software	5 years
Building	30 years

As of June 30, 2007 Property, Plant & Equipment consist of the following:

Machinery	$	841,182
Leasehold improvement		33,420
Automobile		32,726
Office equipment		14,218
Building		529,260
		1,450,805
Accumulated depreciation		(388,154	)
	$	1,062,652

Depreciation expenses were $101,185 and $92,017 for the six month periods ended June 30, 2007, and 2006. Depreciation expenses were $49,324 and $43,049 for the three month periods ended June 30, 2007, and 2006.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

7

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the identifiable assets and liabilities acquired as a result of the Company’s acquisitions of interests in its subsidiaries. Under Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets (“SFAS 142”),” goodwill is no longer amortized, but tested for impairment upon first adoption and annually, thereafter, or more frequently if events or changes in circumstances indicate that it might be impaired. The Company assesses goodwill for impairment periodically in accordance with SFAS 142.

Intagible assets

The Company applies the criteria specified in SFAS No. 141, “Business Combinations” to determine whether an intangible asset should be recognized separately from goodwill. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Per SFAS 142, intangible assets with definite lives are amortized over their estimated useful life and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-lived Assets.” Intangible assets, such as purchased technology, trademark, customer list, user base and non-compete agreements, arising from the acquisitions of subsidiaries and variable interest entities are recognized and measured at fair value upon acquisition. Intangible assets are amortized over their estimated useful lives from one to ten years. The Company reviews the amortization methods and estimated useful lives of intangible assets at least annually or when events or changes in circumstances indicate that it might be impaired. The recoverability of an intangible asset to be held and used is evaluated by comparing the carrying amount of the intangible asset to its future net undiscounted cash flows. If the intangible asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the intangible asset exceeds the fair value of the intangible asset, calculated using a discounted future cash flow analysis. The Company uses estimates and judgments in its impairment tests, and if different estimates or judgments had been utilized, the timing or the amount of the impairment charges could be different.

Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations for a Disposal of a Segment of a Business.” The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. Based on its review, the Company believes that, as of December 31, 2006 there were no significant impairments of its long-lived assets.

8

Recent accounting pronouncements

In September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)’ This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

a. A brief description of the provisions of this Statement

b. The date that adoption is required

c. The date the employer plans to adopt the recognition provisions of this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FAS 159 for their first quarter 2007 financial statements.

The new Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities.

9

Note C - GOODWILL AND INTANGIBLE ASSETS (RESTATED)

Goodwill

As of June, 2007, the Goodwill comprised of the following:

Acquisition of Billion $ 7,039,593

The Company disposed off Galaxy View on April 24, 2007 and recorded an impairment of goodwill of $1,295,556 on the Galaxy acquisition based on the recoverable value of the entity.

Intangible assets

As of June 30, 2007 intangible assets consist of the following:

Customer relationship	$	2,691,445
Design		366,850
Proprietary technology		270,850
Land rights		529,260
Intangible assets		3,858,405
Accumulated amortization		(888,241	)
	$	2,970,164

The intangible assets are amortized over 10 years.

Amortization expenses were $175,159 and $166,458 for the six month periods ended June 30, 2007 and 2006. Amortization expenses were $87,397 and $83,229 for the three month periods ended June 30, 2007 and 2006.

Amortization expenses for the Company’s intangible assets over the next five fiscal years is estimated to be:

2007	$	175,159
2008		350,317
2009		350,317
2010		350,317
2011		350,317
After		1,393,737
Total	$	2,970,164

Note D - DISPOSED ENTITY

On April 24, 2007, the Company entered into an Agreement on Transfer of Shares of Galaxy View with Liu Changqing and Wang Feng (collectively, the Purchasers”) for the sale of our wholly-owned subsidiary Galaxy View (the “Agreement”). Changqing purchased a 60% interest and Feng will purchase a 40% interest in Galaxy View. In exchange for all of the outstanding shares of Galaxy View, the Purchasers agreed to pay $3,000,000 USD as consideration for the acquisition. We entered into promissory notes with the Purchasers for payment of their share of the $3,000,000 which is due within 90 days of April 24, 2007. If payment is not made within 90 days, the promissory notes will accrue interest at 18% per annum from the closing date. The company has recovered $2 million subsequent to June 30, 2007.

