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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal year ended December 31, 2004

OR

For the transition period from                      to                     

Commission File Number: 000-02642

COMTECH GROUP, INC.

(Exact name of Registrant as specified in its charter)

Suite 1001, Tower C, Skyworth Building

High-Tech Industrial Park

Nanshan, Shenzhen 518057, PRC

(Address of Principal Executive Offices) (Zip Code)

011-86-755-26743210

(Registrant’s telephone number, including area code)

Securities registered pursuant Section 12(b) of the Exchange Act:

None.

Securities registered pursuant Section 12(g) of the Exchange Act:

Common Stock, $ 0.01 par value

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

As of June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates of the registrant was $2,229,000.

As of March 30, 2005, there were 25,532,898 common shares outstanding.

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FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions. Uncertainties and other factors, including the risks outlined under Risk Factors contained in Item 1 of this Form 10-K, may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements.

A variety of factors, some of which are outside our control, may cause our operating results to fluctuate significantly. They include:

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the filing date to conform these statements to actual results, unless required by law.

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. You may read and copy these materials at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. You may also obtain copies of reports filed with the SEC, free of charge, via a link included on our website at http://www.comtech.com.cn.

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PART I

Our Company

Comtech Group, Inc. is a leading provider of customized module design solutions in China and serves as a gateway to leading electronics manufacturers in China. We have historically focused on the mobile handset and telecom equipment end-markets, but have recently expanded our addressable market to include the consumer electronics end-market. We work closely with leading manufacturers in these end-markets to develop solutions to meet their needs for customized module designs. Our customized module design solutions allow our customers to use enabling technology components from established technology component suppliers in a timely and cost-effective manner, reducing their time to market and lowering their overall costs. Our customer base has grown to over 200 companies and includes a majority of the largest and most well-known manufacturers in the mobile handset and telecom equipment end-markets in China. In addition to these original equipment manufacturers, or OEMs, our other customers include industry participants which support these OEMs, such as subsystem designers and manufacturers. In developing customized module design solutions for use in our customers’ products, we work closely with over 30 suppliers of enabling technology components, including many large multinational companies such as Broadcom Corp., JDS Uniphase Corp. and Matsushita Electric Works.

Our close collaboration with our customers’ product development teams gives us an understanding of their needs for each specific functional module. Based on a given customer’s specific design requirements, we propose a customized module reference design, which typically incorporates enabling technology components from our suppliers. If the customer accepts our module reference design, it typically agrees to purchase from us some of the specific components contained in our proposed module reference design. Our customers are responsible for the manufacture and assembly of the customized module design solutions based on our module reference design.

We do not charge our customers an independent design fee for our solutions. Instead, our business model is to generate revenue by reselling a limited range of specific components required in our module reference design. The difference between the purchase price we pay our suppliers for these components and our sales price to the customer for these components compensates us for our design, technical support and distribution services. Furthermore, we typically issue purchase orders to our suppliers only after we receive customer orders, enabling us to maintain low inventory levels and, in turn, minimize risks typically associated with holding inventory.

Industry Overview

China has emerged as a major participant in the global electronics market. China has experienced rapid growth in domestic demand for electronics products, including mobile handsets, telecom equipment and consumer electronics products. We believe that China has also emerged as one of the world’s most attractive locations for global electronics manufacturers, where local and foreign manufacturers undertake extensive design and manufacturing work.

Growth of Domestic Electronics Markets. The rapid growth of the domestic mobile handset, telecom equipment and consumer electronics products end-markets have been important drivers of growth of China’s electronics manufacturing industries. According to a February 2005 report by Datamonitor, an independent research and consulting organization, China’s domestic mobile handset market is estimated to grow from approximately 72 million units in 2004 to approximately 99 million units in 2008, a compounded annual growth rate of 8.3%. According to a report published by China’s Ministry of Information Industry in 2004, China ranks as the world’s largest cellular phone market, with approximately 300 million subscribers.

With strong consumer demand for mobile handsets, increasing wireless penetration and the continued build-out and upgrading of China’s telecommunications infrastructure, with the advent of 3G in particular, China’s

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telecom industry continues to see strong investment in the broader telecom equipment industry. Specific segments that we expect to continue growing are the data communications segment, consisting of asymmetric digital subscriber line (ADSL) equipment, Voice over Internet Protocol (VoIP) equipment; routers and network security equipment; the optical transmission systems segment, and the fixed line telecom network segment. The growth in these segments has driven, and we believe will continue to drive, growth in the electronics manufacturing businesses supporting hardware OEMs, including those engaged in the customized design of module solutions such as ourselves.

With increasingly advanced technology requirements within various segments of the consumer electronics market, consumer electronics manufacturers in China are increasingly demanding more customized module design solutions to ensure that their products incorporate the latest technology and innovation. An example of this is the growing digital television, or DTV, market in China.

Rise of Domestic Electronics Manufacturers. The growth of the domestic electronics markets has been accompanied by a proliferation of local companies competing to serve this market. Initially, most domestic companies had limited product offerings and lacked the ability to develop their own products. For example, until the late 1990’s most domestic mobile handset suppliers in China simply re-branded products imported from foreign suppliers and differentiated themselves based on the quality and depth of their distribution channels. More recently, domestic mobile handset designers have begun helping domestic mobile handset suppliers in competing directly with global brands by incorporating leading-edge technology features and shortening design cycles, in a cost-competitive fashion. As a result, domestic mobile handset suppliers have continued to penetrate China’s mobile handset market and have captured market share from international suppliers such as Motorola, Nokia, Siemens and Sony-Ericsson. According to a February 2005 report by Gartner, China’s handset manufacturers have obtained approximately a 40% share of China’s domestic market within the space of five years.

Growth of Exports from Domestic Electronics Manufacturers. The growth in the number of domestic electronics manufacturers has created an environment where the domestic mobile handset and telecom equipment suppliers must continually innovate and develop new products while at the same time follow aggressive pricing policies in order to compete more effectively. The development of a highly-skilled, low-cost manufacturing base has also enabled China’s domestic manufacturers to be competitive in the global marketplace. As an example, Huawei Technologies Co., Ltd., or Huawei, a major domestic telecom equipment manufacturer in China, has become a major supplier of telecom equipment to international customers. ZTE Corporation, or ZTE, the second largest manufacturer of telecom equipment in China, and other telecom equipment manufacturers and mobile handset device makers have also begun to expand overseas.

Growth of China Design and Manufacturing Base for Global Technology Providers. China has historically been recognized as a low-cost manufacturing base for companies seeking to enhance their global competitiveness. Recently, however, China has emerged as a primary location for technology companies seeking access to low-cost, highly-skilled workforce to engage in product design, development and manufacturing. As a result, global technology companies are increasingly using China as a global hub for design and production, leveraging the comparative cost advantages in both product design and manufacturing. An example of this trend is in the mobile handset market where, according to a report by BDA China, a market research firm, the number of mobile handset devices produced in China and sold globally is expected to increase to approximately 260 million in 2005, compared to 186 million in 2003, representing a compounded annual growth rate of 18.3%.

In addition to the preceding trends, we believe that the following factors will continue to influence continued growth in the mobile handset, telecom equipment and consumer electronics end-markets and the OEMs and other industry participants supporting OEMs in these markets:

Increasing technological complexity. Increasing complexity of mobile handsets, due to constantly changing consumer tastes, and the upgrade of telecom networks in China is driving demand for new solutions and greater customization of components. In the mobile handset market, new features are being added to mobile handsets at

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an accelerating pace due to competition between mobile handset makers and the increasing functionality and data transmission capability afforded by advanced networks such as 2.5G and 3G. This increased demand for mobile handset functionality, in turn, will drive demand for more customized applications of standard components, requiring more design and customization work from solutions providers such as ourselves.

Increased reliance on outsourcing. OEMs are increasingly outsourcing the development, design, prototyping, engineering, manufacturing, assembly and testing of components and systems to subsystem and module solution providers in order to:

Our History

Comtech Group, Inc., formerly known as Trident Rowan Group, Inc., or Trident, was incorporated in 1917 as a Maryland corporation. On July 22, 2004, Trident, which was a public reporting company that ceased operations in 2000, acquired all of the outstanding capital stock of Comtech Group, a Cayman Islands company, or Comtech Cayman, in exchange for the issuance of approximately 91.2% of the then-outstanding shares of its common stock to the shareholders of Comtech Cayman. On August 2, 2004, Trident changed its name from Trident to Comtech Group, Inc.

Substantially all of our operations are conducted in the People’s Republic of China, to which we refer to herein as PRC or China (excluding for the purpose of this Form 10-K, Hong Kong, Taiwan and Macau), and Hong Kong, through our PRC operating companies. Our PRC operating companies include our direct and indirect wholly-owned subsidiaries, including our PRC subsidiaries, which are Comtech Communication Technology (Shenzhen) Company Limited, or Comtech Communication, and Comtech Software Technology (Shenzhen) Company Limited, or Comtech Software, and our Hong Kong subsidiary, Comtech International (Hong Kong) Limited, or Comtech Hong Kong, as well as our other operating companies, including Shenzhen Comtech International Limited, or Shenzhen Comtech, and its 60% owned subsidiary, Shanghai E&T System Company Limited, or Shanghai E&T. Our chief executive officer, Jeffrey Kang, and his wife, hold all of the equity in Shenzhen Comtech for the benefit of our 100% owned direct subsidiary, Comtech (China) Holding Limited, through contractual arrangements and to the extent permitted by law. As a result of these contractual arrangements, our consolidated operating results include those of Shenzhen Comtech and Shanghai E&T, and we may refer to these entities as our subsidiaries. For an organizational chart of our company and our PRC operating companies, please refer to Note 1 of our consolidated financial statements included elsewhere in this Form 10-K.

On January 14, 2005, we effected a one-for-two reverse stock split. Unless otherwise indicated, all per share and outstanding share amounts contained in this Form 10-K give effect to the reverse stock split.

Our Growth Strategy

Our objective is to be the leading provider of customized module design solutions for customers in China’s mobile handset, telecom equipment and consumer electronics end-markets. We also plan to expand our design capabilities in new areas, including integrated circuits and application software. To achieve this objective, we plan to execute the following key business strategies:

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Strengthen our design and development capabilities. Our success to date has been, in part, due to our ability to cost-effectively hire, retain and motivate highly skilled technical employees from a large pool of qualified candidates in China. Given the shortening product life cycles in our targeted end-markets, we believe we must continue to build and maintain strong, in-depth and diversified solution development and design capabilities to meet the emerging needs of our customers and to differentiate ourselves competitively.

Leverage our diversified customer base. We have strong, long-term and deep relationships with, and offer a broad range of solutions to, most of the major manufacturers in China’s mobile handset and telecom equipment end-markets. We believe we are well positioned to capture significant growth and higher margin opportunities in the consumer electronics end-market as many of our key customers in the China mobile handset end-market have expanded into the consumer electronics end-market, including Haier, Konka, Lenovo and TCL.

Make investments or acquisitions or form strategic relationships. We intend to grow and expand our businesses by making investments or acquisitions or forming strategic relationships with companies that possess complementary intellectual property or design capabilities. In particular, we plan to pursue opportunities where we expect to generate additional near-term revenue or expand our high-growth opportunities. As an example, we have recently entered into a joint venture agreement with Broadwell Group to establish a Hong Kong-based joint venture to distribute semiconductors and other related products for Broadcom, a leading global producer of broadband communications semiconductors.

