1386019--3/31/2010--China_Skyrise_Digital_Service

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{regulation, change, law}

{operation, international, foreign}

{stock, price, share}

{condition, economic, financial}

{product, market, service}

{stock, price, operating}

{customer, product, revenue}

{product, liability, claim}

{debt, indebtedness, cash}

{system, service, information}

{financial, litigation, operation}

{property, intellectual, protect}

{provision, law, control}

{personnel, key, retain}

{acquisition, growth, future}

{product, candidate, development}

RISKS RELATED TO OUR BUSINESS Due to the nature of our business, we do not have significant amounts of recurring revenues from our existing customers and we are highly dependent on new business development. Our products often are subject to government testing, inspection and approval. We face risks related to general domestic and global economic conditions and to the current credit crisis. In order to grow at the pace expected by management, we will require additional capital to support our long-term growth strategies. If we are unable to obtain additional capital in future years, we may be unable to proceed with our plans and we may be forced to curtail our operations. Our business could be adversely affected by reduced levels of cash, whether from operations or from borrowings. We sometimes extend credit to our customers. Failure to collect the trade receivables or untimely collection could affect our liquidity. If our subcontractors fail to perform their contractual obligations, our ability to provide services and products to our customers, as well as our ability to obtain future business, may be harmed. If we are unable to attract and retain senior management and qualified technical and sales personnel, our operations, financial condition and prospects will be materially adversely affected. Management's estimates and assumptions affect reported amounts of expenses and changes in those estimates could impact operating results. In the event that adequate insurance is not available or our insurance is not deemed to cover a claim, we could face liability. Our quarterly operating results are likely to fluctuate, which may affect our stock price. Future government regulations or other standards could have an adverse effect on our operations. Our limited ability to protect our intellectual property, and the possibility that our technology could inadvertently infringe technology owned by others, may adversely affect our ability to compete. United Digital is a Hong Kong company, while our operating subsidiaries are PRC companies, and most of our officers and directors reside outside the United States. Therefore, certain judgments obtained against our Company by our shareholders may not be enforceable in Hong Kong or China. RISKS RELATED TO OUR INDUSTRY Our success relies on our management s ability to understand the residential digital safety and surveillance industry. If we are unable to respond to the rapid changes in our industry and changes in our customers requirements and preferences, our business, financial condition and results of operations could be adversely affected. We may not be able to maintain or improve our competitive position in the residential digital safety and surveillance industry, and we expect this competition to continue to intensify. Our business and reputation as a provider of high quality residential digital products and services may be adversely affected by product defects or performance RISKS RELATED TO DOING BUSINESS IN CHINA Changes in China's political or economic situation could harm us and our operating results. Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us. You may have difficulty enforcing judgments against us. The PRC government exerts substantial influence over the manner in which we must conduct our business activities. Future inflation in China may inhibit our ability to conduct business in China. Restrictions on currency exchange may limit our ability to receive and use our revenues effectively. Fluctuations in exchange rates could adversely affect our business and the value of our securities. Restrictions under PRC law on our PRC subsidiaries' ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our businesses. 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. Our business and financial performance may be materially adversely affected if the PRC regulatory authorities determine that our acquisition of Skyrise Technology constitutes a Round-trip Investment without MOFCOM approval. Under the New EIT Law, we may be classified as a resident enterprise of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders. We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business. RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY Our common stock is quoted on the OTC Bulletin Board which may have an unfavorable impact on our stock price and liquidity. We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock. Provisions in our articles of incorporation and bylaws or Nevada law might discourage, delay or prevent a change of control of us or changes in our management and, therefore depress the trading price of the common stock. We do not intend to pay dividends for the foreseeable future.

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1386019--3/31/2010--China_Skyrise_Digital_Service_Inc.