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 September 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 xNo o

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

Yes oNo x

The number of shares outstanding of each of the issuer’s classes of common equity, as of September 30, 2007 was 54,460,626 shares of common stock.  

EXPLANATORY NOTE

This Form 10-QSB/A is being filed to amend the China Digital Communication Group ( the "Company") Annual Report on Form 10-QSB/A for the period ended September 30, 2007 in order to reflect the restatement to correct an error of the Company's Consolidated Financial Statements and amendments to related disclosures as of September 30, 2007. The error relates to the incorrect decision not to do purchase price allocation and assignment of value to intangible assets for the acquisition of Billion Electronics Co., Ltd. on November 14, 2004. Based upon new information and communication with the Securities and Exchange Commission, our independent auditors, have concluded that the Company was required to do purchase price allocation and assign value to intangible asset for the acquisition of Billion Electronics Co., Ltd. on November 15, 2004.

CHINA DIGITAL COMMUNICATION GROUP

FORM 10-QSB

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	1
Item 1. Financial Statements	F-1
Item 2. Management’s Discussion and Analysis or Plan of Operation	18
Item 3. Controls and Procedures	23
PART II - OTHER INFORMATION	24
Item 1. Legal Proceedings	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3. Defaults Upon Senior Securities	24
Item 4. Submission of Matters to a Vote of Security Holders	24
Item 5. Other Information	24
Item 6. Exhibits	24
SIGNATURES	25

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)

SEPTEMBER 30, 2007

F-1

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

TABLE OF CONTENTS

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

F-2

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

SEPTEMBER 30, 2007

(UNAUDITED)

ASSETS
Current Assets
Cash and cash equivalents	$	4,421,552
Accounts receivable, net		267,141
Inventory		204,285
Prepaid expenses		1,757
Total Current Assets		4,894,735
Property & equipment, net		1,018,877
Other Assets
Other assets		84,950
Intangible assets, net		2,890,434
Goodwill		7,039,593
Total Other Assets		10,014,977
Total Assets	$	15,928,589
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	460,195
Loan payable		266,800
Loan payable to related party		174,600
Total Current Liabilities		901,595
Stockholders' Equity
Common stock, $.001 par value, 140,000,000
shares authorized, 54,460,626, issued and outstanding		54,461
Preferred stock, $.001 par value, 7,575,757
shares authorized, 7,575,757, issued and outstanding		7,576
Additional paid in capital		16,887,626
Statutory reserve		105,849
Other comprehensive income		696,965
Accumulated deficit		(2,725,483	)
Total Stockholders' Equity		15,026,994
Total Liabilities and Stockholders' Equity	$	15,928,589

F-3

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Month Periods Ended						Nine Month Periods Ended
	September 30, 2007			September 30, 2006			September 30, 2007			September 30, 2006
	(Restated)			(Restated)			(Restated)			(Restated)
Revenue, net	$	336,539		$	2,215,684		$	2,344,350		$	8,427,040
Cost of sales		491,780			1,597,051			2,288,409			5,925,778
Gross profit		(155,241	)		618,633			55,941			2,501,262
Operating Expenses
Selling expense		5,180			7,290			18,546			23,075
General and administrative expenses		452,297			263,267			979,997			928,043
Bad debt		(522,584	)		5,882			(131,062	)		5,882
Total operating expenses		(65,107	)		276,439			867,481			957,000
Income (loss) from operations		(90,134	)		342,194			(811,540	)		1,544,262
Other (Income) Expense
Interest expense (income)		(16,284	)		62,948			(8,599	)		147,678
Miscellaneous (income) expense		(1,489	)		(630	)		(1,489	)		(362	)
Total Other Expense		(17,773	)		62,318			(10,088	)		147,316
Income (loss) before income taxes		(72,361	)		279,876			(801,452	)		1,396,946
Provision for income taxes		-			210			-			72,849
Income (loss) from continuing operations		(72,361	)		279,666			(801,452	)		1,324,097
Discontinued operations
Loss on disposal of subsidiary		-			-			(35,635	)		-
Goodwill impairment		-			-			(1,295,556	)		-
Income (loss) from discontinued operations		-			955,064			(37,578	)		955,064
Net Income (loss)		(72,361	)		1,234,730			(2,170,221	)		2,279,161
Other comprehensive income -restated
Foreign currency translation -restated		64,256			15,282			327,678			247,074
Comprehensive Income (Loss)	$	(8,105	)	$	1,250,012		$	(1,842,543	)	$	2,526,235
Net income (loss) per share from continuing operations
Basic	$	(0.00	)	$	0.01		$	(0.01	)	$	0.02
Diluted	$	(0.00	)	$	0.01		$	(0.01	)	$	0.02
Net income (loss) per share from discontinued operations
Basic	$	0.00		$	0.02		$	(0.00	)	$	0.02
Diluted	$	0.00		$	0.02		$	(0.00	)	$	0.02
Weighted average number of shares outstanding:
Basic		54,460,626			54,460,626			54,460,626			54,460,626
Diluted		54,470,795			54,470,795			54,460,626			54,470,795