Our Competitive Strengths

We believe that our customized module design solutions allow our customers to more effectively utilize our suppliers’ enabling technology components to more efficiently compete in their target end-markets. We believe our competitive strengths include:

Differentiated business model. We facilitate our customers’ use of enabling technology components in their end-products, both reducing their time-to-market and lowering their overall costs. Because we focus on meeting our customers’ requirements instead of on developing technologies, we believe that we remain insulated from risks specific to being a provider of solutions based on specific technology rather than on various competing technologies. We do not charge an independent design fee, as is the practice of many of our indirect competitors. Instead, we generate revenues through the resale of a limited number of components included in a particular module reference design.

Broad and diversified customer base and customer relationships. Our broad and diversified customer base of over 200 customers includes all of the major domestic mobile handset and telecom equipment manufacturers in China and many of their supporting subsystem suppliers. Becoming a customized module solutions provider in China frequently involves a time-consuming and difficult procurement qualification process with our customers. Our deep customer relationships are the result of extensive time spent onsite with our customers’ engineers to develop many different customized solutions. We believe that these close customer relationships, together with our continued approved solution provider status, facilitate understanding of our customers’ time-to-market, technology and cost requirements. We have been an approved module design solution provider to each of our top ten customers in 2004 for at least three consecutive years.

Strong relationships with enabling technology components suppliers. We work closely with more than 30 enabling technology components suppliers, including some of the leading global suppliers. In addition to serving as an enabler of the customization of their technology components, our suppliers often rely on us as a means of penetrating new distribution channels into major China-based electronics manufacturers.

We believe that we have been effective in establishing high entry barriers within our customers’ supply chains, allowing us to build and sustain our competitive position.

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Our Technology Solutions

We believe that our ability to provide “last-mile” customization for each of our many customers’ specific needs forms the core of our value proposition. Our customized module design solutions include:

The following table sets forth the revenue contribution from our mobile handset, telecom equipment and other markets during 2003 and 2004. Revenue from other markets includes the sale of our proprietary network lightning protection solutions for wireless base-stations. Beginning in the first quarter of 2005, other revenue will also include net revenue from consumer electronics related sales.

Sales and Marketing

We generate sales of our customized module design solutions through our direct sales force, consisting of approximately 30 sales directors, account managers and sales support staff at December 31, 2004. Our sales directors are responsible for establishing sales strategy and setting objectives for specific customer accounts. Each account manager is dedicated to a specific customer account and is responsible for the day-to-day management of that customer relationship. Account managers work closely with customers and, in many cases, provide on-site support. Account managers often attend our customers’ internal meetings related to production, engineering design and quality assurance to ensure that our customers’ expectations are appropriately interpreted and communicated to our operations group, and ultimately met or exceeded throughout the design process. Account managers also work with our customers to identify and meet their cost and design-to-delivery cycle time objectives.

Our new business development account managers initiate and develop long-term, multi-level relationships with customer accounts and work closely with customers on new business opportunities throughout the design-to-delivery cycle.

Our Customers

We have over 200 customers. In addition to many of the largest China-based manufacturers of mobile handsets, telecom equipment and consumer electronics products, our customers include industry participants supporting these OEMs, such as subsystem designers and manufacturers in China, as well as international manufacturers who have begun to manufacture end-products in China for the domestic and international market.

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Our largest customer in the mobile handset segment has been TCL, which is one of China’s largest domestic mobile handset manufacturers. Our top two revenue producing customers from the telecom equipment industry since 2003 have been Huawei and ZTE, China’s two largest telecom equipment manufacturers. During 2004, Huawei, ZTE and UTStarcom, another major telecom equipment producer in China, each accounted for more than 10% of our net revenue and collectively accounted for 36% of our net revenue.

Our five largest customers by end-market are:

For the fiscal year 2004 our top 10 customers in terms of net revenue were as follows:

Our Suppliers

We develop our customized module design solutions based on enabling technology components provided by key technology and other suppliers in our target end-markets. We work with a select list of more than 30 key suppliers globally, including:

During 2004, based on cost, we purchased approximately 52% and 24% of the components sold to our customers from Matsushita Electric Works and its affiliated entities and from JDS Uniphase, respectively. For further information concerning our reliance on Matsushita and other key suppliers, see “—Risk Factors—Reliance on our suppliers, with whom we often do not have long term supply agreements, makes us vulnerable to the loss of one or more key suppliers.”

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Our Competitors

We believe that the principal competitive factors affecting the markets for our customized module design solutions include:

We believe that we compete favorably with respect to each of these criteria. In addition, while we do not believe that there are any direct competitors of any meaningful size that operate using the same business model as ours, we face indirect competition from the following:

Other enabling technology component suppliers. For each project, we work with a supplier to compete against other enabling technology component suppliers. Consequently, we compete against our technology partners’ competitors. For example, as JDS Uniphase’s partner, we compete indirectly against companies such as Avanex and Bookham in supplying optical transmission system solutions.

Component manufacturers and distributors. We compete indirectly with component manufacturers such as Vishay Intertechnology and Epcos, and distributors such as Arrow Electronics, Avnet and Memec, which may seek to expand their product/service offerings to include module design solutions. We believe that these large component manufacturers and distributors have not historically engaged in customized module design, and therefore we believe that it is not one of their core competencies.

Our Intellectual Property

We currently have five issued utility patents relating to our lightning surge protection for network products and a ceramic-to-steel adhesive application. Historically, we have derived a small percentage of our net revenue from these proprietary products. However, a component of our growth strategy is to begin to develop proprietary solutions in-house, specifically integrated circuits and application software design, and to make investments in, form strategic relationships with or acquire companies that possess complementary intellectual property and technology know-how. Therefore, we expect that proprietary intellectual property will become increasingly important to our business.

Employees

As of December 31, 2004, we had 94 employees, 25 of whom perform research and development related activities.

We make contributions for most of our employees in the PRC to retirement benefits based on their salaries and length of service upon retirement in accordance with a PRC government-managed retirement plan. The PRC government is directly responsible for the payments of the benefits to these retired employees. We are required to make contributions to the government-managed retirement plan at specified rates of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.

Risk Factors

In addition to the other information in this Form 10-K, readers should carefully consider the following important factors. These factors, among others, in some cases have affected, and in the future could affect, our financial condition and results of operations and could cause our future results to differ materially from those expressed or implied in any forward-looking statements that appear in this on Form 10-K or that we have made or will make elsewhere.

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RISKS RELATED TO OUR BUSINESS

Our operating results fluctuate from quarter to quarter.

Our quarterly revenue, income and other operating results have fluctuated in the past and may fluctuate significantly in the future. The following factors have affected our quarterly results of operations in the past and are likely to affect our future quarterly results of operations:

As a result of these and other factors, our results of operations will vary on a quarterly basis and net revenue may be adversely impacted. For example, our net revenue relating to sales in the mobile handset industry was adversely affected in the third and fourth quarters of 2004 due to excess inventory being held by our customers during those periods, which was a result of softer demand for mobile handsets. Results of operations for a particular quarter may not be indicative of our future performance. If our operating results in a quarter fall below our expectations and the expectations of market analysts or investors, the price of our common stock will likely decrease.

Our operating results are substantially dependent on development of new customized module design solutions.

We may be unable to develop new customized module design solutions in a timely or cost-efficient manner, and our new customized module design solutions may fail to meet the requirements of our customers’ end markets. If we fail to develop new customized module design solutions that help our customers respond to competitive pressures, achieve shorter time to market or broaden and improve their product offerings, we will lose business and our results of operation would be materially and adversely affected.

If our customers do not accept our proposed customized module design solutions or do not purchase from us the specified components contained in the proposed module reference design, our net revenue will be adversely affected.

While approximately 50% of our proposed customized module design solutions are accepted by our customers, there is no obligation for customers to accept our proposed solutions. We dedicate personnel, management and financial resources to research and development and technical support in developing new customized module design solutions for our customers. The time frames for most research and development projects typically range from two to 18 months. If our customers do not accept our proposed solutions, we will fail to capitalize on the invested resources, time and effort that we expended on a project.

Our customers typically purchase products on a purchase order basis and prior to submission of a purchase order are not obligated to purchase from us any agreed upon quantity of specific components that we propose to sell. Further, a purchase order may be cancelled or deferred by our customers on short notice without significant penalty. Even if a customer accepts our proposed module reference design the customer may contract with our competitors or possibly our suppliers directly for the purchase of the specific components we otherwise had expected to sell. The failure to accept our proposed module reference design, the loss of ongoing business from our customers and the transition away from us in favor of direct purchases from our suppliers could each result in our failure to realize potentially significant net revenue.

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The industries in which we operate are highly competitive and fragmented. We expect competition to intensify in the future, and if we fail to compete effectively, our business will be harmed.

Pressures from current or future competitors could cause our solutions to lose market acceptance or require us to significantly reduce the price of our products to keep and attract customers. Our competitors often have longer operating histories, stronger customer and supplier relationships, larger technical staffs and sales forces, and/or greater financial, technical and marketing resources. Although we believe that there are no direct competitors of any meaningful size who operate using the same business model as ours, we face indirect competition from:

We may also face indirect competition from customers and suppliers. Currently many of our customers and suppliers do not focus on module design. If our customers or suppliers decide to devote more time and resources to in-house module design, the demand for our products may decline. In addition, our customers may change their procurement strategy or decide to rely on us primarily for component delivery, and not for integration or design work. Component suppliers may also seek to offer their component products or modules incorporating key components from our solutions directly to our customers. The loss of customers for our customized module design solutions as a result of these factors would have a material adverse effect on our business, financial condition and results of operations.

Loss of key customers may adversely impact our net revenue.

We generate the majority of our net revenue from a small number of key customers, and we anticipate that a small number of key customers will continue to account for a significant portion of our net revenue in the foreseeable future, particularly in the telecom equipment segment. In 2004, our sales to ZTE, UTStarcom and Huawei accounted for approximately 13%, 12% and 11%, respectively, of our net revenue, and sales to our top 10 customers represented approximately 58% of our net revenue. Should we lose, receive reduced orders from, or experience any adverse change in our relationship with, any large customers, we would suffer a substantial loss in net revenue.

Reliance on our suppliers, with whom we often do not have long term supply agreements, makes us vulnerable to the loss of one or more key suppliers.

We typically rely on a limited number of key suppliers, and many customized module design solutions that we develop are designed around enabling technologies provided by our suppliers. In 2004, Matsushita, including its affiliated entities, and JDS Uniphase accounted for approximately 52% and 24%, respectively, of our cost of revenue. If we lose a key supplier or a supplier reduces the amount of products sold to us, does not maintain a sufficient inventory level of products required by us or is otherwise unable to meet our product demand, we may have to expend significant time, effort and other resources to locate a suitable alternative supplier and secure replacement components. If suitable replacement components are unavailable, we may be forced to redevelop certain of our solutions, which new solutions may not be accepted by our customers.

Also, if our suppliers fail to introduce new products that keep up with new technologies, they may be surpassed by other suppliers entering the market with whom we may or may not have existing relationships. The costs and delays related to finding a new supplier or redeveloping a solution could significantly harm our business.

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As we expand our business, we intend to develop new customized module design solutions and technological capabilities in industries where we do not currently have extensive experience or technological capability. Failure to develop or execute this growth strategy will have a material adverse effect on our net revenue.

