UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2011
	For the fiscal year ended December 31, 2012
	OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ______________ to ______________

Commission file number 333-165751

SANTARO INTERACTIVE ENTERTAINMENT COMPANY

(Exact name of registrant as specified in its charter)

Nevada

Nevada	27-1571493
(State or other jurisdiction of	(IRS. Employer
incorporation or organization)	Identification No.)

(State or other jurisdiction of incorporation or organization)

901C, 9th Floor, Building 4, Courtyard 1

Shangdi East Road, Haidian District, Beijing 100025, The People’s Republic of China

(Address of principal executive offices, including zip code)

~~15911041464~~(8610) 82167111

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ¨ No x

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 the past 90 days.

~~YES~~Yes x NO No ¨

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x¨ Non-accelerated filer ¨ Smaller reporting company x (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ¨ No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $2924,~~998~~061,~~881~~425 based on the closing price of such shares on ~~March 9~~June 29, 2012.

As of March 915, ~~2012~~2013, there are 69,875,000 shares of common stock outstanding.

TABLE OF CONTENTS

	Page Number
Special Note Regarding Forward Looking Statements	1
PART I
Item 1. Business	2
Item 1A. Risk Factors	2519
Item 1B. Unresolved Staff Comments	2519
Item 2. Properties	2519
Item 3. Legal Proceedings	2519
Item 4. Mine Safety Disclosures	2519
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2519
Item 6. Selected Financial Data	2720
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2721
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	2327
Item 8. Financial Statements and Supplementary Data	3428
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	3629
Item 9A. Controls and Procedures	31
Item 9B. Other Information.	34
PART III
Item 10. Directors, Executive Officers and Corporate Governance	4034
Item 11. Executive Compensation	4639
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4741
Item 13. Certain Relationships and Related Transactions, and Director Independence	4842
Item 14. Principal Accounting Fees and Services	4943
Item 15. Exhibits, Financial Statement Schedules	51
PART IV
Item 15. Exhibits, Financial Statement Schedules	44
SIGNATURES

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve assumptions, and describe our future plans, strategies, and expectations. Such statements are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words of other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.

Such forward-looking statements include statements regarding, among other things, (a) the potential markets for our products, our potential profitability, and cash flows (b) our growth strategies, (c) anticipated trends in our industry, (d) our future financing plans and (e) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under "Item 1. Business" and "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations," as well as in this Annual Report on Form 10-K generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors as described in this Annual Report on Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report on Form 10-K will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to ensure that the required statements, in light of the circumstances under which they are made, are not misleading.

Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

All references in this Annual Report on Form 10-K to the terms “we”, “our”, “us”, “Santaro” and “the Company” refer to Santaro Interactive Entertainment Company.

ITEM 1. BUSINESS

ORGANIZATIONAL HISTORY

We were incorporated in the State of Nevada on December 30, 2009. We maintain our statutory registered agent's office at EastBiz.com, Inc., 5348 Vegas Drive, Las Vegas, NV 89108, and our business office is located at 901C, 9th Floor, Building 4, Courtyard 1, Shangdi East Road, Haidian District, Beijing, China. We have not been subject to any bankruptcy, receivership, or similar proceeding, or any material reclassification or consolidation.

On October 12, 2010, Santaro Interactive Entertainment Company (OTCBB: STIE.OB) (“STIE”) completed the acquisition of 100% of the issued and outstanding capital stock of Santaro Holdings, Ltd. (“SHL”), a limited liability company organized under the laws of British Virgin Islands ~~incorporated~~ on December 2, 2009, in exchange for Fifty Five Million Six Hundred Seventy Thousand (55,670,000) shares of STIE. As a result of the acquisition, SHL became our wholly owned subsidiary. As shown in the chart below, SHL’s ~~has one~~ wholly -owned subsidiary, Santaro Investments, Ltd, a Hong Kong corporation, was incorporated on January 27, 2010. Santaro Investments, Ltd.’s ~~has one~~ wholly -owned subsidiary, Ningbo Sntaro Network Technology Co., Ltd., a ~~Wholly~~wholly ~~Foreign~~foreign ~~Owned~~owned ~~Enterprise~~enterprise (“WFOE”) organized under the laws of the People’s Republic of China (“PRC”), ~~and~~was incorporated on July 13, 2010. Ningbo Sntaro Network Technology Co., Ltd. exercises contractual control over Beijing Sntaro Technology Co., Ltd. (the “Beijing Sntaro”), an operating company organized under the laws of the PRC, ~~and~~which ~~who~~ is principally engaged in the development and operation of online games. ~~Beijing~~ A detailed ~~Sntaro~~discussion ~~Technology~~regarding Cothe contractual arrangement may be found below under the caption “VIE Structure”., ~~Ltd~~Beijing Sntaro ~~has~~owned a 100% ~~ownership~~equity interest in Beijing Sntaro Freeland Network Co., Ltd, a company organized under the laws of the PRC, until December 31, 2012, when it transferred such interest to an unrelated third party. As a result of the transfer, FL Network ceased to be our subsidiary starting on December 31, 2012.

On July 18, 2011, Santaro Investments, Ltd established Outlets Internet Sale Limited jointly with New Select Group Limited, (an unrelated company incorporated in BVI), each ~~party~~holding ~~holds~~a 50% ~~shares~~ of ~~this~~the equity ~~newly established entity~~interest. The primary objective of the joint venture is ~~the~~to further ~~extension~~extend and ~~development~~develop of our ~~on-line~~online sales in the PRC.

3ORGANIZATIONAL STRUCTURE

$Z:\Vineyard\Live jobs\2013\03 Mar\27 Mar\Shift I\v336394 SANTARO INTERACTIVE ENTERTAINMENT COMPANY - 10K\Draft\06-Merge$

~~BUSINESS PROFILE~~ 3

~~Santaro~~VIE ~~Interactive~~Structure Entertainment Company primarily designs, develops and operates 3D online games, including web-based Massive Multiplayer Online Role-Playing Games (MMORPGs). Santaro’s main focus is on digital interactive entertainment products, primarily in developing and operating web-based multiplayer online games, based on its proprietary SOUL game engine and game development platform. For those unfamiliar with these complex virtual games, typically players spend weeks, even months, in a multiplayer online role-playing environment, adopting the role of a particular character — a warrior or a sorcerer, for example — developing skills and weapons, and engaging adversaries in a series of missions or combats.

~~Online~~PRC ~~Games~~regulations prohibit direct foreign ownership of business entities providing internet content, or ICP, services in the PRC such as the businesses providing online games. In September 2010, a series of contractual arrangements were entered into between Ningbo Sntaro and Beijing Sntaro, its individual owners. These arrangements were renewed in December 5, 2011 due to the change in the paid-in capital of Beijing Sntaro. Pursuant to the agreements, Ningbo Sntaro provides exclusive technical consulting and management services to Beijing Sntaro. A summary of the major terms of the agreements are as follows:

~~Santaro employs a development team of approximately 144 personnel, with strong Research and Development~~ (~~R&D~~1) ~~expertise~~Ningbo ~~and~~Sntaro ~~experience~~has ina ~~the~~decisive ~~online~~right ~~game~~to ~~industry~~determine inthe ~~China~~amount ~~and~~of ~~Korea. Since~~ the ~~company~~fees ~~was founded~~ it ~~has~~will ~~invested~~receive ~~heavily in developing its proprietary SOUL game engine~~ and ~~building~~it ~~new~~intends ~~online games. In addition, Santaro has established relationships and agreements~~ to ~~cooperate~~transfer ~~with~~substantially ~~telecommunications~~all ~~operators~~of ~~and~~the ~~other~~economic ~~value-added~~benefits ~~service~~of ~~providers~~Beijing toSntaro ~~develop and distribute its online games services~~ to 3GNingbo ~~mobile subscribers. Santaro intends to develop and distribute products for specific market segments in the digital interactive entertainment sector.~~Sntaro;

To(2) ~~date,~~The ~~Santaro~~equity ~~has~~owners ~~three online games: Three Kingdoms Online, UU World, and 108 Warriors. Three Kingdoms Online game is now in the post-development adjusting phase; 108 Warriors is scheduled to be launched in June~~ of ~~2012;~~Beijing ~~and~~Sntaro UUirrevocably ~~World~~granted isNingbo ~~undergoing~~Sntaro ~~final testing. While~~ the ~~Company’s~~right ~~main focus is~~ to ~~ensure~~make ~~its~~all ~~current~~operating ~~games will succeed in the market, it is also establishing a strategy~~ and ~~timetable~~business decisions for ~~developing~~Beijing ~~future~~Sntaro ~~games~~on tobehalf ~~position~~of ~~itself as a leading and innovative operator in~~ the ~~Chinese~~equity ~~online game sector.~~owners;

~~SOUL~~(3) ~~Game~~All ~~Engine~~equity owned by the three equity owners of Beijing Sntaro shall be pledged to Ningbo Sntaro as collateral for the service fee payable to Ningbo Sntaro; and

~~Santaro~~(4) ~~has~~The ~~developed~~equity ~~its~~owners ~~own~~of ~~proprietary~~Beijing ~~game~~Sntaro ~~engine~~may ~~technology~~not ~~for~~dispose ~~the development~~ of ~~MMORPGs~~or –enter ~~named~~into ~~the~~any ~~SOUL~~other ~~game~~agreements ~~engine.~~involving ~~Three~~all ~~Kingdoms Online~~ and UUany ~~World~~of ~~have both been developed using~~ the ~~SOUL~~equity ~~engine~~interest ~~and, in future, this engine will continue to be used for the development~~ of ~~both MMORPGs and web games. In March 2009, Santaro established technology subsidiary~~ Beijing Sntaro ~~Freeland~~without ~~Network~~prior ~~Co.~~agreement ~~Ltd~~by ~~(FL~~Ningbo ~~Network), whose primary business is research and development into applying Chinese culture and history to the online game industry~~Sntaro. ~~This subsidiary is also responsible for the proprietary SOUL game engine and game development platform.~~

~~Film~~Pursuant ~~Studios~~to the above arrangements, all of the equity owners' rights and obligations of Beijing Sntaro were assigned to Ningbo Sntaro, which resulted in the equity owners of Beijing Sntaro inability to make decisions that have a significant effect on Beijing Sntaro's operations, and enable Ningbo Sntaro to extract the profits from the operation of Beijing Sntaro and assume Beijing Sntaro's residual benefits. Because Ningbo Sntaro and its indirect parent are the sole interest holders of Beijing Sntaro, the Company consolidated Beijing Sntaro from its inception consistent with the provisions of FASB Accounting Standards Codification ("ASC") 810.

4In addition, since all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they will be interpreted in accordance with PRC law and any disputes will be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these contractual arrangements, it may not be able to exert effective control over Beijing Sntaro and its ability to conduct its business may be materially and adversely affected.

~~One~~None of the ~~key~~assets ~~strategies~~of ~~adopted~~the variable byinterest ~~Santaro~~entities (the is“VIEs”) ~~developing~~can ~~games~~be ~~based~~used onto ~~well-known~~settle ~~themes~~obligations ~~and~~of ~~stories~~the ~~popular~~consolidated ~~with~~VIE. ~~film~~Conversely, ~~directors~~liabilities ~~keen~~recognized toas ~~make~~a result ~~movies~~of ~~and/or~~consolidating TVthe ~~series~~VIEs ~~based~~do onnot ~~these~~represent ~~tales.~~additional ~~Some~~claims ofon the ~~advantages and benefits for the~~ Company’s ~~using~~general ~~this strategy include:~~assets.

·Most ~~The~~of ~~existence~~our ofoperations are aconducted ~~particular~~through ~~game~~our ~~will~~affiliates bethat ~~known~~the byCompany acontrols ~~larger~~through ~~number~~contractual agreements in the form of VIEs. ~~online~~Current ~~game~~regulations ~~players~~in ~~due~~China permit our PRC subsidiaries to ~~the~~pay ~~popularity~~dividends only out of accumulated distributable profits, if any, determined in accordance with their articles of association and~~/or~~ ~~success~~PRC accounting standards and regulations. The ability of ~~the~~these ~~movie~~Chinese affiliates to pay dividends may be restricted by factors that include changes in applicable foreign exchange and other laws and regulations.

·A. ~~Online~~Under ~~game~~PRC ~~players~~law, ~~will~~our ~~familiarize~~subsidiary ~~themselves~~may ~~more~~only ~~easily~~pay ~~with~~dividends ~~the~~after ~~content~~10% ~~and~~of ~~background~~its ofafter-tax ~~the~~profits ~~game~~have been set aside as ~~the~~reserve ~~story~~funds, ~~will~~unless ~~already~~such reserves have reached at least 50% of its registered capital. Such cash reserve may not be ~~popular~~distributed as cash dividends.

·B. The ~~awareness~~PRC ofIncome ~~the~~Tax ~~game~~Law inalso ~~the~~imposes ~~market~~a ~~will~~10% bewithholding ~~faster~~income tax on dividends generated on or after January 1, ~~especially~~2008 and distributed by a resident enterprise to its foreign investors, if ~~the~~such ~~launching~~foreign ofinvestors are considered a non-resident enterprise without any establishment or place in China, or if the ~~game~~dividends ~~coincides~~have ~~closely~~no connection with ~~the~~such ~~launch~~foreign investors’ establishment or place in China, unless such foreign investors’ jurisdiction of ~~the~~incorporation ~~movie~~has ora TVtax ~~series~~treaty with China that provides for a different withholding arrangement.

~~· The game will attract new online game players who are movie fans, and then want to enjoy the story on a different entertainment platform~~4

~~The~~All ~~Company~~of ~~has~~our ~~already~~current ~~established~~revenue is ~~close~~generated ~~working relationships with major film studios and movie directors~~ in ~~China,~~PRC ~~such~~currency asRenminbi ~~the Director Mr~~(“RMB”). ~~Xixi~~Any ~~Gao. These~~future ~~cooperative~~restrictions ~~relationships~~on ~~extend~~currency toexchanges ~~films~~may ~~and~~limit TVour ~~series~~ability to ~~directed~~use bynet ~~Mr.~~revenues ~~Gao,~~generated ~~including~~in ~~the hit TV series Three Kingdoms. Three Kingdoms Online is based on a well-known Chinese fable~~Renminbi, ~~and~~to ~~capitalizes~~make ondividends ~~the~~or ~~success~~other ofpayments ~~the~~in ~~TV series sharing its name~~U. ~~Because~~S. ~~Santaro has built good relationships with a number of TV channels~~dollars, ~~the~~or ~~Three~~fund ~~Kingdoms~~possible ~~Online~~business ~~game~~activities outside ~~will be advertised on these TV channels~~China.

~~ONLINE~~Foreign ~~GAME~~currency ~~PRODUCTS~~ exchange regulation in China is primarily governed by the following rules:

~~The~~· ~~following~~Foreign isExchange anAdministration ~~overview~~Rules of(1996), ~~Santaro’s~~as ~~portfolio~~amended ofin ~~its~~August ~~three self-developed online games~~2008, ~~these~~or ~~include:~~the I)Exchange ~~Three Kingdoms Online~~Rules; ~~II) UU World; and III) 108 Warriors.~~

I· Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996) ~~Three~~, ~~Kingdoms~~or ~~Online~~the Administration Rules.