F-4

CHINA DIGITAL COMMUNICATION GROUP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

(UNAUDITED)

	2007			2006
	(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$	(2,170,221	)	$	2,279,161
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation		154,913			139,505
Amortization of intangible assets		262,832			249,686
Goodwill impairment		1,295,556			-
Loss on disposal of subsidiary		35,635			-
(Increase) / decrease in current assets:
Accounts receivables		1,379,374			(472,045	)
Inventory		89,066			87,451
Other receivables		11,945			268,398
Prepaid expense		14,694			131,285
Deposits		(5,430	)		(505,052	)
Increase/(Decrease) in current liabilities:
Accounts payable and accrued expenses		(159,745	)		(794,989	)
Income tax payable		(74,839	)		(54,950	)
Deferred revenue		-			(79,723	)
Total Adjustments		3,004,001			(1,030,434	)
Net cash provided by operating activities from continuing operations		833,780			1,248,727
Net cash provided by (used in) operating activities from discontinued operations		2,127,965			-
Net cash provided by operating activities		2,961,745			1,248,727
CASH FLOWS FROM INVESTING ACTIVITIES
Advance for business acquisition		-			(3,000,000	)
Cash acquired in acquisition		-			708,002
Proceed from sale of subsiidary		3,000,000			-
Acquisition of property & equipment		(60,150	)		(22,651	)
Net cash used in investing activities from continuing operations		2,939,850			(2,314,649	)
Net cash used in investing activities of discontinued operations		(2,621,762	)		-
Net cash used in investing activities		318,089			(2,314,649	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment on loan payable		-			(3,000,000	)
Loan from related party		-			-
Proceed from loan payable		-			3,000,000
Net cash provided by financing activities from continuing operations		-			-
Effect of exchange rate changes on cash and cash equivalents		66,883			165,230
Net increase (decrease) in cash and cash equivalents		3,346,716			(900,692	)
Cash and cash equivalents, beginning balance		1,074,835			2,061,213
Cash and cash equivalents, ending balance	$	4,421,552		$	1,160,521
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income tax payments	$	-		$	56,902
Interest payments				$	$37,754
Non cash transactions:
Issuance of shares in advance for purchase of business	$	-		$	7,576

F-5

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 nine months ended September 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 ($).

F-6

Translation Adjustment

As of September 30, 2007, the accounts of E’Jenie 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.

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 $17,358 as of September 30, 2007.

F-7

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 September 30, 2007, inventory consisted of raw material, work in progress and finished goods as follows:

Inventory
Raw Material	$	154,683
Work-in-process		-
Finished goods		49,602
	$	204,285

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

Machinery	$	853,336
Leasehold improvement		33,903
Automobile		33,198
Office equipment		14,424
Building		536,907
		1,471,768
Accumulated depreciation		(452,891	)
	$	1,018,877

Depreciation expenses were $154,913 and $139,505 for the nine month periods ended September 30, 2007, and 2006. Depreciation expenses were $53,728 and $47,488 for the three month periods ended September 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.