Historically we have derived substantially all of our net revenue from our customized module design solutions provided to customers in the mobile handset and telecom equipment industries. We recently began targeting the consumer electronics market and, over time, we hope to develop our integrated circuit and application software design capabilities and provide solutions based on our own proprietary technology. In the first quarter of 2005, we began generating net revenue from customized module design solutions for consumer electronics products, primarily for IPTV set top boxes and DTV. Our success in the consumer electronics end-market will depend, in significant part, on our ability to leverage our existing customer base. We expect to incur significant research and development expenses, through hiring additional engineering personnel to develop new solutions and expanding our intellectual property capabilities. If we are unable to quickly develop technological expertise, ramp up our research and development capabilities and leverage our customer base as anticipated, our return on our investment with respect to these efforts may be lower than anticipated and our operating results may suffer. Market acceptance of new consumer electronics products, such as IPTV set top boxes and digital televisions, is unproven, and new markets may not develop as anticipated, or at all. Also, our customer base may not be responsive to our efforts to expand our proprietary capabilities and may be unwilling to utilize these capabilities.

We may be unable to manage rapid growth and a rapidly changing operating environment, which could adversely affect our ability to serve our customers and harm our business.

We have experienced rapid growth over the last three years, with net revenue increasing from RMB207.6 million in 2002 to RMB625.7 million in 2004. Our number of employees has increased from 30 at December 31, 2002 to 94 at December 31, 2004. We have limited operational, administrative and financial resources, which may be inadequate to sustain our desired growth. If we are unable to manage our growth and expansion effectively, the quality of our solutions could deteriorate and our business may suffer. As our customer base increases and we enter new industries, such as the consumer electronics industry, or as we expand our organizational capabilities to include integrated circuit and application software design, we will need to:

Any failure to manage our growth successfully could distract management’s attention and result in our failure to serve our customers which will cause our loss of business.

We may not have sufficient working capital to pay our accounts payable when due, which could adversely affect our operations and net revenue.

We experience a considerable time lag in our accounts payable and accounts receivable cycles. Consequently, we may experience periods during which our working capital is insufficient to fund our operations. We have historically funded our working capital requirements through operating cash flows, as well as short-term credit facilities, factoring arrangements and shareholder loans from our principal shareholder and chief executive officer, Jeffrey Kang and his affiliates. As we grow and our working capital requirements

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increase, these facilities may not be sufficient to meet our needs. We may be unable to maintain these liquidity sources or obtain additional liquidity sources on commercially reasonable terms to meet our increased funding requirements.

We generally cannot replace a supplier easily without redeveloping the module, and in doing so, incurring significant expense and consuming additional development time. If we do not have sufficient working capital to pay our suppliers on a timely basis, we may be unable to grow our business and our suppliers may reduce the quantity of components they supply or may no longer sell components to us, either of which would have a material adverse effect on our operations and net revenue.

We face risks associated with future acquisitions or investments.

An important component of our growth strategy is to invest in complementary companies, products and technologies. We may be unable to identify suitable acquisition or investment candidates or to make these acquisitions or investments on a commercially reasonable basis, if at all. If we complete an acquisition or investment, we may not realize the anticipated benefits from the transaction.

Integrating an acquired company or technology is a complex, distracting, time consuming and expensive process. The successful integration of an acquisition would require us to:

The geographic distance between the companies, the complexity of the technologies and operations being integrated and the disparate corporate cultures being combined may increase the difficulties of combining an acquired company or technology. Acquired businesses are likely to have different standards, controls, contracts, procedures and policies, making it more difficult to implement and harmonize company-wide financial, accounting, billing, information and other systems. Management’s focus on integrating operations may distract attention from our day-to-day business and may disrupt key research and development, marketing or sales efforts.

The unauthorized use of our module design solutions could have a material adverse impact on our net revenue.

Our in-house design engineering teams develop our customized module design solutions. We do not have patent protection for our solutions, nor do we have non-disclosure or confidentiality agreements with suppliers or customers to keep our design specifications confidential. Suppliers may attempt to circumvent us and sell products or module design solutions directly to our customers. The unauthorized use by our suppliers of our module design solution specifications would result in a substantial loss of net revenue for us.

We may not be able to adequately protect our intellectual property.

A component of our growth strategy is to evolve into a integrated circuit and application software design house and ultimately create and license products utilizing our own intellectual property. Third parties may be

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able to obtain and use any such intellectual property without authorization. Any unauthorized use of such intellectual property by third parties may adversely affect our business and reputation. Furthermore, the validity, enforceability and scope of protection of intellectual property in China is uncertain and still evolving, and these laws may not protect intellectual property rights to the same extent as the laws of some other jurisdictions, such as the United States. Moreover, litigation may be necessary in the future to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources, and have a material adverse effect on our business, financial condition and results of operations.

If we fail to attract and retain key personnel, our ability to meet our business goals will be impaired and our financial condition and results of operation will suffer.

Our business greatly relies on the continued services of Jeffrey Kang, our principal shareholder and chief executive officer. Many relationships with our key suppliers and customers have been developed by and continue to be maintained by Mr. Kang. Our future success will depend to a significant degree upon the performance and contribution of Mr. Kang and other members of our senior management team in areas including sales, research and development, information technology and finance. We do not maintain key man life insurance covering our senior management or any of our key employees.

Our future success also depends on our ability to identify, attract, hire, train, retain and motivate highly skilled personnel. If we cannot attract and retain the personnel we require at reasonable cost, our costs will increase and the profitability of our business could be negatively affected. Our business is especially dependent on sales, marketing and research and development personnel. Competition in China for executive-level and skilled technical and marketing personnel is strong, and recruiting, training, and retaining qualified key personnel will be an important factor in our ability to meet our growth objectives. Should key employees leave, we may lose both an important internal asset and net revenue from customer projects tied to those employees.

We became a public company through share exchange with a non-operating public shell company, where we were the accounting acquirer and assumed all known and unknown potential liabilities of our predecessor entity.

Our July 2004 share exchange with Trident was accounted for as a reverse merger in which Comtech Group, Inc. was deemed the accounting acquirer and Trident, which was originally incorporated in 1917, was the legal acquirer. We have retained all the known and unknown liabilities of Trident, including claims for tax rebates made by our non-operating Italian subsidiary, OAM S.p.A., in 1984, where Italian tax authorities counterclaimed assessing additional taxes and penalties. OAM has been successful in two lower courts in its defense of such counterclaims and awaits the results of a final appeal in the highest Italian tax court.

RISKS RELATED TO OUR INDUSTRY

Historically, we have focused on the mobile handset and telecom equipment industries in China, but recently expanded our focus to include the consumer electronics industry in China. We currently do not derive a significant portion of our net revenue from the consumer electronics industry.

Our inability to respond quickly and effectively to rapid technological advances and market developments would adversely impact our competitive position and our results of operations.

The mobile handset and telecom equipment industries are characterized by rapid technological advances, intense competition, frequent introduction of new products and services and consumer demand for greater functionality, lower costs, smaller products and better performance. We must constantly seek out new products

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and develop new solutions to maintain in our portfolio. If we are unable to keep current with new trends, our competitors’ technologies or products may render us noncompetitive and our solutions obsolete. We cannot be sure about the rate at which markets for our target customers’ products will develop or our ability to compete in these markets. We have experienced and will continue to experience some solution design obsolescence. We expect our customers’ demands for improvements in product performance to increase, which means that we must continue to improve our design solutions and develop new solutions to remain competitive and grow our business. Our failure to compete successfully for customers would result in price reductions, reduced margins or loss of market share, any of which could harm our business, operating results and financial condition.

Substantially all of our net revenue currently comes from sales to manufacturers in the highly cyclical mobile handset and telecom equipment industries, and cyclical downturns could harm our operating results.

The mobile handset and telecom equipment industries are highly cyclical and have experienced severe and prolonged downturns, often in connection with maturing product cycles and declines in general economic conditions. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. For example, during the second half of 2004, our net revenue relating to sales in the mobile handset industry was adversely affected due to excess inventory being held by our customers during the period, which was a result of softer demand for mobile handsets. The impact of slowing end-customer demand was compounded by higher than normal levels of equipment and inventories among our customers and our customers’ adjustments in their order levels, resulting in increased pricing pressure. In addition, our recent and significant growth in net revenue resulted, in large part, from the high growth in sales of products manufactured by domestic mobile handset and telecom equipment manufacturers in China. These domestic manufacturers may not continue to grow their sales at historical levels, or at all. The change or reduction in overall demand for mobile handset and telecommunications equipment products would materially affect our financial condition, results of operation and cash flow.

The mobile handset market is characterized by a short product lifecycle, making time to market and sensitivity to customer needs critical to our success and our failure to respond will harm our business.

Mobile handsets typically have a lifecycle of approximately six months before the technology becomes obsolete. Time to market, both with respect to our customers’ ability to supply consumers with timely and marketable products and our ability to provide our customers with a wide array of latest generation customized module design solutions, is critical to our success. As design cycles in the industry shorten, we face logistical challenges in providing our solutions in an increasingly shorter timeframe. If we are unable to respond to the shortened lifecycles and time to market, our business will suffer.

RISKS RELATED TO DOING BUSINESS IN CHINA

There are substantial risks associated with doing business in China, as set forth in the following risk factors.

Our operations may be adversely affected by China’s economic, political and social conditions.

Substantially all of our operations and assets are located in China and substantially all of our net revenues derived from our operations in China. Accordingly, our results of operations and prospects are subject to economic, political and social developments in China. In particular, our operating results may be adversely affected by:

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The PRC economy has historically been a planned economy. The majority of productive assets in China are still owned by various levels of the PRC government. In recent years the government has implemented economic reform measures emphasizing decentralization, utilization of market forces in the development of the economy and a high level of management autonomy. Such economic reform measures may be inconsistent or ineffectual, and we may not benefit from all such reforms. Furthermore, these measures may be adjusted or modified, possibly resulting in such economic liberalization measures being applied inconsistently from industry to industry, or across different regions of the country.

In the past twenty years, China has been one of the world’s fastest growing economies in terms of gross domestic product, or GDP. This growth may not be sustainable. Moreover, a slowdown in the economies of the United States, the European Union and certain Asian countries may adversely affect economic growth in China which depends on exports to those countries. Our financial condition and results of operations, as well as our future prospects, would be materially and adversely affected by an economic downturn in China.

Our financial results benefit from tax concessions granted by the PRC government, the change to or expiration of which would materially change our results of operation.

Our results of operation may be adversely affected by changes to or expiration of preferential tax concessions that some of our PRC operating companies currently enjoy. The statutory tax rate generally applicable to Chinese companies is 33%. As a result of preferential tax rate incentives, our operations have been subject to relatively low tax liabilities. Tax that would otherwise have been payable without preferential tax treatment amounted to approximately RMB19.9 million, RMB10.2 million and RMB2.4 million in 2004, 2003, and 2002, respectively.

Tax laws in China are subject to interpretations by relevant tax authorities. The preferential tax treatment may not remain in effect or may change, in which case we may be required to pay the higher income tax rate generally applicable to Chinese companies, or such other rate as is required by the laws of China.

The telecom equipment market is extensively regulated in China.

The telecom equipment end-market accounted for approximately 40% of our net revenues in 2004. China’s telecom industry is heavily regulated. Changes in regulations affecting sales of these customers could negatively affect the end market for our products, which would materially harm our business.

Government control of currency conversion may restrict our ability to make investments and service debt in U.S. dollars which may adversely affect our operations, financial results.