~~Three~~Under ~~Kingdoms~~the ~~Online takes~~Administration Rules, ~~the~~RMB ~~ancient~~is ~~history~~freely ofconvertible ~~China~~for ascurrent account items, including the ~~background~~distribution toof ~~promoting~~dividends, ~~Chinese~~interest ~~martial~~payments, ~~arts~~trade and service ~~culture~~related inforeign aexchange ~~traditional~~transactions, ~~way.~~but ~~This~~not ~~new~~for ~~game~~capital isaccount ~~based~~items, onsuch ~~the~~as ~~‘Three~~direct ~~Kingdoms’~~investments, ~~(‘Three~~loans, ~~Kingdoms’~~repatriation of ~~translated~~investments and investments in ~~Chinese~~securities isoutside ~~‘SanGuo’)~~of China, aunless ~~well-known~~the ~~historic~~prior ~~Chinese~~approval ~~fable.~~of ~~The~~the ~~Three~~SAFE ~~Kingdoms~~is ~~period~~obtained inand ~~220~~prior –registration with ~~280~~the ADSAFE is ~~one~~made. ofForeign-invested ~~the~~enterprises ~~bloodiest~~like inours ~~Chinese~~that ~~history~~need ~~and~~foreign isexchange ~~part~~for ofthe andistribution ~~era~~ of ~~disunity,~~profits ~~the~~to ~~Six~~their shareholders ~~Dynasties,~~may ~~following~~affect ~~the~~payment ~~loss~~from oftheir ~~power~~foreign ofexchange ~~the~~accounts ~~Han~~or ~~Dynasty~~purchase ~~emperors. Although~~and ~~relatively~~pay ~~short,~~foreign ~~this~~exchange ~~historic~~rates ~~period~~at ~~was~~the ~~full~~designated foreign ofexchange ~~power~~banks ~~struggles,~~to ~~and~~their ~~the~~foreign ~~sophisticated~~shareholders ~~military~~by ~~strategies~~producing ~~have~~board ~~been~~resolutions ~~greatly~~for ~~romanticized~~such inprofit ~~the~~distribution. ~~cultures~~Based ofon ~~China~~their needs, ~~Japan~~foreign-invested ~~and~~enterprises ~~Korea.~~are ~~Celebrated~~permitted ~~and~~to ~~popularized~~open ~~over~~foreign ~~the~~exchange ~~centuries~~settlement inaccounts ~~operas,~~for ~~folk~~current ~~tales~~account receipts and payments ~~novels~~of inforeign ~~more~~exchange ~~recent~~along ~~times,~~with ~~the~~specialized ~~Three~~accounts ~~Kingdoms~~for ~~saga~~capital ~~has~~account ~~now~~receipts ~~been~~and ~~produced~~payments inof ~~films,~~foreign ~~television~~exchange ~~series,~~at ~~and~~certain designated ~~video~~foreign ~~games~~exchange banks.

~~Contrary~~BUSINESS to other games based on the Three Kingdoms legend which are either formatted into western fantasy-style games or into more traditional Japanese-style games, Three Kingdoms Online reproduces the Three Kingdoms scenes very closely to reality with the help of strong historical content, thereby allowing players to have a better and more accurate feeling for the game.OVERVIEW

~~Three~~Santaro ~~Kingdoms~~Interactive Entertainment ~~Online~~Company ~~players~~is ~~need~~a todevelopment ~~choose~~stage acompany ~~Kingdom~~that primarily designs, develops and ~~start~~operates ~~the~~web-based ~~game~~Massive inMultiplayer Online ~~their~~Role-Playing ~~first~~Games ~~role~~(MMORPGs), asmobile agames, ~~soldier.~~browser ~~Players~~game ~~can~~platforms, ~~enjoy~~as ~~reaching~~well ~~characters’~~as ~~levels~~related products and ~~earning~~services. ~~free~~We ~~points~~launched our ~~under~~first MMORPG, the ~~easy~~108 ~~level-playing feature~~Warriors, and ~~are~~a ~~enthralled~~browser bygame ~~the~~platform, ~~large-scale~~www.1799.com, ~~lifelike~~in ~~combat~~August 2012 and ~~war~~November ~~systems~~2012, respectively. We ~~Players~~are ~~not~~in ~~only~~the ~~have~~process toof ~~focus~~developing ona ~~the~~number ~~characters’~~of ~~individual~~web-based ~~abilities,~~and ~~but~~mobile ~~must~~games, ~~also~~including ~~attach~~League ~~importance~~of toChibi ~~using~~Warriors ~~additional~~and ~~equipment~~Rainblood Zero to(temporary), ~~get~~which ~~more~~are ~~power~~excepted to ~~defeat~~be ~~the~~released ~~enemies~~in ~~through~~the athird ~~card~~quarter ~~system~~of 2013.

5MMORPGs

~~Cards~~Santaro ~~offer~~employs ~~instant~~a ~~magical~~development ~~power~~team towith ~~attack~~strong ~~the~~Research ~~enemy~~and Development ~~mercilessly,~~(R&D) ~~which~~expertise isand ~~usually~~experience ~~a decisive factor~~ in the ~~battle.~~online ~~Players~~gaming ~~can~~industry ~~recruit~~in ~~their~~China ~~own~~and ~~army~~Korea. Since ~~once~~our ~~they~~establishment, we have ~~accumulated~~invested ~~enough~~heavily ~~Reputation Score points, a feature which is separate from the various grades a player can obtain. Players~~ in ~~the~~developing ~~virtual~~proprietary ~~world~~SOUL ~~can~~Game ~~choose~~Engine toand ~~kill~~Coral ~~other~~Game ~~players~~Engine onfor anew ~~one-to-one~~MMORPG ~~‘Player Kill’ (PK) or on a massive army PK~~development. In ~~Contestants~~August 2012 ~~will~~Santaro ~~need~~launched toits ~~fight~~first ~~their way up the hierarchy to become the King of all Lands~~MMORPG, ~~who has all~~ the ~~power~~108 ~~and privileges, commands the army in war and tries to unite all the tribes~~Warriors.

InThe ~~terms~~108 ~~of technology for the Three Kingdoms Online, it uses a 2.5D rotating mode, and the MMROPG has achieved several breakthroughs:~~Warriors

·Our ~~The~~first ~~background~~MMORPG, ~~map~~the 108 Warriors, is ~~four~~a ~~times~~new ~~bigger~~Chinese ~~than~~martial arts ~~those~~online ~~seen~~game inbased ~~comparable~~on ~~online~~traditional ~~games~~Chinese culture and inspired by ancient martial arts techniques. The game involves the twelve animals of the Chinese Zodiac, with masks from the Beijing Opera used to identify various characters. Players will be able to purchase different identities and the themes used are linked to the tribes of Chinese minority groups.

·108 ~~The~~Warriors ~~game~~tells isstories of a ~~cross-server~~group ~~game,~~of ~~allowing~~heroes ~~players~~who tostand ~~have~~for different aclasses ~~better~~of ~~personal~~people ~~experience,~~daring ~~with~~to astruggle ~~sense~~against ofthe ~~accomplishment~~corrupt and ~~honor~~unjust royal court and then rise up at the end of Northern Song Dynasty. ~~This~~It is ana ~~important~~realistic ~~feature~~martial-art ~~that~~game ~~Santaro’s~~based ~~programming~~on ~~team~~one ~~has~~of ~~successfully~~the ~~developed~~Four ~~compared~~Chinese toClassical ~~other~~Masterpieces, ~~games~~Outlaws of the Marsh.

~~One~~108 ofWarriors ~~the~~won ~~key aspects of~~ the ~~game~~Golden isPlume ~~that~~Award ~~its~~in ~~promotion~~2012 ~~benefits~~for ~~from~~“Best Originality ~~the~~Online ~~CCTV~~Game” ~~production~~after ~~SanGuo TV series. The promotion can be done through not only~~ the TVrelease ~~series,~~of ~~but also~~ the ~~internet and other channels~~3.1.6 ~~Three~~version ~~Kingdoms~~in ~~Online game will be advertised alongside the SanGuo TV series~~August, ~~both on television and on DVDs~~2012. The ~~preparation~~Golden ofPlume ~~the~~Awards ~~SanGuo~~is TVconsidered ~~series~~the most ~~consisting~~important ofaward 95in ~~episodes~~the ~~started~~online ~~about~~gaming ~~five~~industry ~~years ago, with filming commencing~~ in ~~September 2008~~China. The ~~SanGuo~~award TVis ~~series~~voted ~~production~~on ~~premiered~~by onmore TVthan on50 ~~May~~million 2,gamers ~~2010,~~across ~~simultaneously~~China is onnotorious ~~Jiangsu~~for ~~JSTV,~~providing ~~Anhui~~the ~~AHTV,~~best-representing ~~Tianjin~~of ~~TJTV~~gamers ~~and~~in ~~Chongqing~~Chinese ~~CQTV~~gaming industry.

~~In summary, the key strengths of the Three Kingdoms Online game include:~~5

·As ~~Theme~~of ~~and~~December ~~Scenario:~~31, ~~The~~2012, ~~theme~~there were 203,734 registered users since the development of ~~Three~~the ~~Kingdoms~~game, orincluding ~~SanGuo~~69,069 isregistered ~~greatly~~since ~~loved~~the ~~and~~open ~~very~~beta ~~popular~~release ~~with~~in ~~Chinese~~August ~~players~~2012.

·We ~~Picture:~~expect ~~exciting~~that ~~game~~a ~~pictures~~new server will ~~show~~be anopened ~~accurate~~in ~~battlefield~~April 2013. The total registered members of 108 Warriors in the ~~Three~~fiscal ~~Kingdoms~~year 2013 is expected to reach approximately 500,000.

·Other ~~Game Experience: The game is designed so that thousands of people can fight for the imperial power and ascension to the throne~~MMORPGs

~~· Sophisticated System:~~ The ~~multiple~~following ~~mission~~is ~~equipment~~an ~~system~~overview ~~allows~~of ~~different~~other ~~scenarios~~MMORPGs ~~and~~in ~~outcomes which gives the player more options to choose from~~development.

·UU ~~Film~~World. UU World is a competitive leisure racing game, and ~~Television~~is ~~Resources:~~the first game in Santaro’s UU World library, which will ~~cooperate~~consist ~~with~~of ~~the~~a ~~new~~series ~~SanGuo~~of TVsimilar ~~Series~~and separate role-playing games (RPGs). Players will be able to communicate, trade tools, and ~~match~~conduct various activities in the lobby of UU World. UU World is a platform for online game ~~roles~~users ~~with~~to switch from one game to another. New games will be added to UU World in the TVfuture, ~~characters~~such as UU Combat, ~~including~~UU ~~using~~Air ~~the~~Battle, TVUU ~~actors’~~Golf, ~~voices~~UU Tennis and UU Fishing. Although these games are separate from each other, tools obtained in one game can be used in another.

~~The~~UU ~~Three~~World ~~Kingdoms~~was ~~Online~~suspended ~~game~~due isto ~~currently~~changes of market perspectives in the ~~post-development~~industry ~~adjusting~~and ~~phase~~we expect to further modify and optimize the contents and designs of the game in the future.

6Browser Games Platform

~~II) UU~~In ~~World~~November 16, 2012, the Company established the web browser game platforms www.05yx.com, which later rebranded to www.1799.com. The website focus on providing a platform to Santaro’s self-developed browser games as well as higher quality third party games. The platform distributes games such as MMORPG, simulation games, board games, puzzle games and social games. The focus of the platform is to provide diversification and to make available a wide variety of games that appeal to a large and diverse spectrum of users. At the end of 2012, Santaro entered into distribution agreements with five third party game developers, pursuant to which we will distribute six new massive multiplayer online role-playing browser games developed by those developers.

UUThe ~~World~~following isare asome ~~competitive~~brief ~~leisure~~descriptions ~~racing game, and is the first game in Santaro’s UU World library, which will consist~~ of ~~a series of similar and separate Role Play Games (RPGs). Players will be able to communicate, trade tools, and conduct various activities in~~ the ~~lobby of UU World. However, UU World is not really a RPG, but is the platform for online game users to switch from one game to another. New~~ games ~~will be added to UU World in the future, such as UU Combat, UU Air Battle, UU Golf, UU Tennis and UU Fishing~~. ~~Although these games are separate from each other, tools obtained in one game can be used in another. It is more likely a Social Game, with some MMORPG elements, such as various skills and monsters.~~

UUHeroes ~~World~~of isSango. Redesigned ~~the~~from ~~first~~Santaro’s ~~water-based~~development stage ~~and~~MMORPG, ~~obstacle~~the ~~course~~Three ~~race~~Kingdoms 3DOnline, ~~online~~Heroes ~~game~~of toSango beadopts ~~launched in~~ the ~~Chinese~~ancient ~~market.~~history ~~Water~~of isChina as the ~~basic~~background ~~design~~to ~~foundation~~promoting ~~and~~Chinese martial ~~the~~arts ~~game~~and ~~offers~~culture in a ~~series~~traditional ofway. ~~diversified~~This ~~scenes,~~new ~~with~~game ~~various~~is ~~levels~~based ofon ~~complexity~~the ~~and~~‘Three ~~interactive~~Kingdoms’ ~~elements~~(‘Three ~~added~~Kingdoms’ translated ~~throughout~~in ~~the~~Chinese ~~race;~~is ~~these~~‘SanGuo’), ~~include~~a ~~sharks~~well-known ~~chasing~~historical ~~players~~novel. inThe ~~the~~Three ~~water~~Kingdoms period, ~~high-jumping~~from ~~and~~220 ~~diving~~– ~~platforms~~280 AD, ~~falling~~is ~~coconuts,~~one ~~etc.~~of Itthe isbloodiest ain ~~fun~~Chinese ~~non-violent~~history ~~game~~and ~~where~~is ~~players~~part ~~can~~of ~~race~~an ~~boats~~era ~~and~~of ~~jet~~disunity, ~~skis.~~the ~~The~~Six ~~game~~Dynasties, ~~adopts~~following athe ~~cute~~loss ~~cartoon-style~~of ~~character~~power of ~~setting~~the ~~and~~Han ~~design~~Dynasty ofemperors. ~~dynamic~~Although ~~racing~~relatively ~~tracks~~short, ~~and~~this ~~imitates~~historic ~~different~~period ~~effects~~was full of ~~boat~~power ~~racing~~struggles, onand ~~water~~the ~~due~~sophisticated military tostrategies ~~different~~have ~~speed~~been ~~and~~greatly ~~weight~~romanticized ofin ~~each~~Chinese, ~~boat~~Japanese and Korean cultures. ~~Some~~Celebrated ~~complex~~and ~~key~~popularized ~~technology~~over ~~features~~the centuries ~~have~~in ~~been~~operas, ~~integrated~~folk totales ~~deliver~~and ~~more~~novels ~~visual~~in ~~impact~~more torecent times, the ~~race~~Three ~~and~~Kingdoms ~~further~~saga ~~enrich~~has ~~the~~now ~~experience~~been ~~and~~produced ~~fun~~in ~~for~~films, ~~the~~television series, ~~players~~and video games.

UUContrary ~~World~~to ~~game~~other isgames ~~currently~~based inon ~~its~~the ~~final~~Three ~~phase~~Kingdoms legend which are either formatted into western fantasy-style games or into more traditional Japanese-style games, Three Kingdoms Online reproduces the Three Kingdoms scenes very closely to reality with the help of ~~development~~strong historical content, thereby allowing players to have a better and more accurate feel for the game.

~~III) 108~~Three ~~Warriors~~Kingdoms Online players need to choose a kingdom and start the game in their first role as a soldier. Players can enjoy reaching character levels and earning free points under the easy level-playing feature, and are enthralled by the large-scale lifelike combat and war systems. Players not only have to focus on the characters’ individual abilities, but must also attach importance to using additional equipment to get more power to defeat the enemies through a card system.

