1172319--4/7/2008--Home_System

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{customer, product, revenue}

{regulation, change, law}

{acquisition, growth, future}

{product, market, service}

{control, financial, internal}

{stock, price, share}

{personnel, key, retain}

{cost, regulation, environmental}

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{tax, income, asset}

{competitive, industry, competition}

RISKS RELATED TO OUR BUSINESS The increasing concentration of our small electric household appliance sales among a few retailers and the trend toward private-label brands could negatively affect sales levels or profits. We are susceptible to a material decrease in business if end-users of our products decide not to utilize our distributors. Our business could be adversely affected by retailer inventory management. We rely on only a few suppliers for the bulk of our raw materials and their non-performance would adversely affect our operations. We rely on three customers for the majority of our sales revenues and should their orders decrease or their relationship with us be terminated our business and operations would be adversely affected. The small electric household and appliance industry is consolidating, which could have a material adverse impact on our success. Competition may materially adversely affect our results of operations. We depend on consumer spending, which fluctuates for a variety of reasons, including seasonality. The failure of our business strategy could have a materially adverse effect on our business. Our future success depends on the development of new and innovative products on a consistent basis in order to increase revenues and we may not be able to do so. Our business can be adversely affected by newly acquired businesses or product lines. Government regulations could adversely impact our operations. Environmental regulations impose substantial costs and limitations on our operations. Our business involves the potential for product recalls and product liability claims. If we grow through acquisitions and fail to successfully integrate acquired companies, our operations could be disrupted and management could become distracted by integration issues. Expansion of our business may put added pressure on our management and operational infrastructure impeding our ability to meet any increased demand for our products and possibly hurting our operating results. We depend heavily on key personnel, and turnover of key employees and senior management could harm our business. We may be exposed to potential risks relating to our internal controls over financial reporting and our ability to have the operating effectiveness of our internal controls attested to by our independent auditors. Investor confidence and market price of our shares may be adversely impacted if we are unable to correct a material weakness in our internal controls over our financial reporting identified by our independent registered public accountants. RISKS RELATED TO DOING BUSINESS IN CHINA Adverse changes in political and economic policies of the PRC government could impede the overall economic growth of China, which could reduce the demand for our products and damage our business. Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us. The PRC government exerts substantial influence over the manner in which we must conduct our business activities. Restrictions on currency exchange may limit our ability to receive and use our sales revenue effectively. Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries ability to distribute profits to us or otherwise materially adversely affect us. We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations which became effective on September 8, 2006. Fluctuations in exchange rates could adversely affect our business and the value of our securities. New corporate income tax law could adversely affect our business and our net income. RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when you want to sell your holdings. We do not intend to pay dividends on shares of our common stock for the foreseeable future, but if we intend to do so our holding company structure may limit the payment of dividends to our stockholders.

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1172319--4/7/2008--Home_System_Group