Because the majority of our net revenue is received in RMB, any restrictions on currency exchange may limit our ability to use revenue generated in RMB to meet our foreign currency obligations. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), or the Rules, as amended. Under the Rules, once certain procedural requirements are met, RMB is convertible for current account transactions, including trade and services, but not for capital account transactions, including direct investment, loan or investment in securities outside China, unless the prior approval of the State Administration of Foreign Exchange of the People’s Republic of China is obtained. Although the Chinese government regulations now allow greater convertibility of RMB for current account transactions, significant restrictions still remain. Currently, our PRC subsidiaries, Comtech Communication and Comtech Software, may

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purchase foreign exchange for settlement of current account transactions in accordance with certain procedural requirements under PRC law. A portion of our net revenue will need to be converted into other currencies to meet our foreign currency obligations, which primarily include debt service on foreign currency-denominated debt and purchases of imported components. Since a significant amount of our future revenues will continue to be denominated in RMB, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated to fund our business activities outside of China, if any, or expenditures denominated in foreign currencies, or our ability to meet our foreign currency obligations, which could have a material adverse effect on our business, financial condition and results of operations. We cannot be certain that the PRC regulatory authorities will not impose more stringent restrictions on the convertibility of RMB with respect to foreign exchange transactions.

Our acquisition strategy depends on government regulatory approvals in China.

Regulations in China require PRC entities and individuals to obtain approval from and registration with multiple government authorities for their direct or indirect cross-border incorporation, investment, acquisition or shareholding activities involving foreign jurisdictions. The PRC government also places foreign exchange restrictions on remittances of currency relating to the acquisition of a company organized outside of China. It is possible that any required approval from PRC government authorities may not be obtained or that restrictions imposed could make potential acquisitions unattractive or impractical. Our failure to obtain these approvals may restrict our ability to acquire a company outside of China or use our entities outside of China to acquire companies inside of China, which could negatively affect our business and prospects.

Fluctuations in the value of the Renminbi relative to foreign currencies could affect our financial condition, operating results and the price of our common stock.

The majority of our net revenue is denominated in Renminbi, while a portion of our capital expenditures and trade payables are denominated in foreign currencies, primarily U.S. dollars. Since 1994, the official exchange rate of Renminbi to U.S. dollars generally has been stable. However, recently there has been increased political pressure on the PRC government to decouple the Renminbi from the U.S. dollar. Future movements in the exchange rate of Renminbi and other currencies may have an adverse effect on our financial condition and results of operations. For example, a depreciation of the Renminbi relative to the U.S. dollar would have the effect of reducing our dollar-translated net revenue and increasing the debt servicing requirements for our U.S. dollar-denominated debt. Because many of our customers export manufactured products, the appreciation of the Renminbi, on the other hand, would make our customers products more expensive to purchase, which could adversely affect their sales, thereby eroding our customer base and adversely affecting our operating results.

The legal system in China has inherent uncertainties that may limit the legal protections available to you as an investor or to us in the event of any claims or disputes with third parties.

The legal system in China is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, the central government has promulgated laws and regulations dealing with economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. As China’s foreign investment laws and regulations are relatively new and the legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform and enforcement of these laws, regulations and rules involve uncertainties, which may limit the remedies available to you as an investor and to us in the event of any claims or disputes with third parties. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management.

Substantially all our operations and most of our assets are in China. In addition, most of our directors, executive officers and some of the experts named in this document reside within China, and many of the assets of

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these persons are also located within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon these directors or executive officers or some of the experts named in this document, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of court judgments. As a result, recognition and enforcement in China of judgments of a court of the United States or any other jurisdiction, including judgments against us or our directors, executive officers, or the named experts, may be difficult or impossible.

Our corporate structure may restrict our ability to receive dividends from, and transfer funds to, our PRC operating companies, which may restrict our ability to act in response to changing market conditions.

Substantially all of our operations are conducted through our PRC operating companies. The ability of our PRC subsidiaries, which include Comtech Communication and Comtech Software, to make dividend and other payments to us may be restricted by factors such as changes in applicable foreign exchange and other laws and regulations. In addition, these PRC subsidiaries are required to allocate a portion of their net profit to reserve funds before distributing dividends, according to the prevailing accounting rules and regulations in China. In addition, the profit available for distribution from these PRC subsidiaries is determined in accordance with generally accepted accounting principles in China. This calculation may materially differ from the one performed in accordance with U.S. GAAP. As a result, we may not receive sufficient distributions or other payments from these PRC subsidiaries to enable us to make dividend distributions to our shareholders in the future, even if our U.S. GAAP financial statements indicate that our operations have been profitable.

Shenzhen Comtech and Shanghai E&T, as PRC domestic companies, are also required, subject to certain cumulative limits, to allocate a portion of their net profit to reserve funds. We do not directly own the equity interest in Shenzhen Comtech. Our principal shareholder and chief executive officer, Jeffrey Kang, and his wife, the shareholders of Shenzhen Comtech, have contractually agreed, among others things, to apply all the dividends they receive from Shenzhen Comtech to payments to us for due consideration and to the extent permitted by applicable law, including, without limitation, PRC foreign exchange law. PRC law and regulatory requirements may restrict the ability of Mr. Kang and his wife to apply such dividends from Shenzhen Comtech in U.S. dollars to us.

Lastly, the transfer of funds from our company to our PRC operating companies, either as a shareholder loan or as an increase in registered capital or otherwise, is subject to registration or approval with or by PRC governmental authorities, including the relevant administration of foreign exchange and/or other relevant examining and approval authorities. These limitations on the free flow of funds between us and our PRC operating companies may restrict our ability to act in response to changing market conditions.

RISKS RELATED TO OUR COMMON STOCK

Our principal shareholder and chief executive officer controls a majority of our common stock. As a result, the trading price for our shares may be depressed due to market perception and our principal shareholder and chief executive officer will be able to take actions that may be adverse to your interests.

Jeffrey Kang, our principal shareholder and chief executive officer, directly or through entities he controls, currently beneficially owns approximately 72.6% of our issued and outstanding common stock. This significant concentration of share ownership may adversely affect the trading price of our common stock because investors often perceive a disadvantage in owning shares in a company with just one or several controlling shareholders. Furthermore, Mr. Kang has the ability to control the outcome of all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. This concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit you.

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Efforts to comply with recently enacted changes in securities laws and regulations will increase our costs and require additional management resources and we still may fail to comply which could adversely affect our stock price.

We have only recently begun evaluating our internal controls over financial reporting. Given the status of our efforts, coupled with the fact that guidance from regulatory authorities in the area of internal controls continues to evolve, substantial uncertainty exists regarding our ability to comply by applicable deadlines. As directed by Section 404 of the Sarbanes-Oxley Act of 2002, public companies are required to include a report of management on the company’s internal controls over financial reporting in their annual reports on Form 10-K. In addition, the public accounting firm auditing a company’s financial statements must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. This requirement will first apply to our annual report on Form 10-K for our fiscal year ending December 31, 2006. If we are unable to conclude that we have effective internal controls over financial reporting, or if our independent auditors are unable to provide us with an unqualified report as to the effectiveness of our internal controls over financial reporting as of December 31, 2006 and future year ends as required by Section 404 of the Sarbanes-Oxley Act, we could experience delays or inaccuracies in our reporting of financial information, or non-compliance with SEC reporting and other regulatory requirements. This could subject us to regulatory scrutiny and result in a loss of public confidence in our management, which could, among other things, adversely affect our stock price.

There has not been significant trading in our common stock, and our stock price may fluctuate dramatically in the future.

From March 1999 to January 30, 2005, our common stock was quoted on the Over-The-Counter Market, known as the “pink sheets”, or on the Electronic Bulletin Board of the Over-The-Counter Market, or OTCBB. Since January 31, 2005, our common stock has been quoted on the Nasdaq National Market under the symbol “COGO”. To date, there has been a limited trading market for our common stock. There is a significant risk that our stock price may fluctuate dramatically in the future in response to any of the following factors, some of which are beyond our control:

Significant dilution may result from the indemnification provisions of our share exchange agreement.

The terms of the share exchange with Trident provide for the issuance of up to 30,173,047 additional shares to the original holders of Comtech Cayman in the event there is a breach of any representations, warranties, covenants or obligations made by Trident in the share exchange agreement, which indemnification provision will expire 30 days following the date of filing of this annual report on Form 10-K, except in the case of known claims, which will survive until such matters are resolved finally by a court. The issuance of additional shares pursuant to this indemnification provision would result in dilution to other shareholders. To date, we are not aware of any such breach.

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Future sales of shares could have an adverse effect on the market price of our common stock.

As of March 30, 2005, we had 25,532,898 shares of common stock outstanding, which shares will be able to be sold in the public market in the near future, subject to, with respect to shares of common stock held by affiliates and shares issued between 12 and 24 months ago, the volume restrictions and/or manner of sale requirements of Rule 144 under the Securities Act. A significant portion of these shares are held by a small number of shareholders. Historically, trading volume of our shares has been relatively low. Sales by our current shareholders of a substantial number of shares could significantly reduce the market price of our common stock. These sales also could impede our ability to raise future capital. As of March 21, 2005, we had stock options outstanding to purchase 2,045,000 shares of common stock and warrants outstanding to purchase 1,250,417 shares of our common stock. To the extent that the options and warrants are exercised, they may be exercised at prices below the price of our shares of common stock on the public market, resulting in a significant number of shares entering the public market and the dilution of our common stock. In addition, in the event that any future financing should be in the form of securities convertible into, or exchangeable for, equity securities, investors may experience additional dilution upon the conversion or exchange of such securities.

We lease properties with a total area of approximately 48,000 square feet in seven locations in China including Shenzhen, Shanghai, Beijing, Wuhai, Qingdao, Tianjin and Hong Kong. Approximately 8,000 square feet is for our corporate headquarters located in Shenzhen, approximately 7,000 square feet is for our research and development center in Shenzhen, approximately 20,000 square feet is for our representative offices located in the other six cities, and approximately 13,000 square feet is used for manufacturing of our proprietary lightning protection product for wireless base stations. These leases expire in between one and 36 months.

In 2001, we purchased a small office suite located in Shenzhen from Matsunichi Electronics.

We believe that our existing facilities and equipment are well maintained and in good operating condition, and are sufficient to meet our needs for the foreseeable future.

We claimed several refunds from the Italian government on corporate taxes paid by OAM, our 98.6% owned Italian subsidiary, during the 1970s and early 1980s. In one instance, the Italian tax authorities have counterclaimed, assessing additional unpaid taxes due by OAM. We have been successful in two lower courts in our defense of these counterclaims and are currently awaiting the results of a final appeal in the highest Italian tax court. It is management’s opinion that the risk of a negative judgment is low and the potential for liability is remote.

There were no matters submitted to a vote of security holders during the quarter ended December 31, 2004.

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PART II

Market Prices of Common Stock

In connection with the share exchange transactions with Trident, we changed our name from “Trident Rowan Group, Inc.” to “Comtech Group, Inc.” on August 2, 2004. From March 18, 1999 to August 7, 2004, our common stock was quoted on the Over-The-Counter Market, known as the “pink sheets”, under the symbol “TRGI”. From August 8, 2004 to August 23, 2004, our common stock was quoted on the Electronic Bulletin Board of the Over-The-Counter Market, or OTCBB, under the symbol “TRGI”, and since August 24, 2004 under the symbol “COGO”. Since January 31, 2005, our common stock has been quoted on the Nasdaq National Market under the symbol “COGO”.

The following table sets forth the high and low sale prices for our common stock for the periods indicated as reported by the respective markets. These prices represent prices between dealers, without adjustment for retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. All periods presented prior to July 22, 2004 represent the performance of the common stock of Trident.

On January 14, 2005, we effected a one-for-two reverse stock split. Unless otherwise indicated, all share amounts have been retroactively restated for all periods presented to reflect the reverse stock split.

Shareholders

As of March 30, 2005, there were 25,532,898 shares of our common stock outstanding, and we had approximately 920 shareholders of record. The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company.