F-8

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.

F-9

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.

F-10

Note C - GOODWILL AND INTANGIBLE ASSETS

Goodwill

As of September 30, 2007, the Goodwill comprised of the following:

Goodwill
Balance as of 12/31/03	$	-
Acquisition of Billion		8,253,436
Balance as of 12/31/04		8,253,436
Impairment of Billion in 2005		(1,213,843	)
Balance as of 12/31/05		7,039,593
Acquisition of Galaxy View in 2006		5,101,909
Impairment of Galaxy View in 2006		(3,779,181	)
Balance as of 12/31/06		8,362,321
Impairment of Galaxy View in 2007		(1,295,556	)
Loss on sale of Galaxy View		(27,172	)
Balance as of 9/30/07	$	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 on the end of March 2008 and booked the rest of goodwill when the company disposed Galaxy View on April 24, 2008.

The Company prepares annual forecasts and is reviewed and modified as needed annually. The Company tests for impairment annually after the third quarter or as needed. The Company projected for the decrease in revenue for 2007 in their revised forecast as of December 31, 2006 and recorded their impairment as of December 31, 2006 for future decrease in revenue.

Intangible assets

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

Customer relationship	$	2,691,445
Design		366,850
Proprietary technology		270,850
Land rights		536,907
Intangible assets		3,866,052
Accumulated amortization		(975,618	)
	$	2,890,434

The intangible assets are amortized over 10 years except Land rights whichare amortized over 30 years.

Amortization expenses were $262,832 and $249,686 for the nine month periods ended September 30, 2007 and 2006

F-11

Amortization expenses for the Company’s intangible assets over the next five fiscal years ending September 30, is estimated to be:

2008	$	350,443
2009		350,443
2010		350,443
2011		350,443
2012		350,443
After		1,138,219
Total	$	2,890,434

Note D - DISPOSED ENTITY

During the first quarter of 2007, our two largest customers, China mobile and China Unicom changed their purchase procedures. In the past, purchase orders were made by their local branch offices based on their needs and demand. The change now only allowed their main head office to place purchase orders from their selected vendors. They evaluated all vendors based on their criteria and unfortunately Sono Digital was not selected as one of their vendors. With the loss of the two largest users of our products, the fact that the telecom industry in China was a monopoly, there was no longer a market for our products.

Once the decision was made by our two largest customers, the Company discussed and considered selling Galaxy View.

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. As of September 30, 2007, the amount has been paid in full.

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

Disposal consideration			$	(3,000,000	)
Sono Digital
Cash	2,583,914
Accounts receivable	446,418
Other assets	44,386
Fixed assets	45,042
Accounts payable and accrued expenses	(111,297	)
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	)

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.

F-12

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.

Note E - ACCOUNTS PAYABLE & ACCRUED EXPENSES

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

Accounts payable and accrued expenses	$	460,195
Total	$	460,195

Note F - LOANS PAYABLE

As of September 30, 2007, the Company has an unsecured, due on demand, non interest-bearing loan payable in the amount of $266,800 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 September 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.

F-13

The following is a reconciliation of income tax expense:

9/30/2007	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:

	9/30/2007
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 $10,442 and $77,290 for the nine month periods ended September 30, 2007 and 2006, respectively.

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.

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

F-14

Options outstanding at September 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		0.6	$	0.530		100,000	$	0.530		-
$0.702		150,000		0.5	$	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 nine month periods ended September 30, 2007 as the Company did not earn any profits during the nine month period eneded September 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 nine month period ended September 30, 2007 as the Company did not earn any profits during the nine month period eneded September 30, 2007.

