Commercial digital television services emerged in the early 1990s and have experienced rapid growth in global markets over the past decade. As of December 31, 2005, there were approximately 144.8 million digital television subscribers worldwide, as compared to 51.2 million as of December 31, 2000, according to the TV International Sourcebook 2007.

The PRC has the largest television viewing market in the world, with televisions in 362 million households as of December 31, 2006, according to Analysys International. However, only approximately 3.5% of television-viewing households in the PRC subscribed to digital television as of December 31, 2006.

Cable networks provide an important means of television transmission in the PRC. Approximately 139 million households, or 38% of television-viewing households in the PRC, subscribed to cable television as of December 31, 2006, up from 118 million households as of December 31, 2004, according to Analysys International.

The government has invested heavily in the development of cable television networks as a primary means of making information and entertainment available to the public, with the result that the majority of urban households subscribe to basic cable television services. Urbanization is bringing with it rapid expansion of cable networks to formerly rural areas. The number of households linked to cable television networks is expected to reach 176 million households as of December 31, 2010, according to Analysys International.

The Company’s CA systems consist of software that is installed at the premises of the television network operator, or the head end; software that is installed in a set-top box at the subscriber’s end, or the terminal end; and smart cards that are inserted into the set-top boxes. At both the head end and the terminal end, the Company’s CA systems are designed to interface easily with the software and hardware of as many other vendors as possible.

The Company’s head-end software includes an entitlement management message generator, which notifies the smart card whether the subscriber is entitled to view a program or not; an entitlement control message generator, which sends messages that the set-top box uses to unscramble the digital television signal; and encryption software, which encrypts the outgoing messages.

The Company produces subscriber management system, or SMS, software, which can be used by television network operators to reduce the cost and improve the efficiency of their subscriber management. The Company’s SMS software is compatible with the CA systems of other vendors

The Company’s electronic program guide is a software application that is installed at the head end of a CA system and can be controlled by a remote control. Viewers can use the guide to obtain program schedules as well as information about specific programs, such as plot descriptions and the names of featured actors.

The Company produces a design, or operating system, for set-top boxes and licenses it to set-top box manufacturers. The Company also provides its customers with computer chips for the set-top boxes that have been made to its specifications by third-party fabricators.

Net revenues increased by 108.2% to $21.6 million in the six months ended June 30, 2007 from $10.4 million in the same period of 2006.

Gross profit increased by 113.3% to $17.7 million in the six months ended June 30, 2007 from $8.3 million in the same period of 2006.

Operating expenses increased by 112.6% to $4.4 million in the six months ended June 30, 2007 from $2.1 million in the same period of 2006.

Net income increased by 256.3% to $12.2 million in the six months ended June 30, 2007 from $3.4 million in the same period of 2006.