108 Warriors is a new Chinese martial arts online game based on traditional Chinese culture and inspired by ancient martial arts techniques. The game involves the twelve animals of the Chinese Zodiac, with masks from the Beijing Opera used to identify the various characters. Players will be able to purchase different identities and the themes used are linked to the tribes of Chinese minority groups.6

~~108~~Cards ~~Warriors~~offer ~~tells~~instant ~~stories~~magical ofpower ~~a group of heroes who stand for different classes of people daring~~ to ~~struggle~~attack ~~against~~ the ~~corrupt~~enemy, ~~and~~which is ~~unjust~~usually ~~royal~~a ~~court~~decisive ~~and~~factor ~~then~~in ~~rise~~battle. upPlayers atcan ~~the~~recruit ~~end~~their ofown ~~Northern~~army ~~Song~~once ~~Dynasty.~~they Ithave isaccumulated aenough ~~realistic~~points, ~~martial-art~~a ~~game~~feature which ~~based~~is onseparate ~~one~~from of the ~~Four~~various ~~Chinese~~grades ~~Classical~~a ~~Masterpieces,~~player ~~Outlaws~~can ofobtain. ~~the~~Contestants ~~Marsh. Heroes~~will inneed ~~Mountain~~to ~~Liang~~fight ~~hang~~their way up the ~~flag~~hierarchy to ~~“maintain~~ become the ~~justice~~King ~~in the name~~ of ~~God”.~~all ~~Fang~~Lands, Lawho ishas ~~one~~all of the ~~rebel~~power ~~leaders~~and ~~based~~privileges, incommands the ~~south.~~army ~~The emperor draws on various heroes~~ in ~~military~~war ~~campaigns to suppress rebel forces. Different forces fight openly~~ and ~~secretly.~~tries ~~Under~~to ~~the~~unite ~~circumstances,~~all ~~young~~of ~~heroes from Penglai Island stepped into~~ the ~~history~~tribes.

~~108~~The ~~Warriors~~Three Kingdoms Online game is currently in ~~the final~~ post-development stage ~~and scheduled to be launched in June of 2012~~.

~~Some~~New ~~Key~~Fantasy ~~Characteristics~~City. Developed by Funcity Inc., New Fantasy City was launched on November 16, 2012. The game is a cartoon-style turn-based MMORPG web browser game. It includes multiple battling systems such as group battles and Dungeons. The game has a total of 44 Bosses to compete with, making the game a unique style in the industry. Under the agreement with Funcity, Inc., Santaro’s ~~Online~~is ~~Games~~entitled to 65% of the monthly revenue derived from distributing the game if the monthly revenue is less than RMB300,000 (approximately US$48,000), and is entitled to 70% of the monthly revenue if the monthly revenue is at greater than or equal to RMB300,000 (approximately US$48,000).

7Swooned Journey to the West. Developed by Guangzhou Jieyou Software Co., Ltd., Swooned Journey to the West was launched on November 23, 2012. The game’s storyline is based on one of the four masterpieces of Chinese ancient literature, Journey to the West. The game is integrated with multiple elements, including adventure, role-playing, etc. The featured graphic design and visual effects make it a fun playing game. Under the agreement with Jieyou Software Co., Ltd., Santaro is entitled to 60% of monthly revenue derived from distributing the game if the monthly revenue is less than RMB1,000,000 (approximately US$160,000), and is entitled to 65% of the monthly revenue if the monthly revenue is at greater than or equal to RMB1,000,000 (approximately US$160,000).

Battle of Thousand Heroes. Developed by Gamewave Group, Battle of Thousand Heroes was launched on November 30, 2012. The ~~table~~game ~~below~~is ~~provides~~an action MMORPG based on the popular theme, the Three Kingdom. It has a ~~summary~~faction ofbattle system which makes it unique from other web browser games. The faction battle system was originally introduced from client-based MMORPGs and the ~~key~~system ~~characteristics~~can ofoften attract more users to join and play the game. Under the agreement with Gamewave Group, Santaro’s ~~first~~is ~~three~~entitled ~~new~~to ~~games:~~65% of monthly gross revenue derived from distributing the game.

	Three Kingdoms Online	UU World	108 Warriors
Technical Info
Game Type	MMORPG	MMORPG	MMORPG
Games Features	Chinese Culture Ancient Legends	Jet-Skiing on Water Racing Social Game	Chinese Culture Ancient Legends
Game Mode	Full 2.5D	Full 3D	Full 2.5D
Web-Based	Yes	Yes	Yes
Input Equipment
Keyboard	Yes	Yes	Yes
Mouse	Yes	Yes	Yes
Launch Info
Launch Date	TBA	TBA	June 2012

Fallen Immortals. Developed by Guangzhou Mingchao Network Co., Ltd. Fallen Immortals was launched on December 20, 2012. The game is a cartoon-style action game which has a sophisticated item system and a dungeon system as well. The game’s storyline is based on fantasy fairytales, such as immortals fallen into the human land and conquer the devils and other enemies. Under the agreement with Mingchao Network Co., Ltd., Santaro is entitled to 60% of monthly revenue derived from distributing the game if the monthly revenue is less than RMB200,000 (approximately US$32,000), and is entitled to 65% of such monthly revenue if such revenue is at greater than or equal to RMB200,000 (approximately US$32,000).

~~BUSINESS~~Additionally, ~~STRATEGY~~ the Company has entered into distribution agreements with Shanghai UUZU Information Technology Co., Ltd., Guangzhou Xianhai Network Technology Co., Ltd., and Beijing Babeltime Technology Co., Ltd., pursuant to which the Company will distribute the games Knight Saga, a role playing MMORPG which won the 2012 Golden Plume Award for “User Most Enjoyed Top Ten Webgame”, the General, a simulation game (SLG) which won the 2012 Golden Plume Award for “User Most Anticipated Top Ten Webgame”, Warlord Flame, and Blood King Someday.

~~Santaro~~During ~~has~~the ~~set~~fiscal upyear an2012, ~~advanced~~we ~~in-house~~believe ~~graphic technology games platform~~ that ~~should~~we ~~position~~have ~~the~~enhanced our ~~Company~~game asportfolio ~~one~~through ofagreements ~~the~~with ~~leading~~quality ~~online games companies. Current test results~~ and ~~market~~award-winning ~~assessments~~developers ~~show~~for ~~that~~our ~~the~~expanding ~~Company~~user ~~is continuing to develop attractive products~~base. ~~Santaro’s~~We ~~intention~~intend is to ~~offer~~broaden our ~~games~~strategic ~~that~~relationships ~~are~~in ~~not~~China ~~only~~as ~~fun~~well toas ~~play,~~internationally ~~but~~in ~~that also provide a good forum for understanding and learning about ancient Chinese history~~2013.

ItMobile is the combination of a strong professional team with an entrepreneurial spirit, the current advanced technology and the operating platform that Santaro has in place, which will allow the Company to continue developing new and innovative online games. To achieve a leading position in this competitive market segment, the Company intends to produce two new MMORPGs and at least three web games over the next five years, in addition to the three games described above. The design and themes of the games will feature different graphic styles and characteristics, so that they meet the needs and requirements of a diversified group of consumers. The Company also intends to ensure it keeps up with advances in technology, and plans to develop at least another new game engine to stay ahead of its industry competitors.Games

~~Over~~Mobile ~~the~~games ~~coming~~are ~~few~~commonly ~~years,~~referred ~~the Company’s intention is~~ to ~~sell~~the ~~its online~~ games ~~not~~that ~~only~~are indeveloped specifically ~~China,~~for ~~but~~smart ~~also~~phones inand ~~various~~other ~~Asia-Pacific~~portable ~~markets~~devices. ~~The~~According ~~themes~~to ofPyramid Research, the ~~games~~mobile ~~and~~gaming ~~their~~market ~~running~~is ~~mode~~predicted to ~~will~~reach be$18 ~~designed~~billion inby a2014 ~~way~~due ~~that~~to ~~provides~~ the ~~best~~growing ~~commercial~~number ~~prospects~~of wireless subscribers in ~~these~~emerging markets. ~~This~~such ~~means~~as ~~that~~Brazil, ~~emphasis~~China, ~~will~~India, Mexico, beNigeria, onPoland, ~~equipment~~Russia and ~~point~~South ~~card sales, supplemented by engine sales~~Africa. ~~Because~~Therefore the Company ~~also~~believes ~~will~~that, ~~sell~~with ~~its~~the ~~games~~huge innumber ~~overseas~~of ~~markets~~smart ~~other~~phone ~~than~~users increasing ~~Asia-Pacific~~in China, the ~~themes~~mobile ~~selected~~game ~~for~~sector ~~these~~will ~~games~~be ~~are~~the ~~being tailored to themes that meet international players~~Company’s ~~tastes~~next ~~and~~revenue ~~needs~~generating point.

~~TECHNOLOGY~~ As of December 31, 2012, Santaro was in the process of developing two mobile games that are expected to be released in 2013.

~~SOUL~~League ~~Game~~of ~~Engine~~Chibi Warriors

~~Content~~League ~~might~~of beChibi ~~king,~~Warriors ~~but~~is ~~when~~a itcartoon-style ~~comes~~collectible tocard game ~~Internet content, keeping up with technological innovation is just as crucial~~(CCG). ~~Companies~~ ~~are~~Users ~~continually~~can ~~developing~~access ~~new games with the latest technological tools to attract more users~~ and ~~boost~~control ~~revenues. Without~~a ~~its~~variety ~~own~~of ~~game~~different ~~engine,~~legendary aheroes ~~company~~from ~~cannot~~different ~~understand~~times inthroughout ~~any depth~~ the ~~key~~Chinese ~~drivers needed for developing an online game~~history. With ~~This~~all iskinds ~~the~~of ~~reason~~card-evolving ~~why~~and ~~Santaro~~breeding ~~decided to develop its own proprietary advanced online engine product~~systems, ~~which it calls~~ the ~~SOUL~~users’ ~~Game~~desire ~~Engine.~~of ~~Santaro’s~~collecting ~~proprietary~~cards ~~technology~~ will ~~support~~be ~~over~~fulfilled ~~40,000~~in ~~simultaneous~~the ~~players. This is a larger concurrent user capacity than~~ most possible ~~online~~way ~~game~~by ~~companies~~thousands ~~are currently able to operate in China. Below is a brief description~~ of ~~the~~different ~~six~~kinds ~~key components~~ of ~~the SOUL Game Engine, these include: World Map Editor, Physical Properties Tool, Physical Effects Tool, Visual Material Tool, Artificial Intelligence Tool, and User Interface Tool~~cards.

~~World~~The ~~Map~~beta ~~Editor~~version of the game is expected to be released in May 2013, and we expect to launch the game in July 2013. Also we expect that the total revenue of the fiscal year of 2013 for this game will be approximately RMB 5.7 million (approximately USD 900,000).

~~With~~Rainblood ~~highly~~Zero sophisticated computer graphic design techniques and editors, art designers can build colorful topography and geomorphology through a basic height picture that is dynamic and flexible. Different levels of blending materials can be used, including displacement mapping, normal mapping and all kinds of complicated textures. For example, a rough and winding gravel path can be designed through the hills, and tracks covered with various types of plants and vegetation. The SOUL Game Engine’s map editor completely supports the conversion between indoor and outdoor environments and also enables dynamic features per pixel for light and shade effects. With the synthesizing of the world map editor, the game can show and simulate waves, realistic fire, smoke, etc. In addition, the combination of the dynamic sky box and cloud editor system can produce a lifelike sky effect. Santaro’s aim is to create beautifully designed virtual space and have its customers ‘feel’ they are playing in a stimulating and special game environment.(Temporary)

~~Physical~~Rainblood ~~Properties~~Zero ~~Tool~~is an action game and it is one of a series of games originally developed in China. It tells a story about a virtual world filled with mystery and darkness, and people have to live in betrayal, lies and conspiracies. Our version is the mobile-transplanted version of the Rainblood Series Game

~~The~~We ~~ultimate~~expect ~~role of the Physical Properties Tool editor is~~ to ~~enable~~release ~~games to appear more realistic. Most backgrounds and objects in earlier 3D games look very unreal. Through~~ the ~~dynamic~~beta ~~simulation~~version ~~techniques,~~of the ~~SOUL~~game ~~physical properties tool can set a physical collision bounding box for each model and all the objects~~ in ~~one~~early ~~scene can have the physical information of mass~~April 2013, ~~centre of gravity, linear~~ and ~~angular~~launch ~~velocity,~~the ~~linear~~full ~~and~~version ~~angular~~in July ~~momentum, etc~~2013. ~~This~~The ~~tool~~revenue ~~provides players with an incredible sensation~~ of the ~~real~~fiscal ~~physical~~year ~~world. The~~of ~~SOUL~~2013 ~~Game~~is ~~Engine~~expected ~~physical properties tool enables players~~ to ~~experience~~be ~~the~~approximately ~~games~~RMB 4.6 asmillion a(approximately ~~film~~USD ~~spectacle~~730, ~~with realistic effects, such as explosions, collisions between different kinds of objects, collapsed buildings, etc~~000).

9Other Services

~~Physical~~E-Commerce ~~Effects Tool~~Platform

~~The~~On ~~Physical~~July ~~Effects~~18, ~~Tool editor covers diverse effects~~2011, ~~including~~the aCompany ~~smart~~established ~~particle~~Outlets ~~system~~Internet ~~that~~Sale Limited ~~can~~jointly bewith ~~used~~New ~~for~~Select ~~all~~Group ~~objects under any type of scenario~~Limited, ~~such~~an asunrelated ~~fire,~~company ~~shining~~incorporated ~~metal, and smoke on battlefields. For example, the effect of light and shade on weapons can be seen~~ in ~~the game when a warrior shoots an arrow~~BVI, oreach aholding ~~ray~~50% of ~~light~~the ~~will~~equity ~~appear when a phoenix is passing by~~interest. ~~Users~~ The ~~can~~primary ~~imitate~~objective for the ~~particle~~joint ~~effects~~venture ~~from~~is ~~the~~to ~~real~~further ~~world,~~extend and ~~experience~~develop aour ~~more~~online ~~realistic~~sales ~~lifelike~~in ~~effect~~the PRC.

~~Visual~~Jointly ~~Material~~developed ~~Tool~~by Santaro and Outlet (China) Limited, the Outlets E-Commerce Platform Project is an e-commerce business and management platform, and an online virtual version of the Outlets China centers (www.outletcn.com/en/index.aspx), luxury-brand physical shopping centers currently under construction in the five largest metro regions of China. The Company expects the Outlets Online to be China’s first fully interactive virtual shopping environment, allowing the user to walk around the virtual outlets compound, enter the individual virtual shops, look through the product selection, input the user’s individual size and dimensions, try on the item and purchase it online.

~~The~~Santaro’s ~~Visual~~proprietary ~~Material~~platform ~~Tool~~offers ~~editor~~numerous ~~can~~entertaining applications ~~create multi-layer blending~~ through ~~adjusting~~its ~~alpha~~Application ~~and~~Programming ~~attenuation.~~Interface ~~This~~(API), ~~provides~~providing ~~numerous colors and~~ a ~~display~~perfect ~~function~~high ~~that~~end ~~supports~~shopping ~~various~~experience ~~functions~~to ofonline ~~the games, such as battle, fight, and run~~users. Based on all surface light effects of an object and the physical properties and geometric characteristics of the material, the refractive index and reflectivity of each point can be calculated precisely.

~~With~~Platform this tool, a ray of light will travel more naturally and create vivid light and shade effects, e.g. the path of a bullet can be tracked more easily. The most representative usage of the visual material editor is to produce light reflection for the metallic sheen of weapons, such as swords. Providing gloss for precious stones or gold coins is another typical usage.Features:

~~Artificial~~1. Fine System ~~Intelligence~~Structure. ~~Tool~~Through our proprietary system structure, users rapidly access the luxury Outlets shopping centers, and select products anytime from anywhere, through a platform that is stable, secure, accurate and expandable.