F-15

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 September 30, 2007 are as follows:

	Foreign Currency Translation Adjustment
Balance at December 31, 2006	$	369,287
Change for 2007		303,350
Balance at September 30, 2007	$	696,965

Note N - RELATED PARTY TRANSACTIONS

As of September 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.

F-16

The following table presents a summary of operating information and certain balance sheet information for the nine month periods ended September 30:

	2007			2006
Revenues
Battery component	$	2,344,350		$	8,427,040
Hi-Tech telecommunication (discontinued operations)		-			1,815,913
US shell headquarter		-			-
Total	$	2,344,350		$	10,242,953
Income (loss) before taxes from continuing operations:
Battery component	$	(80,942	)	$	2,268,947
Hi-Tech telecommunication (discontinued operations)		-			955,065
US shell headquarter		(730,598	)		(872,002	)
Total	$	(811,540	)	$	2,352,010
Identifiable assets:
Battery component	$	8,709,367		$	6,669,628
Hi-Tech telecommunication (discontinued operations)		-			3,079,934
US shell headquarter		7,219,222			8,392,687
Total	$	15,928,589		$	18,142,249
Depreciation and amortization:
Battery component	$	168,058		$	136,125
Hi-Tech telecommunication (discontinued operations)		-			3,380
US shell headquarter		249,687			-
Total	$	417,745		$	139,505
Capital expenditures:
Battery component	$	60,150		$	22,586
Hi-Tech telecommunication (discontinued operations)		-			-
US shell headquarter		-			-
Total	$	60,150		$	22,586

(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- GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained net losses of $2,725,483 since its inception, and the Company's current operations do not generate sufficient cash to cover its operating costs. These conditions raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: 1) acquire profitable operations through issuance of equity instruments, 2) to continue actively seeking additional funding and restructure the acquired subsidiaries to increase profits and minimize the liabilities.

F-17

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.

18

RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

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

	Three Month Periods Ended
	September 30, 2007			September 30, 2006
Revenue, net	$	336,539		$	2,215,684
Cost of sales		491,780			1,597,051
Gross profit		(155,241	)		618,633
Operating Expenses
Selling expense		5,180			7,290
General and administrative expenses		452,297			263,267
Bad debt		(522,584	)		5,882
Total operating expenses		(65,107	)		276,439
Income (loss) from operations		(90,134	)		342,194
Other (Income) Expense
Interest expense (income)		(16,284	)		62,948
Miscellaneous income		(1,489	)		(630	)
Total Other Expense		(17,773	)		62,318
Income (loss) before income taxes		(72,361	)		279,876
Provision for income taxes					210
Income (loss) from continuing operations		(72,361	)		279,666
Discontinued operations
Loss on disposal of subsidiary		-			-
Income from discontinued operations		-			955,064
Income (loss) from continuing operations	$	(72,361	)	$	1,234,730

Net sales

Net sales for the three month periods ended September 30, 2007 totaled $336,539 compared to $2,215,684 for the three month periods ended September 30, 2006, a decrease of $1,879,145, or approximately 85%. The decrease was due to increased competition and decreased demands from our customers for the three month periods ended September 30, 2007 as compared to the same periods ended September 30, 2006. Due to the appreciation of RMB dollar and changes in export policy by China Government, several of our customers lost their customers from abroad and because of the increase in costs for raw material, E’jenie could not offer the same low price and high quality that was previously produced. Several of our customers went to our competitors who provide relative low price products but also lower quality.

Cost of Sales

Cost of sales for the three month periods ended September 30, 2007 totaled $491,780 or 146.1% of net revenue compared to $1,597,051 or approximately 72.1% of net revenue for the three month periods ended September 30, 2006, a decrease of $1,105,271, approximately 69%. The decrease was due to decreased net revenue for the three month periods ended September 30, 2007. The percentage cost of sales increased 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 September 30, 2007 totaled $(65,107) or approximately 19.3% of net revenue compared to $276,439 or approximately 12.4% of net revenue for the three month periods ended September 30, 2006, a decrease of $341,546 or approximately 123.6%. The decrease was primarily due to collection of bad debt that was previously written off. Excluding bad debt recovery, operating expense increased by $181,038 or approximately 65%. The increase was due to increase legal and accounting fees related to the restatement of prior year’s financials.

