The Chinese advertising market is undergoing tremendous growth in response to, among other trends, the rapid increase in disposable income of, and consumption by, urban residents in China. The National Bureau of Statistics in China reported that the annual disposable income per urban household increased from $931 in 2002 to $1,475 in 2006, representing a CAGR of 12%. In Beijing and Shanghai, the annual disposable income per household is substantially higher than the national figure, with urban household annual disposable income in 2006 amounting to $2,506 and $2,593, respectively.

China has the largest advertising industry in Asia, excluding Japan. According to PricewaterhouseCoopers LLP, or PwC, advertising spending in China in 2006 was approximately $11.2 billion, accounting for 35% of the total advertising spending in Asia, excluding Japan. By 2008, China is projected to account for over 40% of the total advertising spending in the same region. The advertising market in China is also one of the fastest growing in the world, growing at a CAGR of 18% from 2002 to 2006, and is expected to continue growing at a CAGR of 15% from 2006 to 2011.

Over the past decade, the retail sector in China has experienced dramatic changes, with modern retail chains overtaking traditional open-air markets and independent food stores as the dominant places of transactions for fast-moving consumer goods. According to Euromonitor, the share of grocery sales held by modern retail chains, including hypermarkets, supermarkets, discounters and convenience stores, grew from 11% of total grocery sales in China in 1999 to 54% in 2006, and is expected to grow to 65% by 2011.

Additionally, consumers in China’s urban areas are exercising their increased purchasing power to drive growth in retail sales. According to Euromonitor, the total value of retail sales in China grew from $281 billion in 1999 to $529 billion in 2006, and is expected to grow to $690 billion by 2011.

The Company has entered into contracts to build or is in the process of expanding its network in 544 additional stores. The Company owns and operates the entire network.

The Company designs its screen placements so that customers can have three to five encounters with the same commercial while they shop. The Company typically employs 17” to 32” LCD screens in entrance ways and main aisles while placing side-by-side or back-to-back smaller LCD screens on top of or in front of display racks.

The Company enters into lease agreements with retailers to install its digital displays and servers within their stores.

Under the lease agreements, the Company has title to all of the digital displays and servers within retailers’ stores, and it is also responsible for the maintenance, repair and replacement of these digital displays and servers. Retailers are required to assist the Company in the installation, maintenance, repair and replacement of these displays and servers, if necessary.

Additionally, the Company is also responsible for the content of the advertisements broadcasted in retailers’ stores and are liable for any damages and losses incurred by retailers as a result of its advertising content broadcasted in the retailers’ stores.

Cost of revenues increased substantially from RMB44.1 million for the six months ended June 30, 2006 to RMB69.7 million ($9.2 million) for the same period in 2007.

Selling expenses increased from RMB6.3 million, or 13.0% of total net revenues, in the six months ended June 30, 2006 to RMB12.4 million, or 4.4% of total net revenues, for the same period in 2007.

Depreciation expenses remained relatively stable for the six months ended June 30, 2007, compared to the same period in 2006.

Loss from disposal of property and equipment was RMB2.3 million in the six months ended June 30, 2006 and nil for the same period in 2007.