~~The~~2. Characteristic 3D ~~Artificial Intelligence (AI) Tool is used for editing the movements of non-player characters in the games~~Shopping. ItThrough ~~mainly~~3D ~~focuses~~models ~~on behavior selection~~ and ~~path-finding~~dressing ~~techniques.~~up ~~For example~~technology, ~~the~~products AIare ~~tool~~displayed ~~can~~with ~~make~~fine ~~monsters~~effects. ~~walk~~Online ~~along~~users acan ~~path,~~comprehensively experience ~~keep them away from barriers, chase after~~ a ~~character,~~virtual ~~and~~shopping ~~attack~~experience ~~players who are~~ in ~~their~~a ~~sphere~~most ofrealistic ~~influence. All the monsters in Santaro’s online games will be given specific individual characteristics to make them seem true-to-life~~way, soincluding ~~that~~trying ~~online~~on ~~game~~garments ~~players~~and ~~feel that the virtual games are close to reality~~accessories.

~~User~~3. Flexible Business ~~Interface~~Management. ~~Tool~~Offers brand distributors many cooperation models for flexibility and ease of use.

The User Interface (UI) Tool is used for designing the game players’ interface. Designers establish a main interface, a skills interface, and set up conversation windows by editing all kinds of controls, such as user login interface, role specifications, and a series of other features to help players maximize their game experience.8

E4. Powerful Contents Management. Contents management including web, brands, products, commercials and events can be managed through self-~~commerce~~management backstage ~~platform~~system.

~~The~~5. Complete Data ~~Outlets~~Statistic. ~~E-Commerce~~Customer ~~Platform~~preference ~~Project~~analysis isthrough antracking ~~e-commerce business and management platform developed by Santaro in cooperation with Outlet (China) Limited, and is an~~ online ~~virtual~~behavior ~~version~~enables ofpersonalized ~~the Outlets China centers (www.outletcn.com/en/index.aspx), luxury-brand physical~~ shopping ~~centers~~experiences ~~currently under construction in the five largest metro regions of China. The outlets Online will be China’s first fully interactive virtual shopping environment, allowing the user~~ catered to ~~walk~~a ~~around the virtual outlets compound, enter the individual virtual shops, look through the product selection, input the user~~customer’s individual ~~size~~needs and ~~dimensions, try on the item and purchase it online~~preferences.

~~Santaro’s~~6. Open Platform. ~~proprietary~~Easily ~~platform~~connects ~~offers~~to ~~numerous~~a ~~entertaining~~wide variety of applications through its ~~Application~~open ~~Programming Interface (~~API) function, ~~providing~~building aan ~~perfect~~integrated ~~high~~composite ~~end~~platform with features including shopping, ~~experience~~lifestyle, toentertainment, ~~online~~social ~~users~~network and so on.

~~Platform~~In ~~Features:~~January, 2012, we developed a demo version of the virtual platform which contains most of the above features. However the development of the platform is fully depended on the development of the physical shopping centers since the look of the virtual malls will fully reflect the appearance of its physical models. We are currently waiting for the physical malls to be constructed and inhabited before we can further develop our virtual version of these malls. The constructions of the physical malls which was initiated and commenced by our partner was delayed. We expect to finalize the development of our virtual platform once we are informed of the completion of the physical malls by our partner.

10TECHNOLOGY

~~1. Fine~~SOUL ~~System~~Game Structure. Through our proprietary system structure, users rapidly access the luxury Outlets shopping centers, and select products at anytime from anywhere, through a platform that is stable, secure, accurate and expandable.Engine

~~2. Characteristic~~Santaro 3Dhas ~~Shopping.~~developed ~~Through~~its 3Down ~~models~~proprietary ~~and~~game ~~dressing~~engine up technology, for ~~products~~the ~~are~~development ~~displayed~~of ~~with~~MMORPGs, ~~fine~~namely, ~~effects~~the SOUL Game Engine. Three Kingdoms Online ~~users~~and ~~can~~UU ~~comprehensively~~World ~~experience~~have aboth ~~virtual~~been ~~shopping~~developed ~~experience~~using the inSOUL aGame ~~most~~Engine ~~realistic~~and, ~~way~~in the future, ~~including~~this ~~trying~~engine onwill ~~garments~~continue to be used for the development of both MMORPGs and ~~accessories~~web games.

3Content might be king, but when it comes to Internet content, keeping up with technological innovation is just as crucial. ~~Flexible~~ Companies ~~Business~~are ~~Management~~continually developing new games with the latest technological tools to attract more users and boost revenues. Without ~~Offers~~its ~~brand~~own ~~distributors~~game ~~many~~engine, ~~cooperation~~a ~~models~~company cannot understand in any depth the key drivers needed for ~~flexibility~~developing ~~and~~an ~~ease~~online game. This is the reason why Santaro decided to develop its own proprietary advanced online engine product, which it calls the SOUL Game Engine. Santaro’s proprietary technology will support over 40,000 simultaneous players. This is a larger concurrent user capacity than most online game companies are currently able to operate in China. Below is a brief description of ~~use~~the six key components of the SOUL Game Engine. These include: World Map Editor, Physical Properties Tool, Physical Effects Tool, Visual Material Tool, Artificial Intelligence Tool, and User Interface Tool.

~~4. Powerful~~World ~~Contents~~Map ~~Management. Contents management including web, brands, products, commercials and events can be managed through self-management backstage system.~~Editor

5With highly sophisticated computer graphic design techniques and editing, art designers can build colorful topography and geomorphology through a basic height picture that is dynamic and flexible. ~~Complete~~ Different ~~Data~~levels ~~Statistic~~of blending materials can be used, including displacement mapping, normal mapping and all kinds of complicated textures. ~~Customer~~For ~~preference~~example, ~~analysis~~a rough and winding gravel path can be designed through ~~tracking~~the ~~online~~hills ~~behavior~~and tracks covered with various types of plants and vegetation. The SOUL Game Engine’s map editor completely supports the conversion between indoor and outdoor environments and also enables ~~personalized~~dynamic ~~shopping~~features ~~experiences~~per ~~catered~~pixel tofor light and shade effects. With the synthesizing of the world map editor, the game can show and simulate waves, realistic fire, smoke, etc. In addition, the combination of the dynamic sky box and cloud editor system can produce a ~~customer~~lifelike sky effect. Santaro’s ~~individual~~aim ~~needs~~is to create beautifully designed virtual space and ~~preferences~~have its customers ‘feel’ they are playing in a stimulating and special game environment.

6. Open Platform. Easily connects to a wide variety of applications through its open API function, building an integrated composite platform with features including shopping, lifestyle, entertainment, social network and so on.9

~~Technology~~Physical ~~Infrastructure~~Properties Tool

~~Santaro’s~~The ~~major~~ultimate ~~Internet~~role ~~Data~~of ~~Centre~~the ~~(IDC)~~Physical isProperties ~~located~~Tool ineditor ~~Beijing. This centre~~ is to ~~critical~~enable games to ~~Santaro’s~~appear ~~overall~~more ~~operations,~~realistic. asMost itbackgrounds ~~hosts~~and ~~key~~objects ~~customer~~in ~~information~~earlier ~~such~~3D asgames ~~account~~look ~~verification~~very asunreal. ~~well~~Through as the ~~accounting~~dynamic simulation ~~and~~techniques, ~~billing system. As~~ the ~~centre~~SOUL ~~contains~~physical ~~key~~properties ~~data,~~tool itcan ~~also~~set ~~has~~ a ~~sophisticated~~physical ~~security~~collision ~~system~~bounding ~~consisting~~box offor ~~firewall,~~each ~~load~~model ~~balance~~and ~~devices,~~all ~~multi-processing~~the ~~and~~objects in ~~multi-core~~one ~~routers.~~scene Incan ~~addition,~~have ~~when~~ the ~~number~~physical information of ~~concurrent~~mass, ~~users~~centre ~~reaches~~of ~~100~~gravity,~~000,~~ ~~this~~linear ~~core~~and ~~IDC~~angular ~~will~~velocity, ~~also~~linear ~~play~~and aangular ~~key~~momentum, etc. ~~role~~This ~~for~~tool ~~off-site~~provides ~~disaster~~players ~~recovery~~with ifan ~~ever~~incredible ~~needed.~~sensation Inof ~~summary,~~ the ~~facility~~real isphysical aworld. The ~~major~~SOUL ~~back-up~~Game ~~center~~Engine inphysical properties ~~case~~tool ofenables ~~force~~players ~~majeure~~to ~~events,~~experience ~~such~~the games as ~~earthquake~~a ~~and~~film ~~firer~~spectacle, aswith ~~well~~realistic effects, such as aexplosions, ~~center~~collisions between ~~managing~~different ~~users’~~kinds ~~data~~of ~~and~~objects, ~~network~~collapsed ~~traffic~~buildings, etc.

~~The~~Physical ~~Company~~Effects has built a reliable and secure network infrastructure to fully support its operations. In order to maintain stable operation of its MMORPGs, Santaro will maintain 300 servers located in Internet Data Centers (IDC) and be promoted in 80 major cities in China. These major cities are initially Shanghai, Guangzhou, Shijiazhuang, Shenyang, Chengdu, and Xi’an and will initially be the network backbone nodes. These nodes will provide various regions with the capacity to accommodate up to 100,000 concurrent game players and a sufficient amount of connectivity bandwidth to maintain such a service. When the number of players will be close to 100,000, new backbone nodes will be set up.Tool

11The Physical Effects Tool editor covers diverse effects, including a smart particle system that can be used for all objects under any type of scenario, such as fire, shining metal, and smoke on battlefields. For example, the effect of light and shade on weapons can be seen in the game when a warrior shoots an arrow, or a ray of light will appear when a phoenix is passing by. Users can imitate the particle effects from the real world, and experience a more realistic lifelike effect.

~~OPERATIONS~~Visual Material Tool

The Visual Material Tool editor can create multi-layer blending ~~Customer~~through ~~Service~~adjusting alpha and attenuation. This provides numerous colors and a display function that supports various functions of the games, such as battle, fight, and run. Based on all surface light effects of an object and the physical properties and geometric characteristics of the material, the refractive index and reflectivity of each point can be calculated precisely.

~~Santaro~~With ~~aims~~this totool, ~~provide~~a ~~consistent~~ray ~~high-quality~~of ~~customer~~light ~~service and be responsive to game players’ needs. Game players using Santaro products~~ will betravel ~~able~~more tonaturally ~~access~~and create ~~the~~vivid ~~customer~~light ~~service~~and ~~center~~shade ~~via in-game chats~~effects, ~~phone or~~ e~~-mail~~.g. 24the ~~hours~~path aof ~~day, seven days~~ a ~~week.~~bullet Incan ~~addition,~~be atracked ~~forum~~more ~~website has been setup for game players to submit feedback~~easily. ~~Santaro~~The ~~currently~~most ~~has~~representative ~~over~~usage ~~16 dedicated customer service representatives called Game Masters (GMs), many~~ of ~~whom~~the visual ~~are~~material ~~MMORPG~~editor ~~enthusiasts.~~is ~~Santaro~~to ~~has~~produce ~~set~~light upreflection ~~detailed~~for ~~guidelines~~the onmetallic ~~how~~sheen ~~GMs~~of ~~should handle requests~~weapons, ~~complaints,~~such ~~suggestions or bug reports they receive from customers by email, phone or chat lines,~~ as ~~well~~swords. asProviding ~~how~~gloss ~~they~~for ~~need~~precious stones ~~to send that information back to the Product Development Department and/~~or ~~the~~gold ~~Operation~~coins ~~and~~is ~~Maintenance~~another ~~Department,~~typical ~~to ensure issues are addressed promptly and accurately~~usage.

~~Billing~~Artificial ~~System~~Intelligence Tool

The ~~Company~~Artificial ~~will~~Intelligence ~~sell~~(AI) aTool ~~substantial~~is ~~portion~~used for editing the movements of ~~virtual~~non-player ~~prepaid~~characters ~~game~~in ~~cards~~the ~~and~~games. ~~game~~It ~~points~~mainly tofocuses ~~its~~on ~~players~~behavior ~~through~~selection ~~third~~and path-~~party~~finding ~~online~~techniques. ~~payment~~For ~~platforms.~~example, the InAI ~~addition~~tool can make monsters walk along a path, ~~Santaro~~keep ~~will~~them ~~collect~~away ~~game~~from ~~operations~~barriers, ~~revenue~~chase ~~through~~after ~~the~~a ~~sale~~character, and attack players who are in their sphere of ~~prepaid~~influence. All ~~game~~the ~~cards~~monsters orin Santaro’s online ~~direct~~games ~~sales~~will ofbe given specific individual characteristics to make them seem true-to-life, so that online game ~~points~~players ~~straight~~feel ~~from~~that ~~its~~the ~~own~~virtual ~~website~~games are close to reality.

~~The~~User ~~billing~~Interface system will capture the purchase and consumption of virtual items and record game players’ purchase patterns, so that the Company can improve its product offerings by designing new virtual items. At the same time, the Company may adjust prices according to consumers’ preferences.Tool

~~Santaro’s~~The ~~online~~User Interface (UI) Tool is used for designing the game players’ ~~are~~interface. ~~offered~~Designers establish a ~~number~~main interface, a skills interface, and set up conversation windows by editing all kinds of ~~different~~controls, ~~payment~~such ~~options~~as ~~for~~user ~~playing~~login ~~the~~interface, ~~Company’s~~role ~~online~~specifications, ~~games. These~~and ~~payment~~a ~~options~~series ~~include~~of ~~the~~other ~~following:~~features to help players maximize their game experience.

~~Online~~Coral ~~Banking:~~Game Users may make payments online to Santaro through their online banking account. Santaro has established cooperation agreements with third-party payment platforms such as Alipay, TenPay, 99Bill, and Yeepay.Engine

~~Physical~~Santaro ~~Card:~~has ~~Users~~developed ~~may~~another ~~purchase~~3D ~~physical~~ game ~~point~~engine ~~cards~~specifically ~~with~~for the ~~printed~~development ~~card~~of ~~numbers~~its ~~and~~108 ~~passwords~~Warrior ~~in software stores, Internet cafes, kiosks and department stores~~MMORPG. ~~Santaro~~It ~~plans~~is tointegrated ~~sign distribution agreements~~ with ~~national~~below ~~general agents possessing strong distribution channels.~~features:

~~Virtual~~3D Card: Players may purchase Santaro’s virtual cards by using third-party electronic point card sales platforms, and they are also given the option to e-recharge their virtual cards, if needed. Santaro cooperates with third-party electronic point card sales platforms such as CNcard (cncard.com) and Cobuy (cobuy.com.cn).Shadowing

~~China~~The ~~Mobile,~~Coral ~~China~~game ~~Unicom,~~engine ~~and~~fully ~~China Telecom Top-up Card: China Mobile, China Unicom~~ and ~~China~~equally ~~Telecom~~supports ~~top-up~~OpenGL ~~cards are widely distributed in China~~ technology and ~~can~~Direct3D ~~be used to make online payments~~technology, asboth ~~they are considered as a form~~ of ~~‘hard~~which ~~currency’.~~are ~~Santaro~~the ~~offers~~dominant ~~this~~technologies ~~type~~on of3D ~~payment~~shadowing ~~through~~in athe ~~cooperation agreement with Yeepay~~industry.

~~SMS~~Compatibility ~~and Fixed Line: Users are able to buy game point cards via SMS or their fixed line through the cooperation agreement Santaro has set up with Yeepay.~~

AsIt ~~per~~is ~~Analysis~~compatible ~~International, in 2009, online game players in China used the following payment methods~~ for ~~accessing~~both ~~the~~2D ~~online~~and ~~games:~~3D ~~online banking (51.1%)~~modes, ~~physical~~and ~~cards~~combines ~~(33.8%),~~the advantages ~~virtual~~from ~~cards~~both ~~(19.7%),~~modes ~~and~~as ~~SMS and Fixe line (17~~well.~~2%).~~

12Shadowing Engine

~~MARKETING~~The ~~STRATEGY~~shadowing engine is highly optimized to reflect real lighting effects.