Dividends

Prior to the share exchange with Trident on July 22, 2004, we declared and paid our shareholders dividends of RMB41.4 million. During the last two fiscal years we have not declared any other cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the further development and

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expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, current and anticipated cash needs, restrictions contained in current or future financing instruments plans for expansion and such other factors as our board of directors deems relevant.

Our PRC operating companies are required to allocate a portion of their net profit to reserve funds, before distributing dividends. These reserves can only be used for specific purposes and are not distributable as cash dividends. PRC laws and regulatory requirements may also restrict the payment of dividends from Shenzhen Comtech to us.

A majority of our net revenue is denominated in RMB. A portion of these revenues must be converted into other currencies to meet our foreign currency obligations. These foreign currency-denominated obligations include our business activities outside of China, the payment of dividends, if any, and the repayment of foreign currency obligations, including any debt obligations. Under China’s existing foreign exchange regulations, Comtech Communication and Comtech Software are able to pay dividends in foreign currencies to us, without prior approval from the State Administration of Foreign Exchange, by complying with certain procedural requirements. The payment of dividends by Comtech Communication and Comtech Software is also subject to restrictions including the restriction that foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents. We cannot assure you that the PRC government will not take measures in the future to restrict access to foreign currencies for current account transactions.

Recent Sales of Unregistered Securities

Recent sales of unregistered securities have been previously disclosed on our Form 8-K furnished on July 23, 2004 and our Form 8-K furnished on October 27, 2004. There were no subsequent sales of unregistered securities in 2004.

Equity Compensation Plan Information

See “Item 11. Executive Compensation” for the aggregate information regarding our equity compensation plans in effect on December 31, 2004.

The consolidated statement of operations data for the four years ended December 31, 2004 and the consolidated balance sheet data presented below as of December 31, 2004, 2003, 2002 and 2001, are derived from our audited consolidated financial statements and related notes thereto, which for the three years ended December 31, 2004 have been included elsewhere in this Form 10-K. These audited consolidated financial statements and the related notes thereto have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The consolidated statement of operations data for the year ended December 31, 2000, and the consolidated balance sheet data as of December 31, 2000, presented below were derived from unaudited consolidated financial statements not included in this Form 10-K. The financial data for the year ended December 31, 2000, was prepared by management for discussion purposes only on a basis consistent with the audited financial statements. The unaudited consolidated financial statements include, in the opinion of management, all adjustments necessary for the fair presentation of the financial information set forth in those statements.

The consolidated financial statements are reported in RMB because all of our material operating entities are based in and operated entirely within the PRC. The translation of RMB amounts into U.S. dollar amounts at and for the year ended December 31, 2004 set forth below is included solely for the convenience of the readers of the financial statements and has been calculated at the rate of $1 to RMB8.2773, the exchange rate in effect on

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December 31, 2004. These translations should not be construed as representations that the RMB amounts could be converted into U.S. dollar amounts at that rate or any other rate. RMB and U.S. dollar amounts are presented in thousands.

This data should be read in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this Form 10-K.

Consolidated Statement of Operations Data:

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The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Forward Looking Statements” and “Item 1. Business—Risk Factors” and elsewhere in this Form 10-K, our actual results may differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We are a leading provider of customized module design solutions in China and serve as a gateway to leading electronics manufacturers in China. We historically have focused on the mobile handset and telecom equipment end-markets, but have recently expanded our addressable market to include the consumer electronics end-market. We work closely with leading manufacturers in these end-markets to develop solutions to meet their needs for customized module designs. Our customized module design solutions allow our customers to use enabling technology components from established technology component suppliers in a timely and cost-effective manner, reducing their time to market and lowering their overall costs. Our customer base has grown to over 200 companies and includes a majority of the largest and best-known manufacturers in the mobile handset and telecom equipment end-markets in China. In addition to these OEMs our other customers include industry participants which support these OEMs, such as subsystem designers and manufacturers. In developing customized module design solutions for use in our customers’ products, we work closely with over 30 suppliers of enabling technology components, including many large multinational companies such as Broadcom, JDS Uniphase and Matsushita.

PRINCIPAL FACTORS AFFECTING OUR RESULTS OF OPERATION

The major factors affecting our results of operations and financial condition include:

Revenue mix. Our net revenue and gross profit are affected by our product mix. Over the last two years mobile handset module related sales, which have higher profit margins than our telecom equipment module related sales, have increasingly constituted a significantly greater portion of our total net revenue.

Growth in industry and in end markets. The rapid growth of the domestic mobile handset, telecom equipment and consumer electronics products end-markets have been important drivers of growth of China’s electronics manufacturing industries. According to a February 2005 report by Datamonitor, China’s domestic mobile handset market is estimated to grow from approximately 72 million units in 2004 to approximately 99 million units in 2008, a compounded annual growth rate of 8.3%. With strong consumer demand for mobile handsets, increasing wireless penetration and the continued build-out and upgrading of China’s telecommunications infrastructure, with the advent of 3G in particular, China’s telecom industry continues to see strong investment in the broader telecom equipment industry. Specific segments that we expect to continue growing are the data communications segment, consisting of asymmetric digital subscriber line (ADSL) modems, Voice over Internet Protocol (VoIP) equipment; routers and network security equipment; the optical transmission systems segment, and the fixed line telecom network segment. The growth in these segments has driven, and we believe will continue to drive, growth in the electronics manufacturing businesses supporting hardware OEMs, including those engaged in the customized design of module solutions such as ourselves.

Increase in exports. The development of a highly-skilled, low-cost manufacturing base has also enabled China’s domestic manufacturers to be competitive in the global marketplace. As an example, Huawei has become a major supplier of telecom equipment to international customers, ZTE, the second largest manufacturer of

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telecom equipment in China, and other telecom equipment manufacturers and mobile handset device makers have also begun to expand overseas. We believe that growth in the export market will likely have a positive impact on our results of operations and financial condition, as it will increase the demand for enabling technology components, such as those we provide, particularly among our mobile handset clients.

Growth by entering new markets and strengthening in-house capabilities and leveraging our customer base. We recently began targeting the consumer electronics market and, over time, we hope to develop our integrated circuit and application software design capabilities and provide solutions based on our own proprietary technology. In the first quarter of 2005, we began generating net revenue from customized module design solutions for consumer electronics products, primarily for IPTV set top boxes and DTV, which we anticipate will initially have higher profit margins than our mobile handset and telecom equipment modules related sales. Our success in the consumer electronics end-market will depend, in significant part, on our ability to leverage our existing customer base. We expect to incur significant research and development expenses, through hiring additional engineering personnel to develop new solutions and expanding our intellectual property capabilities.

NET REVENUE

We do not charge our customers an independent design fee for our solutions. Instead, our business model is to generate revenue by reselling a limited number of specific components required in our module reference design. The difference between the purchase price we pay our suppliers for these components and our sales price to the customer for these components compensates us for our design, technical support and distribution services. Our net revenue is revenue net of a 17% value-added tax, or VAT.

We have over 200 customers. In addition to many of the largest China-based manufacturers of mobile handsets, telecom equipment and consumer electronics products, our customers include industry participants supporting these OEMs, such as subsystem designers and manufacturers in China, as well as international manufacturers who have begun to manufacture end-products in China for the domestic and international market. Our largest customer in the mobile handset segment has been TCL, which is one of China’s largest domestic mobile handset manufacturers. Our top two revenue producing customers from the telecom equipment industry based on aggregate sales for 2003 and 2004 have been Huawei and ZTE, China’s two largest telecom equipment suppliers. During 2004, Huawei, ZTE and UTStarcom, another major telecom equipment manufacturer in China, each accounted for more than 10% of our net revenue and collectively accounted for 36% of our net revenue. The loss of, or significant reduction in orders from, any of these customers would have a material adverse impact on our operating results.

Our net revenue is subject to seasonal fluctuation and periods of increased demand. Sales of telecom equipment related modules are typically highest in the fourth quarter of the year due to desire by equipment purchasers to spend remaining budgets allocated for a given period, usually on an annual basis. Sales of telecom equipment related modules have historically been lowest in the first quarter due to the Chinese New Year holiday and the general reduction in sales following the holiday season. Sales of mobile handset and consumer product related modules are typically highest in the first and fourth quarters of the year due to the Chinese New Year and Christmas holidays, and lowest in the second and third quarters. These sales patterns may not be indicative of future sales performance.

COST OF REVENUE

Cost of revenue primarily consists of the purchase of components from suppliers. We develop our customized module design solutions based on specific components purchased from key and other suppliers in our target end-markets. Our list of approximately 30 key suppliers includes JDS Uniphase (optoelectronic

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components), M-Systems (Flash memory, DiskOnChip), Matsushita (switches), NAIS (connectors, Relay), Pixelplus (CMOS sensors) and Sambu (speakers). We typically issue purchase orders to our suppliers only after we receive customer orders, enabling us to maintain low inventory levels and, in turn, minimize risks typically associated with holding inventory. During 2004, based on cost, we purchased approximately 52% and 24% of the components sold to our customers from Matsushita and its affiliated entities and from JDS Uniphase, respectively. If we lose a supplier, or a supplier reduces the amount of products sold to us, does not maintain a sufficient inventory level of products required by us, or if any supplier is otherwise unable to meet our demands for its components, we may have to expend significant time, effort and other resources to locate a suitable alternative supplier and secure replacement components. If we do find a replacement supplier, we may be required to redevelop the customized module design solution to effectively incorporate the replacement components.

OPERATING EXPENSES

Selling, general and administrative expenses

Our selling expenses include expenditures to promote our new module solution and gain a larger customer base, personnel expenses and travel and entertainment costs related to sales and marketing activities, and freight charges. We expense all selling expenses as they are incurred. Selling expenses are expected to continue to grow in the future as we diversify by developing and acquiring new design capabilities and establish new market channels.

General and administrative expenses include compensation and benefits for our general and administrative staff, professional fees, and general travel and entertainment costs. We expense all general and administrative expenses as they are incurred. We expect that general and administrative expenses will continue to increase for the foreseeable future as a result of our expected continued growth and the increased costs of complying with US rules and regulations necessary to maintain our listing in the United States and comply with Section 404 of the Sarbanes-Oxley Act of 2002.

Research and development

Research and development expenses consist primarily of salaries and related costs of the employees engaged in research, design and development activities; the costs for design and testing; the cost of parts for prototypes; equipment depreciation; and third party development expenses. We expense research and development expenses as they are incurred. As of December 31, 2004, we had 25 engineers and other technical employees engaged in research and development related activities to develop new module solutions targeted at the mobile handset, telecom equipment and consumer electronics industries. Research and development expenses were significantly higher in 2004 than they were in 2003 and we expect that our research and development expenses, including those relating to the planned hiring of additional research and development personnel, will increase in the future as we seek to expand our business by developing new solutions, offering new module solutions lines and penetrating new industries within the consumer electronics end-market.

MINORITY INTEREST

Minority interests consist of 40% of the outstanding equity interest in Shanghai E&T, and 1.4% of the equity interest in OAM, a non-operating Italian subsidiary, held by minority shareholders of these entities. During 2004, approximately 10.1% of our total net revenue was generated through Shanghai E&T.

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TAXATION

We are a holding company incorporated in the state of Maryland and conduct substantially all our operations through our PRC operating companies. Although we are subject to United States taxation, we do not anticipate incurring significant United States income tax liability for the foreseeable future because:

Our subsidiaries that are incorporated in Cayman Islands and the British Virgin Islands are not subject to income taxes in those jurisdictions.