19

Income (Loss) from Operations

Income (loss) from operations for the three month periods ended September 30, 2007 totaled $(90,134) or approximately 27% of net revenue compared to $342,204 or approximately 15.4% of net revenue for the three month periods ended September 30, 2006, a decrease of $432,338 or approximately 126%. The decrease in income from operations was primarily due to decrease in sales during the three month periods ended September 30, 2007. The amount would have been greater had it not been for the collection of bad debt for $522,584.

Interest Expense (Income)

Interest expense (income) for the three month periods ended September 30, 2007 totaled $(16,284) compared to $62,948 for the three month periods ended September 30, 2006, a decrease in interest expense (income) of $79,232 or approximately 126%. The decrease in interest expense was due to indebtedness related to the potential acquisition of new business during 2006.

Discontinued Operations

Discontinued operations for the three month periods ended September 30, 2007 totaled $0 compared to $955,064 for the three month periods ended September 30, 2006, a decrease of $955,064. The Company acquired Galaxy View on June 26, 2006 and during the first quarter of 2007, our two largest customers; China mobile and China Unicom changed their purchase procedures. In the past, purchase orders were made by their local branch offices based on their needs and demand. The change now only allowed their main head office to place purchase orders from their selected vendors. They evaluated all vendors based on their criteria and unfortunately Sono Digital was not selected as one of their vendors. With the loss of the two largest users of our products, the fact that the telecom industry in China was a monopoly, there was no longer a market for our products.

Once the decision was made by our two largest customers, the Company discussed and considered selling Galaxy View.

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. As of September 30, 2007, the amount has been paid in full.

Net Income

Net income (loss) for the three month periods ended September 30, 2007 totaled $(72,361) compared to $1,234,730 for the three month periods ended September 30, 2006, a decrease of $1,307,091 or approximately 105.9%. The decrease in net income was primarily due to reason described above.

20

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006

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

	Nine Month Periods Ended
	September 30, 2007			September 30, 2006
Revenue, net	$	2,344,350		$	8,427,040
Cost of sales		2,288,409			5,925,778
Gross profit		55,941			2,501,262
Operating Expenses
Selling expense		18,546			23,075
General and administrative expenses		979,997			928,043
Bad debt		(131,062	)		5,882
Total operating expenses		867,481			957,000
Income (loss) from operations		(811,540	)		1,544,262
Other (Income) Expense
Interest expense (income)		(8,599	)		147,678
Miscellaneous income		(1,489	)		(362	)
Total Other Expense		(10,088	)		147,316
Income (loss) before income taxes		(801,452	)		1,396,946
Provision for income taxes					72,849
Income (loss) from continuing operations		(801,452	)		1,324,097
Discontinued operations
Loss on disposal of subsidiary		(35,635	)		-
Goodwill impairment		(1,295,556	)
Income from discontinued operations		(37,578	)		955,064
Income (loss) from continuing operations	$	(2,170,221	)	$	2,279,161

Net sales

Net sales for the nine month periods ended September 30, 2007 totaled $2,344,350 compared to $8,427,040 for the nine month periods ended September 30, 2006, a decrease of $6,082,690, or approximately 72%. The decrease was due to increased competition and decreased demands from our customers for the nine month periods ended September 30, 2007 as compared to the same periods ended September 30, 2006. Due to the appreciation of RMB dollar and changes in export policy by China Government, several of our customers lost their customers from abroad and because of the increase in costs for raw material, E’jenie could not offer the same low price and high quality that was previously produced. Several of our customers went to our competitors who provide relative low price products but also lower quality.