~~In order to produce a strong brand of online games, Santaro expects to differentiate the Company from the competition through the marketing strategies highlighted below:~~10

~~Market~~Hardware ~~Coverage~~Acceleration ~~Strategies~~

~~The~~It ~~Company~~also issupports ~~implementing~~hardware ~~targeted~~acceleration ~~marketing~~which ~~strategies~~results ~~for~~high ~~each of its online game products to attract customers based~~ efficiency on ~~each~~model ~~product’s characteristics~~shadowing. ~~There are generally three market coverage strategies to choose from:~~

~~Undifferentiated~~Scene ~~Marketing: This~~Management strategy consists of targeting a market as a homogeneous unit, instead of a heterogeneous group, in order to attract as many customers as possible with only one product, one price, and one promotion type. Undifferentiated market relies on mass distribution and mass advertising, aiming to give the product a superior image in the minds of the consumers. It is a very effective strategy when launching an innovative product in a market where competition is close to nil. Today, this market coverage strategy is not that applicable to Santaro.System

~~Differentiated~~Script Marketing: With this strategy, companies break the whole market into several sub-markets, and design different products and sales tactics for each of these sub-markets; this helps to satisfy different consumer demands. Typically differentiated marketing creates more total sales than undifferentiated marketing, but it also increase the costs of doing business. Santaro will implement this marketing strategy at a later stage and plan to design different products that will satisfy different consumers’ requirements and needs, and will adopt different marketing strategies tailored to the various sub-markets in which it will sell its games.System

~~Concentrated~~It ~~Marketing:~~fully ~~Concentrated~~supports ~~marketing~~LUA ~~focuses~~script ~~on one small part of the marketplace and is affected by a concentrated marketing promotion that seeks to gain a large share of the small market~~language. Concentrated marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position in the specific market segment it serves without mass production, mass distribution, or mass advertising. Companies adopting this kind of strategy generally have a good understanding of their target markets, and as this strategy works well for early-stage operators. Concentrated marketing is the strategy that Santaro will adopt for now.

~~Product~~Network ~~Life~~Underlying ~~Cycle~~Library

~~The~~It ~~Company~~contains isa ~~also~~fast ~~looking~~and ~~constantly~~secure ~~for~~network ~~new~~underlying ~~markets to establish additional distribution channels in order to maximize revenues from products already developed~~library. This is done by maximizing awareness of each online game in the market based on its life cycle phase. The operational life cycle of any developed retail product can be divided into four phases: warm-up period, commercial period, mature period, and steady period.

13User Interface Tool

~~Warm-up~~It ~~Period: This~~contains ~~stage~~an iseasy ~~the beta launch of a new product in the market. In order~~ to ~~attract~~use ~~attention~~User ~~and~~Interface ~~interest~~(UI) inTool ~~its~~which ~~products,~~includes map ~~Santaro will ensure attractive features~~tools, ~~side-effects,~~graphic ~~fashionable~~tools ~~trends,~~ and ~~popular~~effects ~~themes~~tool ~~are contained in each product it develops~~etc.

~~Commercial~~Technology Period: After modifications are integrated into the product, the commercial operational phase will start and the Company will start receiving revenue from its customers. Promotion and advertising for this phase will be done via the Internet and by using billboards located in public places with high user density and large numbers of viewers.Infrastructure

~~Mature~~Santaro’s ~~Period: During~~major ~~this~~Internet ~~phase,~~Data toCentre ~~increase~~(IDC) ~~the~~is ~~Company~~located in Beijing. This centre is critical to Santaro’s ~~brand~~overall ~~image~~operations, ~~and~~as ~~awareness~~it ofhosts ~~its~~key ~~products~~customer ininformation such as account verification as well as the ~~market~~accounting and billing system. As the centre contains key data, ~~Santaro~~it ~~will~~also ~~increase~~has ~~advertising~~a insophisticated ~~the~~security system ~~market~~consisting toof ~~gain~~firewall, ~~more~~load ~~online~~balance ~~players~~devices, multi-processing and ~~boost~~multi-core ~~revenue~~routers. ~~Because~~In inaddition, ~~today’s~~when ~~markets~~the ~~there~~number ~~are~~of ~~more~~concurrent users ~~and~~reaches ~~more~~100,000, ~~online~~this ~~players,~~core ~~the~~IDC ~~demand~~will also play a key role for ~~games~~off-site isdisaster ~~now~~recovery, ~~from~~if needed. The facility is a ~~diversified~~major back-up ~~group~~center in case of ~~consumers,~~force ~~giving~~majeure ~~the~~events, ~~opportunity~~such ~~for~~as ~~companies~~earthquake ~~such~~and five, as ~~Santaro~~well toas ~~attract~~a ~~more~~center managing users’ data and network traffic.

~~Steady Period:~~ The Company ~~will~~has ~~establish~~built a reliable and secure network infrastructure to fully support its operations. In order to maintain stable operation of ~~cooperation~~its ~~with~~MMORPGs, ~~local~~Santaro ~~communities~~maintains ~~throughout~~300 servers located in Internet Data Centers (IDC) in 80 major cities in China. These major cities are Shanghai, Guangzhou, Shijiazhuang, Shenyang, Chengdu, and Xi’an and are the ~~country~~network asbackbone ~~well~~nodes. asThese ~~overseas~~nodes ~~agents~~provide various regions with the capacity to ~~further~~accommodate ~~promote~~up ~~its~~to 100,000 ~~products~~concurrent game players and ~~increase~~a ~~its~~sufficient ~~customer~~amount ~~base~~of connectivity bandwidth to maintain such a service. When the number of players is close to 100,000, new backbone nodes will be set up.

For each product the Company develops, it constantly adjusts its marketing strategy depending on the outcome of management’s assessment of the opportunity, and at what stage the product is in its current life cycle. In addition, the Company strives to ensure it has more than one product in the market so that it will continually increase its product offering, strengthen its brand name, as well as increasing annual revenue.OPERATIONS

~~SALES~~Customer ~~AND DISTRIBUTION~~ Service

~~Sales~~Santaro ~~Strategy~~provides consistent high-quality customer service and is responsive to game players’ needs. Game players using Santaro products are able to access the customer service center via in-game chats, phone or e-mail 24 hours a day, seven days a week. In addition, a forum website was setup in August 2012 for game players to submit feedback. As of December 31, 2012, Santaro currently has over 17 dedicated customer service representatives called Game Masters (GMs), many of whom are MMORPG enthusiasts. In August 2012, Santaro has set up detailed guidelines on how GMs should handle requests, complaints, suggestions or bug reports they receive from customers by email, phone or chat lines, as well as how to send information back to the Product Development Department and/or the Operation and Maintenance Department, to ensure issues are addressed promptly and accurately.

Pricing ~~Model~~

The ~~Chinese~~online ~~market~~game industry in China requires free-to-play content if an item-based charging business model is offered. In fact, unlike most western online game operators that rely on a time-based charging business model to generate revenues, the majority of Chinese online game operators offer their games for free. The companies make ~~profit~~profits when players purchase virtual online items in the course of their ~~game play~~games.

Santaro currently uses the item-based revenue model for its games. Under the item-based revenue model, game players can activate the basic functions of the game free of charge for as long as they want. Santaro will generate revenue through the sale of virtual items, such as performance-enhancing clothing, equipments and accessories that enhance the game-playing experience. During the time that users are playing the games, Santaro will encourage users’ purchasing by developing and designing all kinds of tools to buy.11

14Santaro currently uses an item-based revenue model for its games. Under the item-based revenue model, game players can activate the basic functions of the game free of charge for as long as they want. Santaro generates revenue through the sale of virtual items, such as performance-enhancing clothing, equipment, and accessories that enhance the game-playing experience.

~~Promotion/Advertising Strategy~~Distribution

Santaro’s ~~promotion~~primarily ~~strategy~~distributes ~~includes~~its ~~online~~games ~~advertising,~~through ~~offline~~third ~~promotions~~party prepaid ~~and~~cards ~~traditional~~distributors, ~~media.~~online ~~The~~commercials ~~Company~~on ~~uses~~game ~~different~~media ~~methods~~websites, toand ~~target~~pre-installs ~~different~~game ~~demographic~~software ~~groups~~in ofInternet ~~game~~café ~~players:~~computers.

·Distribution ~~For~~Through ~~online advertising, the Company advertises on a variety of websites, including on~~ Internet ~~cafe~~Cafes homepages. Santaro also uses videos to promote its games online, as a dynamic video can show the lifelike fighting scenes of a game and at the same time can give a sense of the exciting special effects.

·The ~~Santaro~~Internet ~~also~~cafe ~~uses~~industry is a ~~variety~~derivative of ~~offline~~the ~~promotional~~World Wide ~~events~~Web ~~including~~economy in China. It is considered to be the most convenient place for people to access the Internet in China. Internet cafes has become the third largest internet accessing place for internet users after home and office, according to the Revelation of the Current Status of Internet Cafe Business in China issued on www.netbarcn.com. According to the internet cafe ~~events,~~market ~~free~~report ~~trial~~issued ~~plays~~by the Culture Department, ~~game~~the ~~players’~~total ~~gatherings~~number of internet cafes in China was 146,000 ~~and~~by ~~provides~~the ~~souvenirs~~end of 2011, ~~awards~~while ~~and~~the ~~prizes~~total number of internet café users has reached 126 million as of the end of 2012, according to CNNIC.

·According ~~With~~to ~~respect~~the to2012 ~~traditional~~China ~~media~~Internet Cafe Development Report issued by TXWM.com, ~~promotions~~90.33% ~~include~~of ~~print~~customers ~~advertisements~~go into ~~magazines~~internet ~~that~~cafes ~~target~~to ~~the~~play ~~Company’s~~games ~~game~~as ~~player~~their ~~base~~main ~~and~~purposes, ~~outdoor~~making ~~multimedia~~a unique advantage for distributing online games through internet cafes.

~~Network~~Santaro ~~Promotion~~is ~~Strategy~~in the process of establishing an online promotion platform for internet cafes featuring the following advantages: direct access to end users shortening the distribution channel, lower promotion costs as compared to the traditional distribution channels, and real-time monitoring. Santaro’s internet cafe promotion platform is focusing on the diversification of the products and services. We believe that making all of our products available on the platform will provide internet cafes more options, giving them more room for their own promotion activities. Through our existing connections in the areas of Sichuan, Shandong, Hebei and other provinces, we expect to have at least 4,000 internet cafes joining the plan in 2013. We believe that with further development of the platform, the concept will become a key to the internet cafes business in China. We are confident to make our platform available to cover the majority of China’s Internet cafe business in the near future.

The network promotion strategy consists of voluntary individuals or groups with sales skills capabilities and who are keen to promote the product to other potential users. Santaro will seek to minimize distribution and advertising costs to attract customers, and will provide rewards such as high-recharge bonus and virtual item redemption to those individuals or groups of people bringing new players/clients to the Company.12

~~Special~~Distribution ~~Launch~~Through ~~Events~~Prepaid Cards

AtAdditionally, ~~the~~Santaro ~~time~~sells ofprepaid ~~the~~game ~~official~~cards ~~launch~~in virtual and physical form to a range of ~~the~~regional ~~online~~third-party ~~games~~distributors, ~~Santaro~~who ~~organizes~~in aturn ~~series~~re-distribute ofthem ~~large-scale~~to ~~promotional~~numerous ~~activities,~~retail ~~such~~outlets across China. Online payment systems in China are not as ~~media~~widely ~~conferences~~available ~~and~~to, ~~activities~~nor ~~with~~accepted ~~celebrities~~by, consumers as they are in ~~attendance~~the United States. As ~~Santaro~~a ~~also~~result, ~~builds~~companies ~~strategic~~still ~~cooperation~~need ~~with~~to ~~popular~~rely ~~movies~~on ~~and~~a TVphysical ~~series~~distribution network, composed of third-party distributors covering a network of retail outlets across China for the sale of their products and ~~participates~~services. As inof ~~large-scale~~December ~~online~~31, ~~game~~2012, ~~industry~~Santaro’s ~~exhibitions~~nationwide distribution ~~such~~network asconsisted ~~Chinajoy~~of two prepaid cards distributors, and ~~Internet~~reached ~~expositions~~over 15 retail outlets.

~~Distribution~~It ~~Strategy~~is our intention once the MMORPGs have been fully operational for at least one to two years and regional distributors are more familiar with Santaro and its games, to establish direct distribution relationships with local dealers. Typically, Santaro will collect payment from its distributors upon delivery of its prepaid game cards and plans to offer sales discounts and rebates to its distributors. The distribution agreements will be non-exclusive, and will not prohibit distributors from working with other online game operators.

~~Access to the Games~~Promotion

Santaro’s ~~game~~promotion ~~players~~activities ~~access~~include ~~the~~online ~~games at Internet cafes or on personal computers connected to the Internet. In order to access the games~~advertising, offline ~~the~~promotions ~~game~~and ~~access~~traditional ~~software must be installed on the computer~~media. ~~Users~~The ~~can~~Company ~~download~~uses ~~client-side~~different ~~software~~methods ~~from the game’s official website and cooperating websites~~ to ~~enter~~target ~~into~~different ~~the~~demographic ~~games.~~groups ~~It is important for Santaro that its MMORPGs are available in a sufficient number~~ of ~~Internet cafes in China, as a substantial number of~~ game players access online games through Internet cafes only. Due to limited hardware capacity, Internet cafes generally feature a limited number of games on their computers. Santaro will select Internet cafes based on the hardware specification of their PCs and users’ preferences in the area where the Internet cafes are located.:

15· For online advertising, the Company advertises on a variety of websites, including on Internet cafe homepages. Santaro also uses videos to promote its games online, as a dynamic video can show the lifelike scenes of a game and at the same time can give a sense of the exciting special effects.

~~Nationwide~~· ~~Distribution~~Santaro ~~Network~~also uses a variety of offline promotional events including, Internet cafe events, free trial plays, game players’ gatherings, and provides souvenirs, awards and prizes.

~~Online~~· ~~payment~~With ~~systems~~respect ~~in China are not as widely available~~ to, ~~nor~~traditional ~~accepted by~~media, ~~consumers~~promotions asinclude ~~they~~print ~~are~~advertisements in ~~the~~magazines ~~United~~that ~~States.~~target ~~Companies still need to rely on a physical distribution network, composed of third-party distributors covering a network of retail outlets across China for~~ the sale of their products and services. Santaro sells prepaid game cards in virtual and physical form to a range of regional third-party distributors, who in turn sub-distribute them to numerous retail outlets across China. As of today, SantaroCompany’s ~~nationwide~~game ~~distribution~~player ~~network~~base ~~consists of over 31 distributors,~~ and ~~reaches~~outdoor ~~over 300 retail outlets~~multimedia. ~~Santaro will establish liaison offices with over 80 dedicated personnel to place and promote its products.~~

ItNetwork ispromotion ~~Santaro’s~~strategy ~~intention~~consists ~~once~~of ~~the~~voluntary ~~games~~individuals or ~~have~~groups ~~been~~with ~~fully~~sales ~~operational~~skills ~~for~~capabilities ~~at least one to two years~~ and ~~regional~~who ~~distributors~~ are ~~more~~keen ~~familiar~~to ~~with~~promote ~~Santaro~~the ~~and~~product ~~its games,~~ to ~~establish~~other ~~direct~~potential ~~distribution relationships with local dealers~~users. ~~Typically,~~ Santaro will ~~collect~~seek ~~payment~~to minimize ~~from~~distribution ~~its~~and ~~distributors~~advertising ~~upon~~costs ~~delivery~~to ofattract ~~its~~customers, ~~prepaid~~and ~~game~~will ~~cards~~provide ~~and~~rewards ~~plans~~such toas ~~offer~~high-recharge ~~sales~~bonus ~~discounts~~ and ~~rebates~~virtual item redemption to ~~its~~those ~~distributors.~~individuals ~~The~~or ~~distribution~~groups ~~agreements~~of ~~will~~people bebringing ~~non-exclusive,~~new players and ~~will~~clients ~~not~~to ~~prohibit~~the ~~distributors from working with other online game operators~~Company.