The usual statutory tax rate applicable to PRC companies is 33%, while the statutory tax rate applicable to PRC companies in the Shenzhen Special Economic Zone in China is 15%. Since two of our PRC operating companies, Shenzhen Comtech and Comtech Communication, are established in the Shenzhen Special Economic Zone and have agreed to operate for a minimum of 10 years in China, Shenzhen Comtech was and Comtech Communication has been and will continue to be, entitled to preferential income tax treatment under PRC law as follows:

Our recently established PRC operating company, Comtech Software, has not had any assessable profit to date and is currently applying for preferential tax treatment. Following expiration of the preferential tax treatment described above, our PRC operating companies located in Shenzhen Special Economic Zone will be subject to the statutory tax rate of 15% for PRC companies located in the Shenzhen Economic Zone. Therefore, the effective rate of income tax relative to these entities is expected to increase following expiration of the preferential tax treatment described above, but to remain below the usual statutory rate of 33%. In addition, Shanghai E&T, which is located in the Shanghai Qingpu Zone, has elected to be taxed on a deemed basis at 0.5% of its net revenue in accordance with guidelines issued by the local tax authority in the Shanghai Qingpu Zone in 2004.

As a result of the incentives above, our operations have been subject to relatively low tax liabilities. Our effective tax rate was 3.5%, 4.3% and 8.2% in 2004, 2003 and 2002 respectively. Our gradual decrease in the effective tax rate was mostly due to our mix of subsidiaries’ earnings. More income was earned in our subsidiaries with tax benefits granted from local tax authorities. Tax that would otherwise have been payable without preferential tax treatment amounted to approximately RMB19.9 million, RMB10.2 million and RMB2.4 million in 2004, 2003, and 2002, respectively.

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BASIS OF PRESENTATION

Our financial statements reflect the historical consolidated operations of Comtech Cayman. In the July 2004 share exchange with Trident, the stockholders of Comtech Cayman received in exchange for our business approximately 91.2% of the then-outstanding common stock of Trident. This share exchange transaction was accounted for as a reverse acquisition in which Comtech Cayman was deemed the accounting acquirer and Trident the legal acquirer. In connection with the share exchange, we changed our name to Comtech Group, Inc. from Trident Rowan Group, Inc.

As a result of the share exchange transaction:

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. These estimates are based on our historical experience and on various other assumptions that we believe to be reasonable. Estimates are evaluated on an ongoing basis, but actual results may differ from these estimates.

Critical accounting policies are those that, in management’s view, are most important in the portrayal of our financial condition and results of operations. Those that require significant judgments and estimates include:

Revenue recognition. Revenue, net of VAT, from sales of our customized module design solutions are recorded when the specific components contained in the related module reference design sold by us are delivered, title has passed to our customers and we have no further obligation to provide services related to the operation of the components.

Allowance for doubtful accounts. We establish an allowance for doubtful accounts primarily based upon the age of receivables and factors surrounding the credit risk of specific customers. We generally do not require collateral or other security from our customers. As of December 31, 2004, our accounts receivable balance was RMB169.0 million, net of a RMB3.8 million allowance for doubtful accounts. As our business grows, we expect our accounts receivable balances to increase. If the financial condition of our customers deteriorates, our uncollectible account receivables could exceed our current or future allowances.

Litigation. We record contingent liabilities relating to litigation or other loss contingencies when we believe that the likelihood of loss is probable and the amount of the loss can be reasonably estimated. Changes in judgments of outcome and estimated losses are recorded, as necessary, in the period the changes are determined or become known. Any changes in these estimates would impact our future operating results.

Stock option valuation. We account for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related interpretations. Under this method, compensation cost for stock options, warrants and

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stock awards is measured as the excess, if any, of the quoted market price of our common stock at the date of the grant over the amount an employee must pay to acquire the stock.

The fair value of the options was estimated at the date of grant using a Black-Scholes option valuation model based on various assumptions including the expected risk-free interest rate, the expected dividend yield, the expected life of the options, and the expected stock price volatility. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options. Our employee stock options have characteristics significantly different from those of traded options such as limited transferability and, in most cases, vesting restrictions. In addition, the assumptions used in option valuation models are based upon historical averages that may not predict future results, particularly the expected stock price volatility of the underlying stock. Changes in these input assumptions can materially affect the fair value estimate of the options.

RESULTS OF OPERATIONS

Year ended December 31, 2004 compared to year ended December 31, 2003

Net Revenue—Details of net revenue for the years ended December 31, 2004 and 2003 are as follows:

Net revenue in 2004 was RMB625.7 million ($75.6 million), or 74.9% higher than in 2003. The increase was mainly attributed to the increase in net revenue from the sale of mobile handset and telecom equipment related components incorporated into our customized module design solutions. Mobile handset related sales increased by RMB224.9 million ($27.2 million), or 157.1%, and telecom equipment related sales increased by RMB42.0 million ($5.1 million), or 20.3%. The increase in mobile handset related revenue reflects continued growth in demand for mobile handsets in the China domestic market, as well as the increase in mobile handset exports by domestic manufacturers. Telecom equipment related revenue increased due to higher demand from telecom operators that continued to expand their existing infrastructures. The contribution to total net revenue by mobile handset related sales in 2004 increased to RMB368.1 million ($44.5 million), or 58.8% of total net revenue, from RMB143.2 million, or 40.0% of total net revenue, in 2003. The contribution to total net revenue by telecom equipment sales decreased from 57.9% in 2003 to 39.9% in 2004, though total sales increased from RMB207.3 million in 2003, to RMB249.3 million ($30.1 million) in 2004.

Gross Profit—Gross profit increased from RMB50.9 million in 2003 to RMB94.9 million ($11.5 million) in 2004. Gross margin was 15.2% in 2004 compared to 14.2% in 2003. The increase in gross margin was principally due to the change in revenue mix, as mobile handset related sales had a higher margin than those of telecom equipment related sales.

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Selling, R&D and General and Administrative Expenses—Selling, R&D and general and administrative expenses were RMB27.2 million ($3.3 million) in 2004, or 34.0% higher than in 2003. Details of these expenses for the years ended December 31, 2004 and 2003 are as follows:

The increase in selling expenses in 2004 as compared to the selling expenses in 2003 by RMB5.0 million ($0.6 million), or 192.3%, was mainly attributed to an increase in marketing and business development expenses for promoting new module solutions lines and gaining a larger customer base. Other indirect selling expenses such as freight charges and salesperson expenses contributed to the balance of the increase and, consistent with the same period of last year, represented about 1.0% of net revenue.

R&D expenses increased in 2004 by RMB5.1 million ($0.6 million), or 510.0%, as compared to the R&D expenses in 2003. The increase reflected approximately RMB2.6 million ($0.3 million) in additional costs incurred in developing new customized module design solutions targeted at the mobile handset, telecom equipment and consumer electronics end-markets, as well as additional personnel costs of approximately RMB2.4 million associated with strengthening our engineering team. The headcount in our R&D department increased from 20 persons as of December 31, 2003 to 25 as of December 31, 2004. As a percentage of net revenue, R&D expenses increased from 0.3% in 2003 to 1.0% in 2004.

General and administrative expenses in 2004 decreased by RMB3.2 million ($0.4 million), or 19.2%, as compared to the general and administrative expenses in 2003. The decrease was attributable to bad debt provision of RMB4.0 million recorded in 2003, while no additional provision was made in 2004. Offsetting this decrease in part were additional corporate expenses of approximately RMB1.0 million ($0.1 million) in 2004 incurred as a result of expanding our business and an increase in legal and other expenses in 2004 associated with meeting our reporting and compliance obligations as a public company in the United States.

Interest Expense—Interest expense in 2004 amounted to RMB2.2 million ($0.3 million), compared to RMB0.8 million in 2003. The increase of RMB1.4 million ($0.2 million) in 2004, or 175.0%, was due to new bank loans totaling RMB72.5 million ($8.8 million) obtained in August and September of 2004. The applicable interest rate on the loans is overnight LIBOR or 1.5% per annum above the deposit rate, whichever is highest. No similar loans were outstanding in 2003.

Interest Income—Interest income in 2004 amounted to approximately RMB38,000 ($5,000), compared to approximately RMB54,000 in 2003. The decrease was attributable to lower average deposit balances.

Income Tax—The effective tax rate for 2004 was 3.5% compared to 4.3% in 2003. The decrease in the effective tax rate was mostly due to having earned more income at subsidiaries with tax benefits granted from their respective local tax authorities.

Net Income; Earnings Per Share—As a result of the above items, net income for 2004 was RMB62.2 million ($7.5 million) compared to net income of RMB28.5 million in 2003, an increase of 118.3%. We reported basic per share earnings of RMB2.87 ($0.35) for 2004, based on 21,690,560 outstanding weighted average shares, and a diluted per share earnings of RMB2.84 ($0.34), based on 21,885,053 outstanding weighted average shares, compared to basic and diluted per share earnings of RMB1.41 ($0.17) for 2003, based on 20,251,075 outstanding weighted average shares.

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Year ended December 31, 2003 compared to year ended December 31, 2002

Net Revenue—Details of net revenue for the years ended December 31, 2003 and 2002 are as follows:

Net revenue in 2003 was RMB357.8 million, or 72.4% higher than in 2002. The increase was mainly attributed to the increase in both mobile handset and telecom equipment module related component sales. The increase in mobile handset related sales reflects increased demand for mobile handsets in China and increased market penetration in China by domestic manufacturers. The increase in telecom equipment related sales relates to growth in China’s telecom equipment industry driven by an increase in investment by telecom operators. Contribution of mobile handset related net revenue to total revenue increased from RMB62.3 million, or 30.0%, to RMB143.2 million, or 40.0% in 2003. Contribution of telecom equipment related net revenue to total net revenue decreased from 69.0% to 57.9%, though the related net revenue increased from RMB143.3 million to RMB207.3 million in 2003.

Gross Profit—Gross profit increased to RMB50.9 million in 2003 from RMB17.3 million in 2002. Gross margin was 14.2% in 2003, compared to 8.4% in 2002. The increase in gross margin was principally due to an increase in sales volume and a change in revenue mix, with mobile handset related sales carrying a higher margin than telecom equipment related sales.

Selling, R&D, General and Administrative Expenses—Selling, R&D, general and administrative expenses increased in 2003 by RMB12.8 million, or 170.7%, compared to 2002. Details of these expenses for the years ended December 31, 2003 and 2002 are as follows:

The increase in the selling expenses in 2003 by RMB1.8 million, or 225.0%, was mainly attributed to the increase in marketing and business development expenses of approximately RMB1.0 million for promoting new module solutions and gaining a larger customer base. Other indirect selling expenses such as freight charges and salesperson expenses contributed to the balance of the increase, primarily due to increased sales transactions. As a percentage of net revenue, selling expenses increased from 0.4% to 0.7% in 2003.

R&D expenses decreased slightly in 2003 by approximately RMB59,000 in 2003. The R&D expenses were incurred in developing new module solutions for handset modules and telecom equipment. As a percentage of net revenue, R&D expenses decreased from 0.5% in 2002 to 0.3% in 2003.

General and administrative expenses increased in 2003 by RMB11.0 million, or 193.0%. The increase was partially attributable to the bad debt provision of RMB4.0 million made in 2003. The remaining RMB7.0 million increase was due to an increase in staff costs, and an increase in corporate administrative expenses reflecting our growth. As a percentage of net revenue, general and administrative expenses increased from 2.7% in 2002 to 4.7% in 2003.

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Interest Expense—Interest expense in 2003 amounted to RMB0.8 million as compared to zero in 2002. The increase in interest expense was associated with bank overdraft and bank handling charges incurred during 2003.

Interest Income—Interest income in 2003 amounted to approximately RMB54,000, compared to approximately RMB157,000 in 2002. The decrease was due to increase in net cash outflow used in operating activities during 2003.