21

Cost of Sales

Cost of sales for the nine month periods ended September 30, 2007 totaled $2,288,409 or 97.6% of net revenue compared to $5,925,778 or approximately 70% of net revenue for the nine month periods ended September 30, 2006, a decrease of $3,637,369, approximately 61%. The decrease was due to decreased net revenue for the nine month periods ended September 30, 2007. The percentage cost of sales increased 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 nine month periods ended September 30, 2007 totaled $867,481 or approximately 37% of net revenue compared to $957,000 or approximately 11% of net revenue for the nine month periods ended September 30, 2006, a decrease of $89,519 or approximately 9%. The decrease was primarily due to collection of bad debt that was previously written off. Excluding bad debt recovery, operating expense increased by $35,542 or approximately 3.7%. The increase was due to increase legal and accounting fees related to the restatement of prior year’s financials.

Income (Loss) from Operations

Income (loss) from operations for the nine month periods ended September 30, 2007 totaled $(811,540) or approximately 35% of net revenue compared to $1,544,262or approximately 18% of net revenue for the nine month periods ended September 30, 2006, a decrease of $2,355,802 or approximately 153%. The decrease in income from operations was primarily due to decrease in sales during the nine month periods ended September 30, 2007. The amount would have been greater had it not been for the collection of bad debt for $131,062.

Interest Expense (Income)

Interest expense (income) for the nine month periods ended September 30, 2007 totaled $(8,599) compared to $147,678 for the nine month periods ended September 30, 2006, a decrease in interest expense (income) of $156,277 or approximately 106%. The decrease in interest expense was due to indebtedness related to the potential acquisition of new business during 2006.

Discontinued Operations

Discontinued operations for the nine month periods ended September 30, 2007 totaled $(1,368,769) compared to $955,064 for the nine month periods ended September 30, 2006, a decrease of $2,323,833. The Company acquired Galaxy View on June 26, 2006 and during the first quarter of 2007, our two largest customers; China mobile and China Unicom changed their purchase procedures. In the past, purchase orders were made by their local branch offices based on their needs and demand. The change now only allowed their main head office to place purchase orders from their selected vendors. They evaluated all vendors based on their criteria and unfortunately Sono Digital was not selected as one of their vendors. With the loss of the two largest users of our products, the fact that the telecom industry in China was a monopoly, there was no longer a market for our products.

Once the decision was made by our two largest customers, the Company discussed and considered selling Galaxy View.

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. As of September 30, 2007, the amount has been paid in full.

22

Net Income

Net income (loss) for the nine month periods ended September 30, 2007 totaled $(2,170,221) compared to $2,279,161 for the nine month periods ended September 30, 2006, a decrease of $4,449,382 or approximately 195%. The decrease in net income was primarily due to reason described above.

LIQUIDTY AND CAPITAL RESOURCES

Cash has historically been generated from operations, excluding impairment. Operations and liquidity needs were funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $4,421,552 at September 30, 2007 and current assets totaled $4,894,735 at September 30, 2007. The Company's total current liabilities were $901,595 at September 30, 2007. Working capital at September 30, 2007 was $3,993,140. During the nine month periods ended September 30, 2007, net cash provided by operating activities was $2,573,000.

Net cash provided by (used in) investing activities totaled $318,089 for the nine month periods ended September 30, 2007, compared with $(2,314,649) for the same periods ended September 30, 2006. The net cash change was $3,346,717 and $(900,692) for the nine month periods ended September 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.

The sale of Galaxy View for $3 million dollar has helped our cash balance and our working capital. The Company's current operations do not generate sufficient cash to cover its operating costs. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company has taken certain restructuring steps to provide the necessary capital to continue its operations. These steps included: 1) acquire profitable operations through issuance of equity instruments, 2) to continue actively seeking additional funding and restructure the acquired subsidiaries to increase profits and minimize the liabilities.

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.

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 September 30, 2007. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were ineffective.

23

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 September 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.

Item 5. Other Information.

None.

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

24

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: April 25, 2008	By:	/s/ Zhongnan Xu
		Zhongnan Xu Chief Executive Officer

25