RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2011

RELATED PARTY TRANSACTIONS

NOTE 17 RELATED PARTY TRANSACTIONS

(1) Sales

For the six months ended June 30, 2011 and 2010, sales included $620,295 and $429,349, respectively that were made to Tianyi Telecom.  For the three months ended June 30, 2011 and 2010, sales included nil and $429,349, respectively that were made to Tianyi Telecom The controlling stockholders of Tianyi Telecom are related to Ms. Yaying Wang, the Company’s COO and one of the Company’s directors.

(2) Guarantees

As of June 30, 2011, and December 31, 2010, Mr. Jianhua Zhu, the Company’s CEO and director, and Tianyi Telecom provided guarantees for the Company’s short-term bank loans of $2,317,819 and $2,264,937, respectively (See Note 11 above).

(3) Loans

On May 19, 2011, Magnify Wealth Enterprise Limited (“Magnify Wealth”), a British Virgin Islands corporation and an entity affiliated with Mr. Jianhua Zhu, the Chief Executive Officer and Chairman of the Company, agreed to loan the Company up to $4 million pursuant to the terms of a demand promissory note (the “Note ”) to partially fund the Company’s previously announced $15 million stock repurchase program to make open market purchases of the Company’s common stock (the “Repurchase Program”)(See Note 13 above). While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to US dollars, such that the Company has encountered difficulty funding the Repurchase Program with US dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in US dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

On May 23, 2011, Magnify Wealth loaned $1 million under the Note, which amount the Company repaid in full on May 25, 2011 in RMB. On June 14, 2011, Magnify Wealth loaned $300,000 under the Note, which amount the Company repaid in full on June 14, 2011 in RMB. The total amount repaid was RMB8,434,660, which was repaid at the average rate of 6.4822 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

As of June 30, 2011, there was no outstanding loan under the Note.

(4) Amount due to a related party

Amount due to Mr. Jianhua Zhu was unsecured, payable on demand and non-interest bearing. The amount was repaid in August 2011.