10

Following is the detail information for loss on disposal of Sono:

Disposal consideration	$	(3,000,000	)
Net assets of Sono at disposal		3,008,463
Goodwill		27,172
Loss on disposal of Sono	$	(35,635	)
Loss from discontinued operations	$	(37,578	)

Note E - ACCOUNTS PAYABLE & ACCRUED EXPENSES

As of June 30, 2007, accounts payable & accrued expenses comprised of the following:

Accounts payable and accrued expenses	$	620,212
VAT payable		4,477
Total	$	624,689

Note F - LOANS PAYABLE

As of June 30, 2007, the Company has an unsecured, due on demand, non interest-bearing loan payable in the amount of $263,000 to a third party.

Note G - INCOME TAXES

The Company through its subsidiaries, E’Jenie and Sono, is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future and hence the Company has not recorded any deferred assets as of June 30, 2007.

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) is at a statutory rate of 33%, which is comprises of 30% national income tax and 3% local income tax. E’Jenie qualified as a new technology enterprise and under PRC Income Tax Laws, is subject to a preferential tax rate of 15%. Sono is a Foreign Investment Enterprise and under PRC Income Tax Laws, they are entitled to either a three-year tax exemption followed by three years with a 50% reduction in the tax rate, commencing the first operating year, or a two-year tax exemption followed by three years with a 50% reduction in the tax rate, commencing the first profitable year.

11

The following is a reconciliation of income tax expense:

6/30/2007	Income tax expenses
Current	$	0
Deferred		-
Total	$	0

Reconciliation of the differences between the statutory U.S. Federal income tax rate and the effective rate is as follows:

	6/30/2007
US statutory tax rate		34	%
Foreign income not recognized in US		-34	%
PRC income tax		15	%
Valuation allowance		-15	%

Note H- COMMITTMENTS

Operating Leases

The Company leases various office facilities under operating leases that terminate on various dates. Rental expense for these leases consisted of approximately $3,563 and $47,270 for the six month periods ended June 30, 2007 and 2006, respectively. Rental expense for these leases consisted of approximately $1,314 and $23,662 for the three months periods ended June 30, 2007.

Note I- PREFERRED STOCKS

Pursuant to the exchange agreement between China Digital and Galaxy View that was finalized on June 28, 2006, the Company issued 7,575,757 million shares of Series A-1 Convertible Preferred Stock valued at $3,787,879.  Each share of Series A-1 Preferred Stock entitles the holder thereof to seven votes per share on all matters to be voted on by the shareholders of the Company and is mandatorily convertible into one share of the Company’s common stock on June 29, 2011. Each share of Series A-1 Preferred Stock shall, with respect to rights on liquidation, dissolution or winding up, rank (i) on a parity with the Company’s common stock, and (ii) junior to any other class of the Company’s preferred stock.

Note J- STOCK OPTION

On November 4, 2005, the Company issued a nonqualified stock option for 100,000 shares to a member of the board with an exercise price of $0.53 that will expire on November 3, 2010. The option vested and became exercisable immediately.

The Company’s 2005 Stock Option Incentive Plan (the “Plan”) provides for the grant of 100,000 option rights to a non-employee director. The Plan is administered by the Company’s Compensation Committee (“Compensation Committee”). The Compensation Committee, as administrator of the plan, has the authority to select plan participants and determine the terms and conditions of such awards.

On March 20, 2006, the Company issued a non-incentive stock option for 150,000 shares to a consultant with an exercise price of $0.702 that will expire on March 19, 2009. The option vested and became exercisable on May 1, 2006.

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The Company did not grant any options during the six months period ended June 30, 2007.