Income Tax—The effective tax rate for 2003 was 4.3% compared to 8.2% in 2002. The decrease in the effective tax rate was mostly due to our mix of subsidiaries’ earnings. More income was earned in the subsidiaries with tax benefits granted from their respective local tax authorities.

Net Income; Earnings Per Share—As a result of the above items, net income for 2003 was RMB28.5 million, compared to a net income of RMB9.2 million in 2002. We reported basic and diluted per share earnings of RMB1.41 for 2003, based on 20,251,075 outstanding weighted average shares, compared to basic and diluted per share earnings of RMB0.46 for 2002, based on 20,251,075 outstanding weighted average shares.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows and working capital

Our payables cycle typically averages approximately one month, whereas our receivables cycle typically averages approximately three months. Accordingly, additional working capital is needed to fund this time lag.

As at December 31, 2004, we had no material commitments for capital expenditures.

We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations, available borrowings under bank lines of credit and factoring facilities and, in the past, loans from our principal stockholder and our chief executive officer, Jeffrey Kang. At times, we may evaluate possible acquisitions of, or investments in, businesses that are complementary to ours, which may require the use of cash. We believe that our cash, operating cash flows, credit arrangements, and access to equity capital markets, taken together, provide adequate resources to fund our ongoing operating expenditures for the next 12 months. In the event that they do not, we may require additional funds in the future to support our working capital requirements or for other purposes and may seek to raise such additional funds through the sale of public or private equity, as well as from other sources.

As of December 31, 2004, we had working capital of RMB186.9 million ($22.6 million), including RMB41.4 million ($5.0 million) in cash, as compared with working capital of RMB14.3 million at December 31, 2003, including RMB30.7 million in cash.

Operating activities used cash of RMB60.3 million ($7.3 million) in 2004, compared to RMB25.4 million used in 2003, despite the contribution of net income in 2004 of RMB62.2 million ($7.5 million) compared to RMB28.5 million in 2003. The decrease in cash used in operating activities in 2004 as compared to 2003 was primarily due to an increase in accounts receivable and bills receivables of RMB71.6 million ($8.7 million) and RMB64.0 million ($7.7 million), and the increase in trade payables of RMB1.4 million ($0.2 million) and a decrease in inventories of RMB4.1 million ($0.5 million). Overall collections of trade accounts receivables and credit quality of customers improved in 2004. Average trade accounts receivable turnover approximated 76 days for 2004, compared with 82 days in 2003. The increase in trade accounts payable was primarily associated with increased purchases. Our inventory levels are generally low as we begin purchasing components generally only after we receive purchase orders from our customers.

Investing activities used RMB1.6 million ($0.2 million) in 2004, mainly for the purchase of property and equipment, and for the acquisition of our 60% owned PRC operating company, Shanghai E&T.

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Financing activities provided net cash inflow of RMB72.7 million ($8.8 million) during 2004. Cash was provided by new bank borrowing and discounting arrangements amounting to RMB53.7 million ($6.5 million) and cash balances of RMB26.7 million ($3.2 million) obtained from the legal acquirer in the share exchange in July 2004. A private placement of 3.2 million shares of common stock to a group consisting primarily of institutional investors, generated aggregate net proceeds of RMB84.0 million ($10.2 million). These financing cash inflows were partially off-set by repayment of amounts due to the holding company of RMB50.4 million ($6.1 million) and the dividend payment for the prior year amounting to RMB41.4 million ($5.0 million).

Distributions by our PRC operating companies to us other than as dividends may be subject to governmental approval and taxation. Any transfer of funds from us to our PRC operating companies, either as a shareholder loan or as an increase in registered capital, is subject to registration or approval with or by PRC governmental authorities, including the relevant administration of foreign exchange and/or other relevant examining and approval authorities. These limitations on the free flow of funds between us and our PRC operating companies may restrict our ability to act in response to changing market conditions.

Indebtedness

In July 2004, Comtech Hong Kong, our wholly-owned subsidiary, entered into a RMB33.1 million ($4.0 million) U.S. dollar denominated revolving credit facility with the Bank of Communications Hong Kong branch. In September 2004, the amount of the facility was increased to RMB82.8 million ($10.0 million). Apart from revenues from operations, this revolving credit facility serves as our principal source of liquidity to fund our working capital needs. During 2004, Comtech Hong Kong drew down approximately RMB72.5 million ($8.8 million) under the facility. In November 2004, RMB49.3 million ($6.0 million) was repaid from the proceeds of our private placement of common stock and as of December 31, 2004, the outstanding loan balance under the revolving credit facility was RMB23.2 million ($2.8 million), leaving RMB59.6 million ($7.2 million) in availability under the facility, subject to top up of the security pledged to $10 million. These bank borrowings were used for general working capital purposes and RMB8.1 million ($978,000) was directly used for settlement of an amount owed to Comtech Global Investment Ltd., an investment entity owned by Jeffrey Kang, our principal shareholder and chief executive officer. The facility is secured by bills receivable and funds on deposit owned by Jeffrey Kang in an amount equal to the outstanding borrowings. The facility bears interest at the higher of LIBOR or 1.5% over the deposit rate, payable monthly. The effective interest rate in 2004 was approximately 2.4%. Based on a variable return on interest, the bank borrowings amounted to fair value.

We are currently in the process of negotiating an additional credit facility with other banks to fund our working capital needs, although this financing may not be arranged on satisfactory terms or at all.

In August 2004, Comtech Communication, one of our PRC operating companies, entered into an accounts receivable factoring agreement with Guangdong Development Bank Shenzhen branch. Under the terms of the agreement, accounts receivable from UTStarcom, one of our major customers, up to a maximum amount of RMB30.0 million ($3.6 million) can be transferred to the bank with recourse. An amount equal to 30% of the accounts receivable transferred is secured by funds we have on deposit with the bank. The factoring arrangement bears interest at the PRC official loan interest rate, payable monthly. On October 20, 2004, we transferred accounts receivable of approximately RMB11.4 million under the agreement. As of December 31, 2004, we had no factored accounts receivable outstanding under the agreement and had no pledged deposit with Guangdong Development Bank.

Some of our customers enter into arrangements with their respective banks for a line of credit for purposes of settling their bills. Under such arrangements, we are entitled to collect the amounts owed directly from the customers’ banks when the invoice becomes due. These amounts are recorded as bills receivable on our consolidated balance sheet. In certain circumstances, we have arranged to transfer with recourse on a revolving basis certain of our bills receivable to the bank. Under this discounting arrangement, the bank pays a discounted amount to us and collects the amounts owed from the customers’ banks. The discount is typically 0.8% of the balance transferred, which is recorded as interest expense. As of December 31, 2004, we had discounted bills receivable amounting to approximately RMB30.6 million ($3.7 million).

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Contractual obligations and commercial commitments

The following table sets forth our contractual payment obligations for operating leases and purchase obligations as of December 31, 2004:

Operating lease obligations consist primarily of operating lease agreements for our office facilities, including our head office and research center in Shenzhen. Our leases have remaining terms from one to thirty-six months.

Purchase obligations consist of outstanding purchase orders for components from our suppliers. We do not have any minimum purchase obligations with these suppliers.

Off-balance sheet arrangements

We have no outstanding off-balance sheet arrangements, derivative financial instruments, interest rate swap transactions or foreign currency forward contracts. We do not engage in trading activities involving non-exchange traded contracts.

Quarterly Results of Operations

The following table presents our supplemental selected unaudited quarterly results of operations for the eight quarters prior to and including the quarter ended December 31, 2004. You should read the following table in conjunction with our audited consolidated financial statements and related notes contained elsewhere in this Form 10-K. In our management’s opinion, we have prepared our unaudited quarterly results of operation on substantially the same basis as our audited consolidated financial statements. Due to the evolving nature of our business and other factors affecting our business as described under “Item 1. Business—Risk Factors,” our results of operations for any quarter are not necessarily indicative of results that may be expected for any future periods.

Our quarterly net revenue over the past two years has experienced continued sequential growth, with the exception of the last two quarters of 2004 when we, like many of our customers and competitors, were affected by a general economic slowdown and an accompanying decline in demand for many of our customers’ products. The impact of slowing end-customer demand was compounded by higher than normal levels of equipment and inventories among our customers and our customers’ adjustments in their order levels, resulting in increased pricing pressure.

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The overall increase in our net revenue over the past two years was consistent with growing demand for both mobile handset solutions in the China domestic market and the telecom equipment solutions as China’s telecom operators continue to expand and upgrade their infrastructure.

We believe that the increase in gross profit from quarter to quarter can be primarily attributed to a change in our product mix. Specifically, mobile handset related sales, which have higher profit margins than our telecom equipment related sales, have increasingly constituted a significantly greater portion of our total net revenue over the past two years.

Foreign exchange risk

Our functional currency is the RMB. Transactions in other currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are remeasured into RMB at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in our statements of operations as a component of current period earnings.

The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into foreign currencies. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended. Under the Rules, once various procedural requirements are met, RMB is convertible for current account transactions, including trade and services, but not for capital account transactions, including direct investment, loan or investment in securities outside China, unless the prior approval of the State Administration of Foreign Exchange of the People’s Republic of China is obtained. Although the Chinese government regulations now allow greater convertibility of RMB for current account transactions, significant restrictions still remain. Currently, our PRC subsidiaries, Comtech Communication and Comtech Software, may purchase foreign exchange for settlement of current account transactions in accordance with certain procedural requirements under PRC law. A portion of our net revenue will need to be converted into other currencies to meet our foreign currency obligations, which primarily include debt service on foreign currency-denominated debt and purchases of imported components.

The value of the RMB is subject to changes in China’s central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Since 1994, the conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and current exchange rates on the world financial markets. Since 1994, the official exchange rate generally has been stable. However, recently there has been increased political pressure on the PRC government to decouple the RMB from the U.S. dollar.

We conduct substantially all of our operations through our PRC operating companies, and their financial performance and position are measured in terms of RMB. Any devaluation of the RMB against the United States dollar would consequently have an adverse effect on our financial performance and asset values when measured in terms of United States dollars. Our solutions are primarily procured, sold and delivered in the PRC for RMB. The majority of our revenues are denominated in RMB. Should the RMB devalue against United States dollar, such devaluation could have a material adverse effect on our profits and the foreign currency equivalent of such profits repatriated by the PRC entities to us. On the other hand, because many of our customers are involved in the export of goods, the appreciation of the RMB could make our customers products more expensive to purchase, which may have an adverse impact on their sales. A decrease in sales by our customers could have an adverse effect on our operating results. In addition, from time to time we may have U.S. dollar denominated borrowings, and therefore a decoupling of the RMB many affect our financial performance in the future.

We have experienced minimal foreign exchange gain and losses to date due to the relative stability of the RMB. We believe that our overall exposure to foreign currency exchange rate risk is not material and we do not currently engage in hedging activities to reduce our exposure to exchange rate fluctuations.

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Interest rate risk

We are exposed to interest rate risk arising from having short-term variable rate borrowings from time to time. Our future interest expense would fluctuate in line with any change in our borrowing rates. We do not have any derivative financial instruments and believe our exposure to interest rate risk and other relevant market risks is not material. Our bank borrowings amounted to RMB23.2 million ($2.8 million) as of December 31, 2004. They are secured by funds owned by Jeffrey Kang, our principal shareholder and chief executive officer, on deposit with Bank of Communications. Based on a variable rate of return, the bank borrowings approximated fair value.

Inflation

In recent years, China has not experienced significant inflation, and thus inflation has not had a material impact on our results of operations in recent years. According to the National Bureau of Statistics of China, the change in Consumer Price Index in China was -0.8%, 1.2% and 3.9% in 2002, 2003 and 2004, respectively.