Overseas Distribution Strategy

Identifying appropriate overseas markets, negotiating with potential third-party licensees and managing the relationships with those licensees require substantial management effort and skills.

Chinese online games can prove attractive to foreign markets, and some Asian countries, such as Malaysia, Taiwan and Vietnam are fast-growing online games markets, but lack local product development. Because those countries have less competition than what is currently in China, they are attractive markets for Santaro. ToIn order to distribute some of ~~its~~our online games to those selective overseas markets, ~~Santaro~~we will establish cooperation agreements with one of the local game operators in a selected ~~countries~~country. The basic structure of the cooperation agreement will ~~have~~enable the local online game operators acting as distribution agents for Santaro’s games in their local market. Overseas licensing revenues will consist of an initial license fee and ongoing revenue-based royalties.

~~INDUSTRY~~We ~~OVERVIEW~~ expect to initiate the discussion later in the year 2013 with some potential overseas distributors in some Asian markets especially in Chinese speaking markets such as Hong Kong, Taiwan and Malaysia.

~~Online~~Billing ~~Games Market~~System

~~Today~~Santaro’s ~~the~~billing ~~online~~system ~~games~~can ~~market~~effectively iscapture ~~one of~~ the ~~growth~~purchase and ~~drivers~~consumption inof ~~the~~virtual ~~Internet~~items ~~content~~and ~~business~~record ingame ~~China. Internet~~players’ ~~content~~purchase ~~encompasses just about anything consumed online~~patterns, ~~from~~so ~~news~~the toCompany ~~video~~can ~~and~~improve ~~games.~~its ~~The~~product ~~fastest~~offerings by ~~growing~~designing ~~companies~~new invirtual ~~this~~items. ~~business~~At ~~segment~~the ~~fall~~same ~~into two main categories: advertising-supported Web portals (such as Baidu and Yahoo)~~time, ~~and~~it ~~online~~enables ~~games~~the ~~companies~~Company ~~that~~to ~~charge~~adjust ~~subscription~~prices ~~fees~~according orto ~~sell~~consumers’ ~~in-games merchandise~~preferences. ~~In both categories, China is the big story.~~

~~Internet~~The ~~Market~~Company sells a substantial portion of virtual prepaid game cards and game points to its players through third-party online payment platforms. Starting from the launch of 108 Warriors on August 23, 2012 through the end of the fiscal year, we sold 1,739 virtual prepaid game cards through our online system as well as third party online payment platforms.

1613

In ~~the mid 1990’s~~addition, ~~there were only three million PC users in China. According to China's government, as of September 2009, internet users in China had increased to 360 million and it has become~~ the ~~leader~~Company inplans ~~the number of internet users in the world. However, China’s current Internet penetration rate of 27% is still very low compared~~ to ~~some~~collect ofgame ~~the~~operations ~~other~~revenue through ~~developed nations where~~ the ~~penetration~~sale ~~rates are over 75%. As China’s Internet penetration rate increases and reaches levels in other developed countries, the number~~ of ~~Internet~~prepaid ~~users~~game iscards ~~expected~~or ~~to increase at a rapid rate. By comparison, the United States had about 228 million Internet users (about 74% penetration rate), and much slower growth, as most Americans are already~~ online~~. Approximately~~ ~~70%~~direct ofsales ~~China’s estimated 383 million Internet users today are under the age~~ of ~~30. This~~game ~~age~~points ~~group~~straight isfrom ~~most~~its ~~likely~~own ~~to seek online entertainment, including games, music and chat rooms, which should drive future revenues for the online games market~~website.

~~Mobile~~Santaro’s ~~Market~~online players are offered a number of different payment options for playing the Company’s online games. These payment options include the following:

AtOnline ~~the~~Banking: ~~end~~Users ofmay ~~2008,~~make ~~China~~payments ~~had~~online ~~the~~to ~~highest~~Santaro through ~~number~~their ofonline ~~mobile~~banking ~~cellular subscribers with approximately 641 million users~~account. ~~However,~~Santaro ~~the~~has ~~number~~established ofcooperation ~~subscribers~~agreements ~~per~~with ~~100~~third-party ~~inhabitants~~payment ~~was~~platforms ~~still low at 48. This is expected to increase as the penetration rate increases and reaches levels observed in other developed countries~~ such as Alipay, ~~the~~TenPay, ~~U.S.~~99Bill, and ~~Japan~~Yeepay. The implementation and realization of 3G has also laid the foundation for the development of mobile broadband communications. According to CNNIC and Morgan Stanley research, in 2009 the stage was set with 46% of internet population using 2.xG mobile data service.

~~Source~~Physical Card: ~~CNNIC~~ Users may purchase physical game point cards with printed card numbers and passwords in software stores, ~~Morgan~~Internet ~~Stanley~~cafes, kiosks and department stores. Santaro plans to sign distribution agreements with national general agents possessing strong distribution channels.

~~The~~Virtual ~~growth~~Card: inPlayers ~~mobile~~may ~~subscription~~purchase isSantaro’s ~~likely~~virtual cards toby ~~spur~~using ~~growth~~third-party inelectronic ~~mobile~~point ~~internet~~card ~~usage~~sales platforms. ~~According~~They toare ~~iResearch,~~also given the ~~mobile~~option ~~internet~~to ~~market~~e-recharge istheir ~~expected~~virtual tocards, if ~~reach RMB41~~needed.3 ~~billion~~Santaro ~~(US$6.07~~cooperates ~~billion)~~with bythird-party ~~2012~~electronic ~~with~~point ~~annual~~card ~~growth~~sales ~~rate~~platforms ~~reaching~~such as ~~high~~CNcard ~~as 47~~(cncard.7%com) ~~in 2012. The growth in mobile phones~~ and ~~mobile~~Cobuy ~~internet usage opens up a huge opportunity for mobile gaming, especially in connected casual and multiplayer gaming~~(cobuy. ~~According to iResearch, the number of mobile phone game users is expected to reach 98 million by 2012, with growth averaging over 20% for the next 5 years~~com.cn).

17China Mobile, China Unicom, and China Telecom Top-up Card: China Mobile, China Unicom and China Telecom top-up cards are widely distributed in China and can be used to make online payments, as they are considered as a form of ‘hard currency’. Santaro offers this type of payment through a cooperation agreement with Yeepay.

~~Source~~SMS and Fixed Line: ~~iResearch~~Users are able to buy game point cards via SMS or their fixed line through the cooperation agreement Santaro has set up with Yeepay.

~~Online~~Marketing ~~Games Market~~Strategy

~~Ten~~In ~~years~~order ~~ago~~to ~~China~~produce ~~didn’t have an online games industry, but today after~~ a ~~decade~~strong brand of ~~progress China’s~~ online games ~~industry is a stable industry with numerous companies providing all levels of the value chain~~, ~~including~~Santaro expects ~~development, publishing, distributing and selling. According~~ to ~~International~~differentiate ~~Data Corporation (IDC), since 2005~~ the ~~volume~~Company offrom ~~Chinese~~its ~~developed~~competition ~~games~~through ~~has~~the ~~been~~marketing ~~exceeding~~strategies ~~that~~highlighted ~~of foreign games.~~below:

ByMarket ~~year~~Coverage end 2008, iResearch estimates that the United States, China and Korea were the world’s top three online games markets, making up about 29%, 27% and 21%, respectively, of the online global market. This year China is likely to surpass the U.S. to become the world’s largest online games market. China’s competitive advantage includes its large market size, growing demand, improved game production skills, and strong synergy between the games industry and supporting industries. China’s online games industry has expanded concurrently with the development of broadband technology to become one of the fastest-growing interactive entertainment industries in the world. The industry is by far the most successful Internet content business in China with over 200 new game titles being launched annually. Key trends in China’s online games market (Source: Financial Times, CNNIC, Niko Partners) can be summarized as follows:Strategies

·The ~~64%~~Company ofis ~~China’s~~implementing ~~Internet~~targeted ~~users~~marketing ~~are~~strategies for each of its online game ~~players~~products and services to attract customers. There are generally three market coverage strategies to choose from:

·Undifferentiated ~~50%~~Marketing. This strategy consists of ~~online~~targeting a ~~gamers~~market ~~have~~as ~~been~~a ~~playing~~homogeneous ~~for~~unit, ~~more~~instead ~~than~~of ~~three~~a ~~years~~heterogeneous group, in order to attract as many customers as possible with only one product, one price, and one promotion type. Undifferentiated marketing relies on mass distribution and mass advertising, aiming to give the product a superior image in the minds of the consumers. It is a very effective strategy when launching an innovative product in a market where competition is close to nil. Today, this market coverage strategy is not applicable to Santaro.

·Differentiated ~~Over~~Marketing. 2With ~~million~~this ~~young~~strategy, ~~Chinese~~companies ~~can~~break the bemarket ~~found~~into several sub-markets and design different products and sales tactics for each of these sub-markets. This helps to satisfy different consumer demands. Typically differentiated marketing creates more total sales than undifferentiated marketing, but it also increase the costs of doing business. Santaro will implement this marketing strategy at ~~any~~a ~~one~~later ~~time~~stage ~~playing~~and anplans ~~online~~to design ~~game~~different products that will satisfy different consumers’ requirements and needs. We will adopt different marketing strategies tailored to the various sub-markets that we sell our games in.

·Concentrated ~~The~~Marketing. ~~industry~~Concentrated ~~reflects~~marketing ~~strong~~focuses ~~consumer~~on ~~demand~~one small ~~for~~part ~~media~~of ~~content~~the marketplace and is affected by a concentrated marketing promotion that seeks to gain a large share of a small market. Concentrated marketing is ~~relevant~~particularly effective for small companies with limited resources because it enables the company to ~~local~~achieve ~~culture~~a strong market position in the specific market segment it serves without mass production, mass distribution or mass advertisement. Companies adopting this kind of strategy generally have a good understanding of their target markets, and as this strategy works well for early-stage operators. Concentrated marketing is the strategy that Santaro currently has adopted.

~~· Internet cafes play a key role in the online games growth in China, with over 23 million PCs in Internet cafes provide cheap and easy Internet access to low-income games players~~14

18Product Life Cycle

~~According~~The toCompany ~~iResearch,~~is inalso ~~2009~~looking ~~China’s~~constantly ~~online~~for ~~games~~new ~~market~~markets ~~increased 30.2%~~ to ~~RMB27.1~~establish additional ~~billion~~distribution ~~(US$3.97bn)~~channels ~~over~~in ~~2008.~~order ~~The~~to ~~overall~~maximize ~~online~~revenues ~~games~~from ~~market~~products isthat ~~expected~~have toalready ~~keep~~been ~~growing~~developed. atThis anis ~~average~~done ~~annual~~by maximizing ~~rate~~awareness of ~~20%~~each online game in the ~~coming~~market ~~five~~based ~~years~~on asits ~~shown~~life ~~in the two graphs below~~cycle. ByThe ~~2012,~~operational ~~iResearch~~life ~~forecasts~~cycle ~~that~~of ~~the~~any ~~market~~developed ~~will~~retail product can be ~~worth~~divided ~~more~~into ~~than~~four ~~RMB68~~phases: ~~billion~~warm-up ~~(US$10 billion)~~period, ~~when~~commercial ~~China~~period, ~~will~~mature ~~then~~period ~~account~~and ~~for~~steady ~~almost half the global market~~period.

~~Source~~Warm-up Period: ~~iResearch~~ This stage is the beta launch of a new product in the market. In order to attract attention and interest in our products, we will ensure attractive features, side-effects, fashionable trends, and popular themes are contained in each product we develop.

~~Market~~Commercial ~~Data~~Period: After modifications are integrated into the product, the commercial operational phase will start and ~~Analysis~~we will start receiving revenue from our customers. Promotion and advertising for this phase will be done via the Internet and by using billboards located in public places with high user density and a large number of viewers.

~~Market~~Mature ~~Dynamics~~Period: During this phase, to increase our brand image and awareness of our products in the market, we will increase advertising in the market to gain more online players, and boost revenue. Because in today’s markets there are more and more online players, the demand for games is now from a diversified group of consumers, giving us the opportunity to attract more users.

~~The~~Steady ~~Chinese~~Period: ~~online~~We ~~games~~will ~~market~~establish ~~has~~a ~~proven~~network ~~resilient to the worldwide economic downturn in the latter half~~ of ~~2008~~cooperation ~~and~~with local ~~2009. In~~communities ~~addition,~~throughout ~~many industry experts argue that~~ the ~~online-games industry is not only recession-proof~~country, but can actually benefit from the economic crisis. In fact, many Chinese games developers remain optimistic because they believe that a worldwide economic downturn has had little effect on their business. In a challenging economic environment as ~~consumers~~well ~~tend to stay at home instead of going out, they take advantage of more economical forms of entertainment such~~ as ~~online~~overseas ~~games. With such games constituting a small-ticket item~~agents, ~~users~~to ~~have~~further ~~not~~promote ~~cut~~our ~~back~~products ~~as much on this type of discretionary spending. Online games are now part of China's culture~~ and itincrease ~~costs~~our ~~around US$0~~customer base.~~15 an hour to play a game which is the cheapest form of entertainment.~~

19For each product we develop, we constantly adjust our marketing strategy depending on the outcome of management’s assessment of the opportunity, and at what stage the product is in its current life cycle. In addition, we strive to ensure we have more than one product in the market in order to increase our product offering, strengthen our brand name and annual revenue.

~~Market~~GOVERNMENT ~~Data~~REGULATIONS

1Our online games, online services and related content on our websites are subject to various PRC laws and regulations relating to the telecommunications industry, Internet and online games. ~~Data~~ ~~Analysis~~We are regulated by various government authorities, including:

~~According~~• to the ~~Monitor~~Ministry ~~Report~~ of ~~China~~Industry ~~Online~~and ~~Game~~Information ~~Market~~Technology ~~in Q4 2011~~and, ~~issued~~before byits ~~EnfoDesk,~~formal ~~the~~establishment ~~market scale of China online games~~ in Q42008, ~~2011~~its ~~reached 10.29 Billion RMB~~predecessor, athe ~~chain~~Ministry ~~growth~~ of ~~8.3%~~Information ~~and an increase of 29.5%.~~Industry;

~~The~~• ~~data~~the ~~issued~~General byAdministration ~~EnfoDesk~~of ~~with~~Press ~~regard to Q4 2011 results is in accordance with EnfoDesk’s predictions made during Q3,~~ and ~~indicates~~Publications (the ~~client-based~~National ~~online~~Copyright ~~game market continues to expand in a healthy form.~~Administration);

An• ~~examination of~~ the ~~2011~~State ~~Chinese~~Administration ~~client-based~~for ~~online~~Industry ~~game~~and ~~market shows the following features:~~Commerce;

·• ~~Focus~~the onMinistry ~~Game~~of ~~Development,~~Culture; ~~Frequent Large Productions:~~and

~~The~~• ~~quality~~the ofMinistry ~~games in 2011 has distinctly improved compared with previous years. Game engines were innovatively upgraded based on user experience, and 3D productions attained state-~~of~~-the-art~~ ~~quality.~~Public ~~Investment in game development was increased significantly~~Security.