Options outstanding at June 30, 2007 and related weighted average price and intrinsic value is as follows:

Exercise Prices	Total Options Outstanding	Weighted Average Remaining Life (Years)	Total Weighted Average Exercise Price	Options Exercisable	Weighted Average Exercise Price	Aggegrate Intrinsic Value
$0.530	100,000	0.7	$0.530	100,000	$0.530	-
$0.702	150,000	0.6	$0.702	150,000	$0.702	-

Note K - STATUTORY COMMON WELFARE FUND

As stipulated by the Company Law of the People’s Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i.   Making up cumulative prior years’ losses, if any;

ii.   Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital;

iii.   Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company’s “Statutory common welfare fund”, which is established for the purpose of providing employee facilities and other collective benefits to the Company’s employees; and

iv.   Allocations to the discretionary surplus reserve, if approved in the stockholders’ general meeting.

The Company established a reserve for the annual contribution of 5% of net income to the welfare fund in 2005. The Company did not transfer any amount to statutory reserve for the six month periods ended June 30, 2007 as the Company did not earn any profits during the six month period ended June 30, 2007.

Note L - STATUTORY RESERVE

In accordance with the Chinese Company Law, the company has established a policy to reserve 10% of its annual net income as statutory reserve. The Company reserved $0 for the six month period ended June 30, 2007 as the Company did not earn any profits during the six month period ended June 30, 2007.

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Note M - OTHER COMPREHENSIVE INCOME (RESTATED)

Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders’ equity, at December 31, 2006 and June 30, 2007 are as follows:

	Foreign Currency Translation Adjustment
Balance at December 31, 2006	$	369,287
Change for 2007		263,422
Balance at June 30, 2007	$	632,709

Note N - RELATED PARTY TRANSACTIONS

As of June 30, 2007, the Company has an unsecured, due on demand, non interest-bearing loan from Xuemei Fang, an officer and director, in the amount of $174,600.

Note O- SEGMENT REPORTING

The Company had two principal operating segments which were: battery components manufacturer and supplier of 3G telecommunications equipment, and supplier of hi-tech telecommunication equipment to the telecommunications industry. These operating segments were determined based on the nature of the products offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company’s chief executive officer and chief financial officer have been identified as the chief operating decision makers. The Company’s chief operating decision makers direct the allocation of resources to operating segments based on the profitability, cash flows, and other measurement factors of each respective segment.

The Company disposed off the supplier of 3G telecommucations equipment, Galaxy, during the six month period ended June 30, 2007 and has determined that the battery components manufacturer is the only reportable segment. The operations of Galaxy have been presented separately, as discontinued operations, in the accompanying financial statements. The loss of discounting operations during the periods ended June 30, 2007 was $37,578 and the loss on disposal of Galaxy was $35,635.

The Company evaluates performance based on several factors, of which the primary financial measure is business segment income before taxes. The segments’ accounting policies are the same as those described in the summary of significant accounting policies. The following table shows the operations of the Company’s reportable segments:

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	Battery
	Component			US shell			Total
Revenues	$	2,007,811		$	-		$	2,007,811
Income (loss) before taxes of continuing operations		(368,934.00	)		(1,786,775.00	)		(2,155,709	)
Total identifiable assets		5,813,754			3,115,131			8,928,885
Capital expenditures		59,721			-			59,721
Depreciation and amortization		105,535			166,458			271,993
Interest expense		9,355			-			9,355
Interest income	$	1,670		$	-		$	1,670

(1)	Total identifiable assets are the owned or allocated assets used by each business. Corporate assets consist of cash and cash equivalents, unallocated fixed assets of support divisions and common facilities, and certain other assets.
(2)	Capital expenditures and depreciation and amortization expense include items attributable to the unallocated fixed assets of support divisions and common facilities.

Also, because all of the Company’s sales are derived from the sales of products outside of the United States, all long-lived assets are located outside the United States.

