RELATED PARTY TRANSACTIONS - Note 17

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements

RELATED PARTY TRANSACTIONS - Note 17

NOTE 17 — RELATED PARTY TRANSACTIONS

Due from related parties

 As of June 30, 2011 and December 31, 2010, due from related parties were:

	June 30, 2011		December 31, 2010
			(Audited)
Due from related parties - short term
Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd.	$	5,687,729	$	26,085
Beijing Leimone Shengtong Wireless Technology Co., Ltd.	201,114		232,614
Leimone (Tianjin) Industrial Co., Ltd.	10,389,724		16,338,738
Beijing Leimone Shengtong Cultural Development Co., Ltd.	3,027,944		703,042
Tianjin Tong Guang Group	442,411		557,325
Shenzhen Leimone	422,766		328,694
712 (Shareholder)	1,050,861		870,076
Total due from related parties	$	21,222,549	$	19,056,574

Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd. ("Electronics Science & Tech"), an entity related to the Company through a common shareholder of TCB Digital, purchased products from the Company. For the six months ended June 30, 2011 and 2010, the Company recorded revenues of $12,541,921 and $688from sales to Electronics Science & Tech respectively. For the three months ended June 30, 2011 and 2010, the Company recorded revenues of $6,270,484 and $688 from sales to Electronics Science & Tech respectively.

Beijing Leimone Shengtong Wireless Technology Co., Ltd. ("Beijing Leimone") was founded by Gu, the largest shareholder of the Company. Beijing Leimone borrows money from the Company. The borrowings bore no interest and had a maturity of 12 months.

Leimone (Tianjin) Industrial Co., Ltd. ("Tianjin Leimone") was controlled by Gu, the largest shareholder of the Company. Tianjin Leimone sells raw materials to the Company. For the six months ended June 30, 2011 and 2010, the Company recorded total purchases from Tianjin Leimone of $23,684,030 and $6,156,261respectively. The amount due from Tianjin Leimone represented advances of $3,728,344and $9,780,893 as of June 30, 2011 and December 31, 2010 respectively. The Company also sold certain products to Tianjin Leimone. In addition, Tianjin Leimone borrowed money from the Company and these borrowings bore no interest. As of June 30, 2011 and December 31, 2010, the balance of such loans was $6,661,380 and $6,557,845 respectively.

The amount due from Beijing Leimone Shengtong Cultural Development Co., Ltd. ("Beijing Leimone Cultural") for short term loan granted by the Company. Beijing Leimone Cultural was controlled by Gu. The borrowing bore no interest and no maturity date.

Tianjin Tong Guang Group, a 20% shareholder of our TCB subsidiary, borrowed money from the Company. The borrowings bear no interest and have no repayment term.

712 is a minority shareholder of TCB Digital before Mr. Gu exercised the option to acquire 29.0% of TCB Digital. (See note 1.) 712 purchases raw materials from the Company. For the six months ended June 30, 2011 and 2010, the Company recorded revenues from sales to 712 of $15,757,425 and $1,382,076 respectively. For the three months ended June 30, 2011 and 2010, the Company recorded revenues from sales to 712 of $7,838,896 and $29,711 respectively. In addition, the Company purchases raw materials from 712. For the six months ended June 30, 2011 and 2010, the Company recorded purchases from 712 of $15,523,282 and $10,004,165 respectively. For the three months ended June 30, 2011 and 2010, the Company recorded total purchases from 712 of $6,399,926 and $10,004,165 respectively. 712 was no longer a related party of the Company after Mr. Gu exercised his option to acquire the additional 29.0% of TCB Digital in March 2010.

Shenzhen Leimone Company, Ltd., formed by individuals including our Chairman, Mr. Gu, is set up with the intention of providing manufacturing services to our Company particularly for exports. The amount of$422,766 and $328,649 (audited) as of June 30, 2011 and December 31, 2010 was a loan to Shenzhen Leimone for setup costs. Our Chairman, Mr. Gu, plans to personally fund the cost of equipment as his investment into Shenzhen Leimone and become the controlling shareholder of Shenzhen Leimone.

Due to related parties

As of June 30, 2011 and December 31, 2010, due to related parties was:

	June 30, 2011		December 31, 2010
			(Audited)
Hui Pak Kong	$	277,428	$	-
Leimone (Tianjin) Industrial Co., Ltd.		437,710
Tianjin Tong Guang Group Special Equipment Co., Ltd.		3,868		3,781
Gu		3,003,786		2,880,559
Total due to related parties	$	3,722,792	$	2,884,340

The Company borrowed money from Hui Pak Kong, a prior shareholder of CDE before the Company's acquisition on January 4, 2011. The borrowings bear no interest and are due on demand. As of June 30, 2011 and December 31, 2010, the balance of such loans was $277,428 and Nil respectively.

The Company purchased raw materials from Tianjin Leimone. (See due from related parties).

Gu provides fund to the Company with no interest and are due on demand. As of June 30, 2011 and December 31, 2010, the balances of funds provided by Gu was $3,003,786 and $2,880,559 respectively.