Recently issued accounting pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, “Share-Based Payment”. This statement is a revision to SFAS No. 123 and supercedes APB Opinion No. 25. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, primarily focusing on the accounting for transactions in which an entity obtains employee services in share-based payment transactions. Entities will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with limited exceptions. That cost will be recognized over the period during which an employee is required to provide service, the requisite service period (usually the vesting period), in exchange for the award. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models. If an equity award is modified after the grant date, the incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. This statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005.

In accordance with the standard, we will adopt SFAS No. 123R effective July 1, 2005. Upon adoption, we have two application methods to choose from: the modified-prospective transition approach or the modified-retrospective transition approach. Under the modified-prospective transition method, we would be required to recognize compensation cost for share-based awards to employees based on our grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied as well as compensation cost for awards that were granted prior to, but not vested as of the date of adoption. Prior periods remain unchanged and pro forma disclosures previously required by SFAS No. 123 continue to be required. Under the modified-retrospective transition method, we would restate prior periods by recognizing compensation cost in the amounts previously reported in the pro forma footnote disclosure under SFAS No. 123. Under this method, we are permitted to apply this presentation to all periods presented or to the start of the fiscal year in which SFAS No. 123R is adopted. We would follow the same guidelines as in the modified-prospective transition method for awards granted subsequent to adoption and those that were granted and not yet vested. We have not yet determined which methodology we will adopt but believe that the impact that the adoption of SFAS No. 123R will have on our financial position or results of operations will approximate the magnitude of the stock-based employee compensation cost disclosed in Note 2 of our consolidated financial statements.

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The following financial statements and the footnotes thereto are included in the section beginning on page F-1.

There were no changes in and disagreements with accountants on accounting and financial disclosure.

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of December 31, 2004, the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission, or SEC, reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to us, including our consolidating subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared.

ITEM 9B. OTHER INFORMATION

None.

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PART III

Directors and Executive Officers

The following table sets forth information about our directors and executive officers as of March 31, 2005.

Jeffrey Kang, Chairman of the Board, Chief Executive Officer and President. Mr. Kang was a co-founder of Comtech and has served as our chief executive officer and chairman of the board since September 1999. Mr. Kang founded Shenzhen Matsunichi Electronics Co., Ltd. and Matsunichi Electronic (Hong Kong) Limited, predecessor to Comtech Group, in 1995, when Matsunichi commenced operations as a distributor for Matsushita. In 1999, Mr. Kang formed Comtech and transferred all operations and assets of Matsunichi into the Comtech Group. Prior to forming Matsunichi, Mr. Kang worked for Matsushita Electronics from June 1992 to July 1995 where he was responsible for selling components to the telecom industry within China. From 1998 to 1999, Mr. Kang was vice president of Shenzhen SME (Small and Medium Enterprises) Association, a non-profit association in Shenzhen. Mr. Kang earned B.S. degree in Electrical Engineering from South China Technology University in Guangzhou, China.

Li Zhou, Chief Technical Officer and Director. Prior to joining us in November 2003 as our chief technology officer, Mr. Zhou served as chief technology officer of HTW China, the largest personal digital assistant vendor in China from October 2000 to December 2002. Previously, he worked for Microsoft Corporation in Redmond, Washington from 1991 to 1998, and in Beijing, China from 1998 to 2000, where he held various positions including group manager of Microsoft’s embedded systems. Mr. Zhou earned an M.S. degree in computer science from Michigan State University after completing a B.S. and M.S. degrees in computer science in China.

Hope Ni, Chief Financial Officer and Secretary. Prior to joining us in August 2004 as our chief financial officer, Ms. Ni spent six years as a practicing attorney at Skadden, Arps, Slate, Meagher & Flom LLP in New York and Hong Kong, specializing in corporate finance. Prior to that, Ms. Ni worked at Merrill Lynch, investment banking division in New York. Currently, Ms. Ni is a member of the investment committee of Time Innovation Ventures, a venture capital firm focused on funding technology start-ups and joint ventures in China. Ms. Ni also serves on the board of Qianjia Consulting Company, which she founded in 2002. Ms. Ni received her J.D. degree from University of Pennsylvania Law School and her B.S. degree in Applied Economics and Business Management from Cornell University.

Amy Kong, Director. Ms. Kong has been a director since July 2004. Ms. Kong founded Primustech Ventures (HK) Limited, a private equity investment firm focused on Greater China, and has been its chief executive officer since 2000. Ms. Kong invested in a number of private equity projects in the areas of document

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management, professional training and education, medical waste management, medical devices, consumer electronics and information technology consulting. From 1999 to 2000, Ms. Kong served as interim chief executive officer of Cyber City International, a privately owned Shenzhen-based science park company. In 1996, Ms. Kong founded GTF Asset Management for the Gajah Tunggal Group, a $800 million global asset management company. Ms. Kong received an B.A. degree from Princeton University and an M.B.A. degree from New York University.

Q.Y. Ma, Director. Mr. Ma has been a director since December 2004. Mr. Ma has been the managing director of Time Innovation Ventures, a venture capital firm, since 2000, and has served as a professor at the University of Hong Kong since 1998. Dr. Ma was an associate professor at the Columbia University from 1994 to 2000. He has also served as a technology consultant to IBM, General Electric, TRW and DuPont. Dr. Ma is a co-founder and advisor of Semiconductor Manufacturing International Corp., and has served as an adviser to the Ministry of Information Industry, Beijing Government, and a senior advisor to Zhangjiang Hi-Tech Park in Shanghai. Dr. Ma received his Ph.D. from Columbia University, and attended the Executive Program of Stanford University’s School of Business.

Frank Zheng, Director. Mr. Zheng has been a director since January 2005. He has been the vice president of travel service for eLong, Inc., a leading online travel service company in China, since May 2000. Mr. Zheng is responsible for the overall operation of eLong’s travel services. Before he joined eLong, Mr. Zheng was a senior director of travel services with Asia.com. From 1994 through 2000, Mr. Zheng held various financial and operations positions with Bank of New York, The Reserve Management Corp, and Dean Witter Intercapital Company. Mr. Zheng received a B.B.A degree in Accounting from City University of New York.

Mark S. Hauser, Director. Mr. Hauser has been a director since May 1997. He served as president and chief executive officer or joint chief executive officer of Trident from March 1998 until the consummation of the share exchange on July 22, 2004. Since July 2000, Mr. Hauser has also been a managing director of FdG Associates, a middle-market private equity fund based in New York. Prior to that, he was an attorney and a founder and managing director of Tamarix Capital Corporation, a New York-based merchant and investment banking firm. Mr. Hauser received his undergraduate degree from Sydney University and an LLM from London School of Economics.

Mark B. Segall, Director. Mr. Segall has been a director since December 1999, and previously served as non-executive secretary of Trident from December 1999 until the consummation of the share exchange on July 22, 2004. Mr. Segall is the founder and chief executive officer of Kidron Corporate Advisors LLC, a mergers and acquisitions and corporate advisory boutique for emerging growth companies. Prior to founding Kidron in 2003, Mr. Segall was the chief executive officer of Investec Inc., the US investment banking operations of the South African based Investec Group. While at Investec, Mr. Segall also served as general counsel and senior vice president of Investec Ernst & Company, the US securities and clearing operations of Investec. Prior to joining Investec in 1999, he was a partner at Kramer Levin Naftalis & Frankel LLP, a New York law firm. Mr. Segall is a director and audit committee member of Greg Manning Auctions Inc., and a director of Gurunet Corporation, and Integrated Asset Management. Mr. Segall received a B.A. degree from Columbia University and a J.D. degree from New York University.

Board Practices

Our business and affairs are managed under the direction of our board of directors. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. It is our expectation that the board of directors will meet regularly on a quarterly basis and additionally as required.

Board Committees

Our board of directors has an audit committee, a nominating and corporate governance committee, and a compensation committee. Our board of directors has determined that Amy Kong, Frank Zheng and Q.Y. Ma

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are “independent” under the current independence standards of Nasdaq and the Securities Exchange Commission, and have no material relationships with us—either directly or as a partner, shareholder or officer of any entity—which could be inconsistent with a finding of their independence as members of our board of directors.

Audit Committee

The audit committee, consisting of Ms. Kong and Messrs. Ma and Zheng, oversees our financial reporting process on behalf of the board of directors.

The responsibilities of our audit committee include the following functions:

Our board of directors has determined that Ms. Kong, the Chairperson of the Audit Committee, is an “audit committee financial expert” as defined by the SEC’s rules.

Nominating And Corporate Governance Committee

The nominating and governance committee, consisting of Ms. Kong and Messrs. Ma and Zheng, is responsible for identifying potential candidates to serve on our board and its committees.

The responsibilities of our nominating and corporate governance committee include for the following functions:

Compensation Committee

The compensation committee, consisting of Ms. Kong and Messrs. Ma and Zheng, is responsible for making recommendations to the board concerning salaries and incentive compensation for our officers and employees and administers our stock option plans.

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The responsibilities of our compensation committee include the following functions:

Director Compensation

Our non-employee directors receive compensation in the form of cash and stock options for serving on our board. For 2004, each non-employee director received options to purchase 5,000 shares of our common stock at an exercise price of $3.74 per share, which was the fair market value of the stock on the date of the grant and which vested fully on December 31, 2004, as well as $2,000 cash. For 2005, each non-employee director receives annually $4,000 in cash and a grant of options to purchase 10,000 shares of our common stock. The members of our Audit Committee receive a grant of options to purchase 5,000 shares of common stock each year, with the Chairman of the Audit Committee receiving an additional grant of options to purchase 2,500 shares of common stock. The members of each of our Compensation Committee and Nominating and Corporate Governance Committees receive a grant of options to purchase 2,500 shares of common stock per year. All of the options granted to the directors will vest quarterly during the year following the date of grant. The exercise price for these director options granted for 2005 is $3.74 per share. If a non-employee director ceases to act as a board member or to serve on a committee, he or she will be entitled to all vested options; other options will be forfeited.

On January 19, 2005, our board of directors adopted similar director compensation resolutions relating to our two newly appointed directors, Q.Y. Ma and Frank Zheng, with the exception that the options granted to them for 2005 have an exercise price of $5.50 per share, which was the fair market value of the stock on the date of the grant.

Each non-employee director who becomes a director after the grant of options shall receive options on a pro rata basis for the portion of the period for which they will serve. All of the options granted to the incoming directors will be exercisable at the fair market value on the date of grant and will vest quarterly during the remainder of the period following the close of grant.

Compensation Committee Interlocks And Insider Participation

No member of our Compensation Committee has at any time been an officer or employee of ours, or our subsidiaries. No interlocking relationship exists between our board of directors or compensation committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.

There was a failure by each of the following to timely file their respective Form 4s: Li Zhou, Amy Kong, Jeffrey Kang, Mark Segall, and Mark Hauser (Messrs. Hauser and Seagall each failed to timely file two Form 4s.) There was a failure by Hope Ni and Bin Li to timely file their respective Form 3s. Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all other filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with during 2004.

Code of Ethics

On November 4, 2004, we adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our chief executive officer and chief financial officer—our principal executive officer and principal financial and accounting officer, respectively. This code is filed as Exhibit 14.1 to this Form 10-K.

The following summary compensation table sets forth the aggregate compensation awarded to, earned by, or paid to the chief executive officer and the other executive officers at December 31, 2004, whose annual compensation exceeded $100,000 for the fiscal year ended December 31, 2004:

Summary Compensation Table