RELATED PARTY TRANSACTIONS - Note 17

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

RELATED PARTY TRANSACTIONS - Note 17

NOTE 17 — RELATED PARTY TRANSACTIONS

Due from related parties

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

	September 30, 2011		December 31, 2010
			(Audited)
Due from related parties - short term
Tianjin Tong Guang Group Electronics Science & Technology Co., Ltd.	$	12,672,292	$	26,085
Beijing Leimone Shengtong Wireless Technology Co., Ltd.	185,260		232,614
Leimone (Tianjin) Industrial Co., Ltd.	9,276,051		16,338,738
Beijing Leimone Shengtong Cultural Development Co., Ltd.	2,745,657		703,042
Tianjin Tong Guang Group	-		557,325
Shenzhen Leimone	601,178		328,694
712 (Shareholder)	998,589		870,076
Total due from related parties	$	26,479,027	$	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 nine months ended September 30, 2011 and 2010, the Company recorded revenues of $21,603,055 and $688 from sales to Electronics Science & Tech respectively. For the three months ended September 30, 2011 and 2010, the Company recorded revenues of $9,061,134 and Nil 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 nine months ended September 30, 2011 and 2010, the Company recorded total purchases from Tianjin Leimone of $36,153,234 and $15,422,945 respectively. The amount due from Tianjin Leimone represented advances of $2,549,949 and $9,780,893 as of September 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 September 30, 2011 and December 31, 2010, the balance of such loans was $6,726,102 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 are due on demand.

Tianjin Tong Guang Group, a 20% shareholder of our TCB subsidiary, borrowed money from the Company. The borrowings bear no interest and are due on demand.

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 nine months ended September 30, 2011 and 2010, the Company recorded revenues from sales to 712 of $15,757,425 and $13,501,391 respectively. For the three months ended September 30, 2011 and 2010, the Company recorded revenues from sales to 712 of nil and $12,119,315 respectively. In addition, the Company purchases raw materials from 712. For the nine months ended September 30, 2011 and 2010, the Company recorded purchases from 712 of $15,523,282 and $19,184,276 respectively. For the three months ended September 30, 2011 and 2010, the Company recorded total purchases from 712 of nil and $9,180,111 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 $601,178 and $328,649 (audited) as of September 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. In addition, for the nine months ended September 30, 2011 and 2010, the Company recorded revenues from sales to Shenzhen Leimone of $153,695 and Nil respectively. For the three months ended September 30, 2011 and 2010, the Company recorded revenues from sales to Shenzhen Leimone of $153,695 and Nil respectively.

Due to related parties

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

	September 30, 2011		December 31, 2010
			(Audited)
Hui Pak Kong	$	277,076	$	-
Tianjin Tong Guang Group		868,371
Tianjin Tong Guang Group Special Equipment Co., Ltd.		-		3,781
Key Network Holdings Limited		1,309
Beijing Leimone Shengtong Cultural Development Co., Ltd.		4,500		-
Gu		2,734,695		2,880,559
Total due to related parties	$	3,885,951	$	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 September 30, 2011 and December 31, 2010, the balance of such loans was $277,076 and Nil respectively.

Tianjin Tong Guang Group, a 20% shareholder of our TCB subsidiary, provides fundsto the Company with no interest and are due on demand.

Gu provides fund to the Company with no interest and are due on demand. As of September 30, 2011 and December 31, 2010, the balances of funds provided by Gu was $2,734,695 and $2,880,559 respectively.