RESULTS OF OPERATIONS

Comparison of Fiscal Year 2005 Compared to Fiscal Year 2004

The following table presents the statement of operations for the year ended
December 31, 2005 and the results of operations for the periods ended of
December 31, 2004. The discussion following the table is based on the these
results.

                                            2005              2004

Sales, net                              $ 12,742,088   $ 1,412,276

Cost of sales                              8,971,859       718,785
   Gross profit                            3,770,229       693,491

Operating Expenses
  Selling expense                            165,780        46,793
  General and administrative expenses      1,202,359       261,751
  Goodwill impairment                      1,213,843
  Consulting Fees                                  -       598,000

      Total operating expenses             2,581,982       906,544

  Income from operations                   1,188,248      (213,053 )

Other (Income) Expense
  Interest income                             (3,877 )          (6 )
  Miscellaneous income                             -         5,141
  Interest expense                            32,856         3,468
      Total Other Income                      28,979         8,603

  Income before income taxes               1,159,269      (221,656 )

Provision for income taxes                   111,773        13,555

Net income                              $  1,047,496   $  (235,211 )

Net sales

Net sales for 2005 totaled $12,742,088 compared to $1,412,276 for 2004, an increase of $11,329,812, or approximately 802%. The increase was due to the expansion of our product lines in order to meet the needs of our customers in 2005 and also because the result of operations for 2004 only included the results from E'Jenie after the date of acquisition which was November 16, 2004.

Cost of Sales

Cost of sales for 2005 totaled $8,971,859, or approximately 70.4% of net sales, compared to $718,785, or approximately 50.9% of net sales, for 2004. The increase in cost of sales as a percentage of net sales was due to an increase in the cost of raw materials from the introduction of new product lines during 2004. As we increased our sales revenue in 2005 our cost of sales has also increased and also because the result of operations for 2004 only included the results from E'Jenie after the date of acquisition.

Operating Expense

Selling, general and administrative, and consulting fees for 2005 totaled $2,581,982, or approximately 20.3% of net sales, compared to 906,544, or approximately 64.2% of net sales, for 2004. This increase in operating expenses of $1,675,438, or approximately 185%, was due to $1,213,843 increase in goodwill impairment in 2005. Overall operating expenses increase due to the overall increase in sales and employees during the year ended December 31, 2005 and also because the result of operations for 2004 only included the results from E'Jenie after the date of acquisition which was November 16, 2004.

Income (Loss) from Operations

Income (loss) from operations for 2005 was $1,188,248 as compared to income from operations of $(213,053) for 2004, an increase of $1,401,301, or approximately 657.7%. This increase was due to the increase in our sales revenue and also because the result of operations for 2004 only included the results from E'Jenie after the date of acquisition which was November 16, 2004.

Interest Expense

Interest expense for 2005 totaled $32,856 compared to $3,468 for 2004, an increase of $29,388. The increase in interest expense was due to indebtedness related to the acquisition of fixed assets.

Net Income

Net income (loss) was $1,047,496 for 2005 compared to net income of $(235,211)for 2004, an increase of $1,282,707. The increase was due to an increase in our sales revenue and also because the result of operations for 2004 only included the results from E'Jenie after the date of acquisition which was November 16, 2004.

LIQUIDTY AND CAPITAL RESOURCES

China Digital, as the successor company, had no significant business operations or assets prior to the Acquisition. As such, the liquidity and capital resources described below of E'Jenie are the same for China Digital.

Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $2,061,213 at December 31, 2005 and current assets totaled $4,765,684 at December 31, 2005. The Company's total current liabilities were $1,416,719 at December 31, 2005. Working capital at December 31, 2005 was $3,348,965. We believe that the funds available to us are adequate to meet our operating needs for 2006. During 2005, net cash provided by operating activities was $2,087,181.

Capital expenditures

Total capital expenditures during the year ended December 31, 2005 was $535,843 for purchase of fixed assets.

Working Capital Requirements

Historically operations and short term financing have been sufficient to meet our cash needs. We believe that we will be able to generate revenues from sales and raise capital through private placement offerings of its equity securities to provide the necessary cash flow to meet anticipated working capital requirements. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Future expansion will be limited by the availability of financing products and raising capital.

Off Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.