Note P- CURRENT VULNERABILITY DUE TO RISK FACTORS

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC’s economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Note Q - RESTATEMENTS

Subsequent to the issuance of the Company’s financial statements for the three month period ended March 31, 2007, the Company determined that certain transactions and presentation in the financial statements had not been accounted for properly in the Company’s financial statements. Specifically, the Company did not allocate purchase price properly for the acquisition of Billion Electronics Co., Ltd. on November 15, 2004 properly.

The Company has restated its financial statements as of December 31, 2004 for these adjustments.

Other than the correction shown below form, the restatement also effected the beginning balance of intangible assets and goodwill of 2007. The beginning balance of intangible assets after restatement was $3,136,622 compared to $0 balance as of December 31, 2006.

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The effect of the correction of the error is as follows:

CONSOLIDATED BALANCE SHEETS

	Restated			Reported
	2007			2007
Other Assets
Goodwill	$	7,039,593		$	8,253,436
Total Other Assets		10,018,287			11,232,130
Total Assets		15,968,478			17,182,321
Stockholders' Equity
Statutory reserve		289,931			273,809
Other comprehensive income		632,709			572,029
Accumulated deficit		(2,966,115	)		(1,675,470	)
Total Stockholders' Equity		14,906,189			16,120,031
Total Liabilities and Stockholders' Equity	$	15,968,478		$	17,182,321

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Month Periods Ended				Six Month Periods Ended
	June 30, 2006		June 30, 2006		June 30, 2006		June 30, 2006
	(Reported)		(Restated)		(Reported)		(Restated)
Foreign currency translation	$	88,591	$	44,207	$	179,937	$	169,862
Comprehensive Income (Loss)	$	479,467	$	435,083	$	1,224,367	$	1,214,292

	Three Month Periods Ended						Six Month Periods Ended
	June 30, 2007			June 30, 2007			June 30, 2007			June 30, 2007
	(Reported)			(Restated)			(Reported)			(Restated)
Foreign currency translation	$	(24,540	)	$	83,363		$	155,519		$	264,424
Comprehensive Income (Loss)	$	(1,071,185	)	$	(963,282	)	$	(2,073,403	)	$	(1,965,550	)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Month Periods Ended				Six Month Periods Ended
	June 30, 2006		June 30, 2006		June 30, 2006		June 30, 2006
	(Reported)		(Restated)		(Reported)		(Restated)
General and administrative expenses	$	333,548	$	416,777	$	498,321	$	664,779
Total operating expenses		342,139		425,368		514,106		680,564
Income (loss) from operations		566,211		482,982		1,368,524		1,202,066
Income (loss) before income taxes		506,207		422,978		1,283,527		1,117,069
Income (loss)	$	474,105	$	390,876	$	1,210,888	$	1,044,430

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Item 2.  Management’s Discussion and Analysis or Plan of Operation.

The following discussion should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this Form 10-QSB.

Safe Harbor Regarding Forward-Looking Statements

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2007 AND 2006

The following table presents the statement of operations for the three months ended June 30, 2007 as compared to the comparable period of the three months ended June 30, 2006. The discussion following the table is based on these results.

	Three Month Periods Ended
	June 30, 2007			June 30, 2006
	(Restated)			(Restated)
Revenue, net	$	368,823		$	3,027,810
Cost of sales		635,645			2,119,460
Gross profit		(266,822	)		908,350
Operating Expenses
Selling expense		7,273			8,591
General and administrative expenses		778,556			416,777
Goodwill impairment		-			-
Total operating expenses		785,829			425,368
Income (loss) from operations		(1,052,651	)		482,982
Other (Income) Expense
Interest income		-			(5,482	)
Miscellaneous income		-			-
Interest expense		7,319			65,486
Total Other Expense		7,319			60,004
Income (loss) before income taxes		(1,059,970	)		422,978
Provision for income taxes		(59,269	)		32,102
Income (loss) from continuing operations		(1,000,701	)		390,876
Discontinued operations
Loss on disposal of subsidiary		(8,366	)		-
Loss from discontinued operations		(37,578	)		-
Net Income (loss)		(1,046,645	)		390,876

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Net sales

Net sales for the three month periods ended June 30, 2007 totaled $368,823 compared to $3,027,810 for the three month periods ended June 30, 2006, a decrease of $2,658,987, or approximately 87.8%. The decrease was due to increased competition and decreased demands from our customers for the three month periods ended June 30, 2007 as compared to the same periods ended June 30, 2006.

