In the past, China’s supply chain infrastructure served to restrain economic development and limit the performance of local and foreign companies. Compared with other countries, China has been hampered by poor infrastructure, a disorganized distribution system, local protectionism, difficulties with cash flow and accounts receivable, and an antiquated legal system at national, regional and local levels. In recent years, the Chinese government has committed significant effort to modernize China’s logistics and transport infrastructure. In particular, China’s accession to the World Trade Organization in 2001 emphasized the liberalization and modernization of China’s economic system. Under China’s WTO agreement, the country will progressively remove the restrictions that prevent foreign companies from participating in the logistics and transportation sectors. It is also expected China’s WTO status to stimulate China’s growth by opening its economy to competition and encouraging collaboration between local and foreign companies.

Participants in China’s supply chain are currently facing intensifying competition, fluctuating demand, evolving retail channels and increasing globalization. Sales are pressured, margins are compressed through intensified competition and most companies are trying to achieve improved results with fewer people. As a result, small and large Chinese companies are increasingly seeking technology solutions to better manage their increasingly complex businesses, improve their operating efficiencies and financial performance, and strengthen their relationships with customers and suppliers. Despite the fact that Chinese businesses traditionally have low technology adoption rates, it is believed that China’s rapid economic development will require Chinese companies to look to source ready-made solutions for supply chain management.

The Company’s ONE SCM is a product designed for synergistic distribution designed to promote collaborative business between retailers and their suppliers. Developed with IBM Websphere application software, this program gives support to upstream enterprises to participate in retailing enterprises’ vendor managed inventory processes and provides online analyses via the Internet. The Company’s ONE CPFR/VMI is a program that provides customers with collaborative planning, forecasting and replenishment features. This solution collects, manages and analyzes supply and demand chain data to enable rapid response to changes in market conditions. It employs industry standards to accelerate the execution of the order flow and improve the accuracy of planning. The Company’s ONE CRM is a system tool mining and analyzing customer data for retailing operations. It helps retailers to identify, acquire, activate, serve and retain the most profitable customers. It can also help retailers find, promote and expand potential customers. The Company’s ONE BI is a program designed for intelligent distribution. This solution turns data about retail customers, merchandise and operations into knowledge that provides greater insight into performance and empowers retailers to make more informed decisions, gain a competitive advantage, strengthen customer and vendor loyalty, and improve profitability.

The Company’s consulting services group consists of business consultants, systems analysts and technical personnel with extensive retail, manufacturing, and wholesale industry experience. The consulting services group assists the customers in all phases of systems implementation, including systems planning and design, customer-specific configuration of application modules, and on-site implementation or conversion from existing systems. The Company also offers a variety of post-implementation services designed to maximize its customers’ return on software investment, which include enhanced utilization reviews and business process optimization.

Following the installation of the Company’s software solutions, clients will typically require ongoing maintenance support to ensure the efficient operation of their system. These services include: database operation maintenance, space management, data migration and database tune-ups; system servicing, device management, system updating and version control; application servicing, debugging, real-time servicing, and application of interfaces with other business systems; 24 hour call center services; and training in ongoing system operation.

Software sales increased 47.9% from RMB 13.6 million for the year ended December 31, 2003 to RMB 26.1 million for the year ended December 31, 2004.

Cost of software increased by 63.6% from RMB 6.4 million for the year ended December 31, 2003 to RMB 10.5 million for the year ended December 31, 2004.

Cost of hardware decreased by 62.8% from RMB 11.0 million for the year ended December 31, 2003 to RMB 4.1 million for the year ended December 31, 2004.

Cost of services increased 34.5% from RMB 463.7 thousand for the year ended December 31, 2003 to RMB 623.7 thousand for the year ended December 31, 2004.