·The ~~Vast~~principal ~~Game~~PRC ~~Contents~~regulations governing Internet content, ~~Variable~~as well ~~Marketing~~as ~~Means~~online game services in China include:

~~The~~• ~~client-based~~Telecommunications ~~online~~Regulations ~~game market of 2011 showed varieties of products based on precision marketing and ample resources. The performance of DotA~~ (~~Defense of the Ancients~~2000) ~~and shooting type online games caused a huge competition in market segments. The launching of new products caused a gradual increase in competition across market segments.~~;

·• ~~Redeveloping~~the ~~Old~~Administrative ~~Products~~Rules for Foreign Investments in Telecommunications Enterprises (2001, ~~Micro-Innovation:~~and as amended in 2008);

~~Due~~• tothe ~~gradually~~Administrative ~~increasing~~Measures ~~development and marketing expense, redeveloping existing products became a new way of innovation~~ for ~~current~~Telecommunications ~~developers.~~Business ~~With~~Operating ~~constant~~Licenses ~~user groups and reputations of the existing products, redeveloping and upgrading the existing versions made games more playable desirable.~~(2009);

20• the Internet Information Services Administrative Measures (2000);

~~2. Conclusion~~• the Interim Measures for the Administration of Online Games (2010);

Despite challenges brought by web-based and mobile platform game markets, the client-based game, which has mature technology, well-rounded market segment and thorough user base, will continue as the core of the Chinese game market in 2012, and the market scale is expected to experience steady growth.15

~~Market~~• ~~Analysis:~~the Tentative Measures for Administration of Internet Culture (2010);

~~According~~• to the ~~data~~Tentative ~~provided~~Measures byfor ~~EnfoDesk,~~Administration ~~the~~of ~~client-based~~Internet ~~games~~Publication ~~will reach 269 million users in 2014, a chain growth of 12.08%.~~(2002);

~~According~~• tothe Notice of Implementing the ~~data,~~State Council’s “Regulation ‘Sanding’” and Relevant Interpretation Issued by State Commission Office for Public Sector Reform (“SCOPSR”) and Further Strengthen the ~~development~~Administration and Approval of the ~~Chinese client~~Pre-~~based~~approval ~~gaming~~and ~~market~~Import ~~has~~of ~~slowed~~Online ~~since~~Games ~~2011.~~(2009);

~~1. The~~• ~~features~~the ofForeign ~~client-based~~Investment ~~game~~Industrial ~~market:~~Guidance Catalog (2011);

~~Based~~• on the ~~integral~~Administrative ~~development~~Measures ofon ~~Chinese~~Electronic ~~client-based~~Publications ~~online games, the market currently has the below features:~~(2008);

·• ~~Steady~~the ~~Growth~~Administrative ~~Market,~~Measures ~~Slowing~~on ~~Down：~~Software Products (2009);

~~According~~• to the ~~data~~Administrative ~~shown~~Measures byon ~~EnfoDesk,~~Internet ~~the~~Electronic ~~total~~Bulletin ~~revenue~~Board ~~generated~~Services ~~in the Chinese client-based game market in 2011 reached 37 Billion RMB, slightly higher than expected. There are 420 self-developed games, an increase of 69 since 2010.~~(2000);

·• ~~Reputation~~the ~~Increased~~Measures ~~for~~on ~~Client-Based~~Computer ~~Games:~~Software Copyright Registration (2002);

21• the Notice of the Ministry of Culture on Enhancing the Content Review Work of Online Game Products (2004);

~~After~~• aSome ~~tough~~Opinions ~~year~~of ~~for~~ the ~~entire~~Ministry ~~gaming~~of ~~market~~Culture inand ~~2010,~~ the ~~game~~MIIT ~~giants~~on ~~strengthened self-development in 2011, while increasingly considering overseas products for domestic operation. This trend both increased~~ the ~~number~~Development ~~of products,~~ and ~~brought~~Administration ~~back a large number~~ of ~~users~~Online ~~who~~Games ~~regained interest in client-based games. Overall increases in game quality together with increases in variety bolstered reputation and user attraction.~~(2005);

·• ~~Client-Based~~the ~~Games~~Notice ~~Achieving~~on ~~Excellence~~the ~~Through~~Work ~~Customer~~of ~~Service：~~Purification of Online Games (2005);

~~While~~• ~~attracting~~the ~~users~~Circular ~~through~~on ~~ever~~Strengthening ~~improving gaming effects, features and paying methods is~~ the ~~main~~Administration ~~approach~~ of ~~most~~Foreign ~~major~~Investment ~~game developers, increases~~ in ~~the~~and ~~quality~~Operation of ~~customer~~Value-added ~~service~~Telecommunications ~~helped~~Business ~~to keep current users interested.~~(2006);

~~2. The~~• ~~Blocking~~the ~~Factor~~Circular ofon ~~the~~Implementing ~~Client-Based~~Online Game ~~Market:~~Anti-fatigue System to Protect the Health of the Minors (2007);

~~The~~• ~~driving force of~~ the ~~client-based~~Administrative ~~game~~Measures ~~market~~on isInternet ~~the~~Video/Audio ~~release~~Program ofServices new products and the increase of core users throughout market segments. Although the enormous revenue generated still places client-based gaming in the core of the entire gaming market, the following blocking factors cause direct competition with this core market segment:(2007);

·• ~~Plagiarism,~~Notice ~~Lack~~on Initializing the verification of ~~Innovation:~~Real-name Registration for Anti-Fatigue System on Internet Games (or the Real-name Registration Notice) (2011);

~~Plagiarism~~• ~~will be a blocking factor to future market development. Any product well received by~~ the ~~market~~Tentative ~~draws~~Catalog ~~many~~of ~~similar~~Internet ~~products~~Video/Audio ~~into~~Program ~~the~~Services market. As an example in the 2011 market, there were more than 20 FPS games operated at the same time, and MMORPG games were mostly fantasy themed and lacked innovation, resulting in a decrease in user attraction.(2010);

·• ~~Human~~the ~~Resources~~Notice ~~Problem:~~on the Reinforcement of the Administration of Internet Cafés and Online Games (2007);

A• ~~shortage~~the ofTentative ~~individual~~Measures ~~talent is a major reason~~ for aAdministration ~~lack~~ of ~~innovation~~Internet inCommodity ~~game~~Transaction ~~contents~~ and ~~operating~~Relevant ~~models.~~Services Although there were many game related colleges established throughout the country, a shortage of potential employees with real-world development experience hurts innovation. Fierce competition for qualified individuals is common in the industry. The unavailability of qualified individuals results in a lack of continuity in internal talent development.(2010);

·• ~~Pressure~~the ~~from~~Notice ~~Other~~on ~~Market~~Strengthening ~~Segments:~~the Administration of Virtual Currency of Online Games (2009); and

~~Both~~• the ~~web-based~~Tentative ~~and~~Measures ~~mobile~~for ~~platform~~Administration gaming markets are expected to develop faster than the client-based gaming market over the next 2 years. This trend not only splits user groups but also decreases investment in client-based games. These 2 market segments will keep pushing and challenging the growth of ~~the~~Internet ~~client-based~~Goods ~~game market. However, from another prospective, these 2 markets are not expected to replace the needs of users desiring a high-class product in terms of effects~~ and ~~usability. Therefore~~Relevant ~~these~~Services ~~markets~~Transactions ~~can be taken advantage of to attract new users and further develop the client-based gaming market base~~(2010).

~~Competition~~As the online game industry is at an early stage of development in China, new laws and regulations may be adopted from time to time to require additional licenses and permits. As a result, substantial uncertainties exist regarding the interpretation and implementation of current and any future Chinese laws and regulations applicable to the online game industries.

~~Currently~~Restrictions ~~it is estimated that there are some 120 online game operators running approximately 200 online games in China. But only a few developers can make a profit~~ on ~~their~~Foreign ~~games. Developing~~Investment an online game in-house takes 12 to 18 months and the R&D of an ordinary 3D online game often costs as much as RMB10 million (around US$1.5 million) according to analysis performed by ThinkEquity. Insiders say that out of ten online games, only one is profitable. Such estimates may shock those who believe that the business consistently generates huge profits. In March 2009, iResearch estimated that about 70% of China's online games companies spend more than they earn.

22Under the above regulations, a foreign investor is currently prohibited from owning more than 50% of the equity interest in a Chinese entity that provides value-added telecommunications services, including online games and other Internet content provision services. In addition, foreign and foreign invested enterprises are currently not able to apply for certain required licenses to provide these services.

~~Top Online Game Operators~~16

~~Source: Securities~~The ~~Asia~~Circular ~~Estimates~~on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business issued by the MIIT in July 2006, reiterated the regulations on foreign investment in telecommunications business, which require foreign investors to set up foreign-invested enterprises and obtain an ICP license in order to conduct any value-added telecommunications business in China. Under this circular, a domestic company that holds an ICP license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance in forms of resources, sites or facilities to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local ICP license holder or its shareholders. This circular further requires each ICP license holder to have the necessary facilities for its approved business operations and to maintain such facilities in the regions covered by its license. In addition, all value-added telecommunications service providers are required to maintain network and information security in accordance with the standards set forth under relevant PRC regulations. Due to the lack of further necessary interpretation from the regulators, it remains unclear what impact this circular will have on us or the other Chinese Internet companies that have adopted the same or similar corporate and contractual structures as ours.

AsOn ~~displayed~~September 28, in2009, GAPP, the ~~chart~~National ~~above~~Copyright Administration, and National Office of Combating Pornography and Illegal Publications jointly issued the ~~current~~GAPP ~~Chinese~~Notice, which restates that foreign investors are not permitted to invest in online ~~games~~game-operating ~~market~~businesses isin ~~dominated~~China byvia ~~eight~~wholly ~~operators~~owned, ~~with~~equity ajoint ~~total~~venture ~~market~~or ~~share~~cooperative joint ofventure ~~76%~~investments. ~~Tencent~~The GAPP Notice expressly prohibits foreign investors from gaining control over or participating in domestic online game operators through indirect ways such as establishing other joint venture companies, ~~Shanda~~or contractual or technical arrangements. However, ~~and~~the ~~NetEase~~GAPP ~~are~~Notice does not provide any interpretation of the ~~top~~term 3“foreign investors” or make a distinction between foreign online game companies inand China ~~with~~based ~~combined~~companies ~~market~~under ~~share~~a ofsimilar ~~50%~~corporate structure like ours. ~~Six~~ ofThus, it ~~the~~is ~~top~~unclear ~~Chinese~~whether such regulations will be applicable to us or many other China based companies that rely on similar contractual arrangements with variable interest entities that operate online games ~~operators~~in ~~are~~China. ~~listed~~Since inthe promulgation of the USGAPP Notice, we have applied for and ~~three~~obtained ISBNs from GAPP for Internet publications of several new games without encountering any problem. We are ~~listed~~not onaware that GAPP has taken any enforcement action under the ~~Hong~~GAPP ~~Kong~~Notice ~~Stock~~against ~~Exchange:~~any online game operators under a similar corporate structure like ours.

·We USconduct ~~NASDAQ:~~our ~~NetEase~~online ~~(NTES),~~game ~~The9~~and ~~(NCTY),~~related ~~Perfect~~businesses ~~World~~through ~~(PWRD),~~contractual arrangements ~~Sohu/ChangYou~~with ~~(SOHU~~Beijing &Sntaro. ~~CYOU),~~Such ~~and~~arrangements ~~Shanda~~are ~~Games~~described ~~(GAME)~~in greater details under the caption “VIE Structure”.

·Regulation USof ~~NYSE:~~Licenses ~~Giant~~for ~~(GA)~~Online Games

·Online HKgame ~~HKSE:~~operators ~~Tencent~~are ~~(0700.HK),~~required ~~Net~~to ~~Dragon~~hold ~~Websoft~~a ~~Inc.~~variety ~~(0777.HK)~~of permits and ~~Kingsoft~~licenses, ~~(3888.HK)~~which include:

~~The~~ICP top online games operators have already begun strengthening their product offering platform and disengaging themselves from dependence on one single product. In this aim, they have achieved notable success, which is evident from the attractive games they currently have in their portfolio. At the same time, most of them have started to develop multiple games targeted at different market segments, and also put more emphasis on promoting a few competitive products to keep ahead of the market and achieve maximum profits. With their diversified portfolio of games, the top online games operators have been able to maximize interest from potential users and consequently maximize their revenue streams. Because competition is becoming fiercer in the online games industry, only developers who have core competency in R&D, operations and distribution can expand in a sustainable way.License

~~Online~~Under ~~Games~~current ~~Platform~~Chinese laws and regulations, a commercial operator of Internet content provision services must obtain a value-added telecommunications business operating license for Internet content provision from the appropriate telecommunications authorities in order to carry on any commercial Internet content provision operations in China. Santaro has obtained the ICP licenses.

23Internet Culture Operation License

~~The~~Each ~~majority~~ICP oflicense ~~online~~holder ~~games~~that ~~revenue~~engages in ~~China~~the ~~comes~~supply ~~from~~of ~~Massive~~Internet culture ~~Multiplayer~~products ~~Online~~and ~~Role-Playing~~related ~~Games (MMORPGs). However~~services, ~~casual~~including ~~games~~provision ~~are~~of ~~becoming~~online ~~increasingly~~games ~~popular~~services, asmust ~~these~~obtain ~~are~~an ~~usually~~additional ~~easier~~Internet toculture operation ~~pick~~license upfrom ~~and~~the ~~less~~appropriate ~~time-consuming.~~culture Inadministrative ~~the~~authorities ~~high-end~~pursuant 3Dto ~~online~~the ~~games~~newly ~~market,~~issued ~~foreign~~Tentative ~~products~~Measures ~~still~~for ~~dominate~~Administration of ~~the~~Internet ~~market.~~Culture ~~Online~~(2011), ~~games~~which ~~developed~~superseded inthe ~~Korea~~Tentative ~~and~~Measures ~~the~~for USAdministration ~~are~~of ~~predominantly~~Internet 3DCulture ~~products~~(2003, ~~whereas~~and ~~Chinese~~as ~~products~~amended in ~~are either 2D or 2~~2004).~~5D.~~

InInternet aPublishing 2009 China Online Games Market report it was estimated that 52% of MMORPGs in China are 2D products, with 3D products accounting for only 33%. The expectation is that 3D products will become the mainstream in the future, but 2D products will continue to play a role. 2D products have some advantages, one being that players do not need sophisticated hardware to play the game, an important feature especially when selling these games in rural areas or small cities in China. Today, 3D games are more popular than 2D games, and represent 50% of the market. All three games that Santaro is presently developing are 3D games.License

~~Success~~The ~~Factors~~GAPP &and ~~Key~~the ~~Features~~MIIT jointly impose a license requirement for any company that intends to engage in Internet publishing, defined as any act by an Internet information service provider to select, edit and process content or programs and to make such content or programs publicly available on the Internet. According to the Tentative Measures for Administration of Internet Publication (2002), the provision of online games services is deemed an Internet publication activity. Therefore, online game operators need to obtain an Internet publishing license in order to directly make their online games services publicly available in China.

Moreover, the 2009 China online games market report from Yiguan International provides a good overview of what features players value most in online games. Interviews with presidents of 10 media games associations show that the top key features contributing to make an online game successful include the following: Picture Quality, Interest/Complexity of the Game, and the Narrative, in particular, Games Featuring Chinese Culture. The chart below reflects the opinions of chief editors at 10 professional media companies in China regarding the factors contributing to the success of an online game product.17

~~Source: 10~~Online ~~Professional~~Bulletin ~~Media~~Board ~~Companies~~Service Approval

~~Regulatory~~The ~~Environment~~MIIT has promulgated rules requiring ICP license holders that provide online bulletin board services to register with, and obtain approval from, the relevant telecommunication authorities.

~~Certain~~Regulation ~~Internet areas, such as telecommunications, information services, international connections to computer information networks, information security and censorship, are covered extensively by a number~~ of ~~existing~~Internet ~~laws~~Content and regulations issued by Chinese governmental authorities. There are three key regulatory bodies overseeing the Chinese online games industry: 1) Ministry of Culture (MOC); 2) Ministry of Industry and Information Technology; and, 3) General Administration of Press and Publication (GAPP).