Cost of Sales

Cost of sales for the three month periods ended June 30, 2007 totaled $635,645 or 172.3% of net revenue compared to $2,119,460 or approximately 70% of net revenue for the three month periods ended June 30, 2006, a decrease of $1,483,815, approximately 70%. The decrease was due to decreased net revenue for the three month periods ended June 30, 2007. The gross profit rate decreased 102.3% to (72%) from 30% due to the fact that some cost are fixed and is not impacted by the decrease in revenue.

Operating Expense

Selling and general and administrative expenses for the three month periods ended June 30, 2007 totaled $785,829 or approximately 213% of net revenue compared to $425,368 or approximately 14% of net revenue for the three month periods ended June 30, 2006, an increase of $360,461 or approximately 84.7%. The increase in general and administrative expenses was primarily due to the increase in accounting, legal and other professional fees related to SEC comment letters and 2004 re audit during the three month periods ended June 30, 2007.

Income (Loss) from Operations

Income (loss) from operations for the three month periods ended June 30, 2007 totaled $(1,052,651) or approximately 285.4 % of net revenue compared to $482,982 or approximately 16% of net revenue for the three month periods ended June 30, 2006, a decrease of $1,535,633or approximately 317.9%. The decrease in income from operations was primarily due to decrease in sales during the three month periods ended June 30, 2007.

Interest Expense

Interest expense for the three month periods ended June 30, 2007 totaled $7,319 compared to $65,486 for the three month periods ended June 30, 2006, a decrease of $58,167, or approximately 89%. The decrease in interest expense was due to indebtedness related to the potential acquisition of new business during 2006.

Net Income

Net income (loss) for the three month periods ended June 30, 2007 totaled $(1,046,645) compared to $390,876 for the three month periods ended June 30, 2006, a decrease of $1,437,521 or approximately 368%. The decrease in net income was primarily due to reason described above.

RESULTS OF OPERATIONS

The following table presents the statement of operations for the six month periods ended June 30, 2007 as compared to the comparable period of the six month periods ended June 30, 2006. The discussion following the table is based on these results.

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	Six Month Periods Ended
	June 30, 2007			June 30, 2006
	(Restated)			(Restated)
Revenue, net	$	2,007,811		$	6,211,357
Cost of sales		1,796,629			4,328,727
Gross profit		211,182			1,882,630
Operating Expenses
Selling expense		13,366			15,785
General and administrative expenses		1,050,284			664,779
Goodwill impairment		1,295,556			-
Total operating expenses		2,359,206			680,564
Income (loss) from operations		(2,148,024	)		1,202,066
Other (Income) Expense
Interest income		(1,670	)		(10,597	)
Miscellaneous income		-			268
Interest expense		9,355			95,326
Total Other Expense		7,685			84,997
Income (loss) before income taxes		(2,155,709	)		1,117,069
Provision for income taxes		-			72,639
Income (loss) from continuing operations		(2,155,709	)		1,044,430
Discontinued operations
Loss on disposal of subsidiary		(35,635	)		-
Loss from discontinued operations		(37,578	)		-
Net Income (loss)		(2,228,922	)		1,044,430

Net sales

Net sales for the six month periods ended June 30, 2007 totaled $2,007,811 compared to $6,211,357 for the six month periods ended June 30, 2006, a decrease of $4,203,546, or approximately 67.7%. The decrease was due to increased competition and decreased demands from our customers for the six month periods ended June 30, 2007 as compared to the same periods ended June 30, 2006.

Cost of Sales

Cost of sales for the six month periods ended June 30, 2007 totaled $1,796,629 or 89.5% of net revenue compared to $4,328,727 or approximately 69.7% of net revenue for the six month periods ended June 30, 2006, a decrease of $2,532,098, approximately 58.5%. The decrease was due to decreased net revenue for the six month periods ended June 30, 2007. The gross profit rate decreased 19.8% to 10.5% from 30.3% due to the change of labor cost structure during the six months ended June 30, 2007 as compare to June 30, 2006. In order to retain skilled workers, the company decided to use fixed salary instead of variable salary based on quantity of units produced.

Operating Expense

Selling and general and administrative expenses for the six month periods ended June 30, 2007 totaled $2,359,206 or approximately 117.5% of net revenue compared to $680,564 or approximately 11.0% of net revenue for the six month periods ended June 30, 2006, an increase of $1,678,642 or approximately 246.7%. The increase in general and administrative expenses was primarily due to the increase in accounting, legal and other professional fees related to SEC comment letters and 2004 re audit and impairment of $1,295,556 for intangibles during the six month periods ended June 30, 2007.

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Income (Loss) from Operations

Income (loss) from operations for the six month periods ended June 30, 2007 totaled $(2,148,024) or approximately 107.0% of net revenue compared to $1,202,066 or approximately 19.4% of net revenue for the six month periods ended June 30, 2006, a decrease of $3,350,090or approximately 278.7%. The decrease in income from operations was primarily due to decrease in sales and impairment loss recognized during the six month periods ended June 30, 2007.

Interest Expense

Interest expense for the six month periods ended June 30, 2007 totaled $9,355 compared to $95,326 for the six month periods ended June 30, 2006, a decrease of $85,971, or approximately 90.2%. The decrease in interest expense was due to indebtedness related to the potential acquisition of new business during 2006.

Net Income

Net income (loss) for the six month periods ended June 30, 2007 totaled $(2,228,922) compared to $1,044,430 for the six month periods ended June 30, 2006, a decrease of $3,273,352 or approximately313.4%. The decrease in net income was primarily due to reason described above.

LIQUIDITY AND CAPITAL RESOURCES

Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $815,571 at June 30, 2007 and current assets totaled $4,887,539 at June 30, 2007. The Company’s total current liabilities were $1,062,290 at June 30, 2007. Working capital at June 30, 2007 was $3,825,249. During the six month periods ended June 30, 2007, net cash provided by operating activities was $1,953,537.

Net cash used in investing activities totaled $(2,643,635) for the six month periods ended June 30, 2007, compared with $(2,302,115) for the same periods ended June 30, 2006. The net cash change was $(259,264) and $1,173,692 for the six month periods ended June 30, 2007 and 2006, respectively.

We will continue to evaluate alternative sources of capital to meet our growth requirements, including other asset or debt financing, issuing equity securities and entering into other financing arrangements. There can be no assurance, however, that any of the contemplated financing arrangements described herein will be available and, if available, can be obtained on terms favorable to us.

Working Capital Requirements

Historically operations, short term financing and the sale of our company stock have been sufficient to meet our cash needs. We believe that we will be able to generate revenues from sales. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Future expansion will be limited by the availability of financing products and raising capital.

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OFF-BALANCE SHEET ARRANGEMENTS

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Item 3.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2007. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

To the best of our knowledge, neither the Company nor any of its subsidiaries is a party to any pending or threatened legal proceedings.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None. 

Item 3. Defaults Upon Senior Securities.

None.

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

None.

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Item 5. Other Information.

On April 24, 2007, we entered into an Agreement on Transfer of Shares of Sono Digital Electronic Technologies Co., Ltd. with Liu Changqing and Wang Feng (collectively, the Purchasers”) for the sale of our wholly-owned subsidiary Sono Digital Electronic Technologies Co., Ltd. (“Sono”). As a result of the Agreement, we no longer own, control or operate Sono and have disposed of this asset.

Item 6. Exhibits.

Exhibit No.	Document Description
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

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

	CHINA DIGITAL COMMUNICATION GROUP
Date: October 24, 2007	By:	/s/ Zhongnan Xu
		Zhongnan Xu Chief Executive Officer

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