24The Chinese government has promulgated measures relating to Internet content through a number of ministries and agencies, including the MIIT, the Ministry of Culture and the GAPP. These measures specifically prohibit Internet activities, which includes the operation of online games, that result in the publication of any content which is found to, among other things, propagate obscenity, gambling or violence, instigate crimes, undermine public morality or the cultural traditions of the PRC, or compromise State security or secrets. When an Internet content provider or an Internet publisher finds that information falling within the above scope is transmitted on its website or is stored in its electronic bulletin service system, it shall terminate the transmission of such information or delete such information immediately and keep records and report to relevant authorities. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites. In addition, in accordance with the Notice on Enhancing the Content Review Work of Online Game Products (2004) promulgated by the Ministry of Culture, imported and domestic online games should be filed with the Ministry of Culture before the operation of each game.

InRegulation ~~July, 2009, the Ministry~~ of ~~Culture~~Information ~~issued~~Security a notice banning online games that feature Mafioso kingpins, marauding street gangs or any sort of organized hooliganism. This is an important aspect which shows that once an online game is developed, the process is not yet over. Indeed, if the government does not approve the game, the operator cannot launch the game in the market. In accordance with the national laws and regulations of China, Santaro plans to make full use of its advantages to provide high-quality and professional digital interactive entertainment services for its partners and players.

~~ITEM~~Internet 1Acontent in China is also regulated and restricted from a State security standpoint. ~~RISK~~The ~~FACTORS~~National People’s Congress, China’s national legislative body, has enacted a law that may subject to criminal punishment in China any effort to: (1) gain improper entry into a computer or system of strategic importance; (2) disseminate politically disruptive information; (3) leak State secrets; (4) spread false commercial information; or (5) infringe intellectual property rights.

WeThe ~~are~~Ministry aof ~~smaller~~Public ~~reporting~~Security ~~company~~has aspromulgated ~~defined~~measures bythat prohibit ~~Rule~~use ~~12b-2~~ of the ~~Securities~~Internet ~~Exchange~~in ~~Act~~ways which, among other things, result in a leak of ~~1934~~State secrets or a spread of socially destabilizing content. The Ministry of Public Security has supervision and ~~are~~inspection ~~not~~rights ~~required~~in this regard, and we may be subject to ~~provide~~the jurisdiction of the ~~information~~local ~~under~~public ~~this~~security ~~item~~bureaus. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites.

~~ITEM~~Intellectual ~~1B. UNRESOLVED~~Property ~~STAFF~~Rights ~~COMMENTS~~

~~There~~The State Council and the National Copyright Administration have promulgated various regulations and rules relating to protection of software in China. Under these regulations and rules, software owners, licensees and transferees may register their rights in software with the National Copyright Administration or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are noencouraged ~~unresolved~~to ~~comments~~go ~~from~~through the ~~SEC~~registration process and registered software rights may receive better protections.

~~ITEM~~The 2PRC Trademark Law, adopted in 1982 and revised in 2001, with its implementation rules adopted in 2002, protects registered trademarks. ~~PROPERTIES~~ The Trademark Office of the SAIC handles trademark registrations and grants a protection term of ten years to registered trademarks.

~~The~~Virtual ~~Company’s~~Currency ~~property and equipment consists wholly of computer equipment, leasehold improvements, and furniture. The net value of the Company’s property and equipment was $494,412 as of December 31, 2011.~~

~~ITEM~~On 3February 15, 2007, the Ministry of Commerce, the People’s Bank of China and other relevant government authorities jointly issued the Notice on the Reinforcement of the Administration of Internet Cafes and Online Games, or the Internet Cafés Notice. ~~LEGAL~~ ~~PROCEEDINGS~~Under this notice, the People’s Bank of China is directed to strengthen the administration of virtual currency in online games to avoid any adverse impact on the economy and financial system. This notice provides that the total amount of virtual currency issued by online game operators and the amount purchased by individual game players should be strictly limited, with a strict and clear division between virtual transactions and real transactions carried out by way of electronic commerce. This notice also provides that virtual currency should only be used to purchase in-game items.

~~Currently we are not involved in any pending litigation or legal proceeding.~~18

~~ITEM~~On June 4, 2009, Ministry of Commerce jointly issued Notice on the Reinforcement of the Administration of Virtual Currency in Online Games, which defines what is virtual currency and requires that entities shall obtain the approval from the Ministry of Commerce before issuing virtual currency and engaging in transactions using virtual currency in connection with online games. ~~MINE~~ ~~SAFETY~~Entities ~~DISCLOSURES~~are prohibited from using virtual currency to carry out gambling business.

~~None~~ITEM 1A. RISK FACTORS

~~ITEM~~We ~~5. MARKET~~are ~~FOR~~a ~~REGISTRANT’S~~smaller ~~COMMON~~reporting ~~EQUITY,~~company ~~RELATED~~as ~~STOCKHOLDER~~defined ~~MATTERS~~by ~~AND~~Rule ~~ISSUER~~12b-2 of ~~PURCHASES~~the OFSecurities ~~EQUITY~~Exchange ~~SECURITIES~~Act of 1934 and are not required to provide the information under this item.

~~Only~~ITEM ~~a limited market exists for our securities~~1B. ~~There~~UNRESOLVED isSTAFF no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder in all likelihood will be unable to resell his securities in our company. Furthermore, it is unlikely that a lending institution will accept our securities as pledged collateral for loans unless a regular trading market develops.COMMENTS

25There are no unresolved comments from the SEC.

~~Our~~ITEM ~~company's securities are traded on the Over-The-Counter Bulletin Board (“OTCBB”) operated by the Financial Industry Regulatory Authority (FINRA) under the symbol “STIE”~~2. PROPERTIES

Fiscal Quarter	High Bid	Low Bid
2011
Fourth Quarter 10-01-11 to 12-31-11	$4.95	$1.12
Third Quarter 07-01-11 to 09-30-11	$4.95	$3.00
Second Quarter 04-01-11 to 06-30-11	$5.35	$4.00
First Quarter 01-01-11 to 03-31-11	$5.35	$4.43

The Company’s office is located at Dazhongsi Zhongkun Plaza Building E, 903. 18A North 3rd Ring Road West, Haidian District Beijing 100098 PRC. We do not own any real property. The Company’s other property and equipment consists wholly of computer equipment, leasehold improvements, and furniture. The net value of the Company’s property was $556,884 as of December 31, 2012.

Fiscal Quarter	High Bid	Low Bid
2010
Fourth Quarter 10-01-10 to 12-31-10	$5.55	$4.10
Third Quarter 07-01-10 to 09-30-10	$0.00	$0.00
Second Quarter 04-01-10 to 06-30-10	$0.00	$0.00
First Quarter 01-01-10 to 03-31-10	$0.00	$0.00

ITEM 3. LEGAL PROCEEDINGS

~~Shareholders~~Currently we are not involved in any pending litigation or legal proceeding.

AsITEM ~~of December 31, 2011, we had 320 shareholders of record of our common stock, including shares held by brokerage clearing houses, depositories or otherwise in unregistered form~~4. AsMINE ofSAFETY ~~December 31, 2011, we had outstanding warrants to purchase a total of 1,187,500 shares at a strike price of $5.00 per share.~~DISCLOSURES

~~Dividend~~Not ~~Policy~~applicable.

~~Section~~Market ~~15(g) of the Securities Exchange Act of 1934~~Information

~~Our~~Only ~~shares~~a ~~are~~limited ~~covered~~market byexists ~~section~~for ~~15(g)~~our ofsecurities. ~~the~~There ~~Securities~~is ~~Exchange~~no assurance ~~Act of 1934, as amended,~~ that ~~imposes~~a ~~additional~~regular ~~sales~~trading ~~practice~~market ~~requirements~~will ~~on broker/dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5~~develop,~~000,000~~ or ~~individuals~~if ~~with net worth in excess of $1~~developed,~~000,000~~ orthat ~~annual~~it ~~income~~will ~~exceeding~~be ~~$200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years)~~sustained. ~~For transactions covered by the Rule~~Therefore, ~~the broker/dealer must make~~ a ~~special~~shareholder ~~suitability~~in ~~determination~~all likelihood ~~for~~will ~~the~~be ~~purchase~~unable ~~and have received the purchaser's written agreement~~ to ~~the~~resell ~~transaction~~his ~~prior~~securities toin ~~the~~our ~~sale~~Company. ~~Consequently~~Furthermore, ~~the~~it ~~Rule~~is ~~may~~unlikely ~~affect~~that ~~the~~a ~~ability~~lending ofinstitution ~~broker/dealers~~will accept ~~to sell~~ our securities ~~and~~as ~~also~~pledged ~~may~~collateral ~~affect~~for ~~your~~loans ~~ability~~unless toa ~~sell~~regular ~~your~~trading ~~shares in the secondary~~ market develops.

26Our company's securities are traded on the Over-The-Counter Bulletin Board (“OTCBB”) operated by the Financial Industry Regulatory Authority (FINRA) under the symbol “STIE”.

Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as “bid” and “offer” quotes, a dealers “spread” and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

Fiscal Quarter	High Bid		Low Bid
2012
Fourth Quarter	$	2.00	$	0.30
Third Quarter	$	0.90	$	0.16
Second Quarter	$	0.80	$	0.10
First Quarter	$	2.39	$	0.35

Securities authorized for issuance under equity compensation plans

Fiscal Quarter	High Bid		Low Bid
2011
Fourth Quarter	$	4.95	$	1.12
Third Quarter	$	5.29	$	3.00
Second Quarter	$	5.35	$	4.00
First Quarter	$	5.35	$	4.50

~~We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.~~19

~~ITEM 6. SELECTED FINANCIAL DATA~~Holders

WeAs ~~are~~of aMarch ~~smaller~~15, ~~reporting~~2013, ~~company~~we ashad ~~defined~~316 byholders ~~Rule~~of ~~12b-2~~record of ~~the~~our ~~Exchange~~common stock, ~~Act~~including ~~and~~shares ~~are~~held ~~not~~by ~~required~~brokerage toclearing ~~provide~~houses, ~~the~~depositories ~~information~~or ~~under~~otherwise ~~this~~in ~~item~~unregistered form.

~~ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Dividends

~~The~~We ~~following~~have ~~discussion~~not isdeclared anany ~~overview~~cash ofdividends. ~~the~~We ~~important~~do ~~factors~~not ~~that~~intend ~~management~~to pay ~~focuses~~dividends on in ~~evaluating our business; financial condition and operating performance should be read in conjunction with~~ the ~~financial~~foreseeable ~~statements~~future, ~~included~~but inrather ~~this Annual~~to ~~Report~~reinvest onearnings, ~~Form~~if 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of any ~~number of factors~~, ~~including those set forth~~ in ~~the~~our ~~Company’s~~business ~~reports filed with the SEC on Form 10-K, 10-Q and 8-K as well as in this Annual Report on Form 10-K~~operations. ~~Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.~~

~~Results~~Section 15(g) of ~~Operations~~the Securities Exchange Act of 1934

~~Because~~Our ~~the~~shares ~~Company~~are iscovered inby section 15(g) of the ~~development~~Securities ~~stage~~Exchange Act of 1934, ~~our~~as ~~operations~~amended, ~~have~~that ~~been~~imposes ~~limited~~additional tosales ~~developing~~practice ~~our~~requirements ~~products. As~~on abroker/dealers ~~result,~~who ~~the~~sell ~~Company~~such ~~realized~~securities noto ~~revenue~~persons other ~~during~~than ~~the~~established ~~period~~customers ~~from~~and ~~inception~~accredited investors (~~August~~generally 9,institutions ~~2006)~~with ~~through~~assets ~~December~~in 31excess of $5,000,000 ~~2011.~~or ~~The~~individuals with ~~Company’s~~net ~~business~~worth in excess of $1,000,000 ~~financial~~or ~~condition~~annual ~~and~~income ~~results~~exceeding $200,000 in each of ~~operations~~the ~~may~~two bemost ~~influenced~~recent years or joint income with a spouse exceeding $300,000 for those years). For transactions covered by the ~~political~~Rule, ~~economic~~the ~~and~~broker/dealer ~~legal~~must ~~environments~~make ina ~~the~~special suitability ~~PRC~~determination ~~such~~for asthe ~~changes~~purchase inand ~~governmental~~have ~~policies~~received ~~with~~the ~~respect~~purchaser's written agreement to ~~laws~~the ~~and~~transaction ~~regulations,~~prior ~~anti-inflationary~~to ~~measures~~the sale. Consequently, ~~currency~~the ~~conversion~~Rule ~~and~~may ~~remittance~~affect ~~abroad,~~the ~~and~~ability ~~rates~~of broker/dealers to sell our securities and ~~methods~~also ofmay ~~taxation,~~affect ~~among~~your ~~other~~ability ~~things~~to sell your shares in the secondary market.

27Section 15(g) also imposes additional sales practice requirements on broker/dealers who sell penny securities. These rules require a one-page summary of certain essential items. The items include the risk of investing in penny stocks in both public offerings and secondary marketing; terms important to in understanding of the function of the penny stock market, such as “bid” and “offer” quotes, a dealers “spread” and broker/dealer compensation; the broker/dealer compensation, the broker/dealers duties to its customers, including the disclosures required by any other penny stock disclosure rules; the customers rights and remedies in causes of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.

~~The~~Securities ~~following~~Authorized ~~table sets forth a summary,~~ for ~~the~~Issuance ~~periods~~under ~~indicated,~~Equity ~~our consolidated results of operations. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.~~Compensation Plans

	Years Ended December 31,
	2011				2010
Operating expenses
Research and development expenses		$	2,439,991			$	1,532,966
Sales and marketing expenses			21,280				27,935
General and administrative expenses			1,312,272				574,859
Loss from operations			(3,773,543	)			(2,135,760	)
Non-operating expenses			925				1,035
Loss before income tax expense and non-controlling interest			(3,774,468	)			(2,136,795	)
Deferred tax expense			-				610,694
Net loss before non-controlling interest		$	(3,774,468	)		$	(2,747,489	)
Less: Net loss attributable to the non-controlling interests			-				(239,775	)
Net loss attributable to the Company		$	(3,774,468	)		$	(2,507,714	)

We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.

~~Research~~ITEM ~~and~~6. ~~Development~~SELECTED ~~(R&D)~~FINANCIAL ~~expenses~~DATA

~~R&D~~We ~~expenses~~are ~~primarily~~a ~~consist~~smaller ofreporting ~~R&D~~company ~~salary,~~as ~~rent~~defined ~~expenses,~~by ~~social~~Rule ~~assurance, depreciation, and testing fee which occurred for R&D activities. For the years ended December 31, 2011, R&D expense was $~~12b-2~~,439,991, representing an increase~~ of ~~$907,025 or 59.17%, compared with $1,532,966 for~~ the ~~corresponding~~Exchange ~~period~~Act inand ~~2010~~are ~~which~~not ~~due~~required to ~~the~~provide salary expense increased $574,078; Social assurance fee increased $84,141; Rent expenses increased $60,956; Design fee increased $60,683 and testing fee increased $70,413 compared with same periods of 2010, respectively. Since the ~~game~~information ~~Three~~under ~~Kingdoms~~this ~~Online and 108 Warriors are in testing stage, the Company hired more technical staff for recurring R&D activities~~item. ~~Other variances include expenses for business entertainment, business travelling, etc., presenting a slight increase, accumulated about $56,754.~~

~~Sales and marketing expenses~~20

~~Selling~~ITEM ~~expenses mainly represent car expenses and promotion fee~~7. ~~For~~MANAGEMENT'S ~~the~~DISCUSSION ~~year~~AND ~~ended~~ANALYSIS ~~December~~OF ~~31,~~FINANCIAL ~~2011,~~CONDITION ~~selling~~AND ~~expense~~RESULTS ~~was~~OF $21,280, representing a decrease of $6,655 or 23.82% compared with $27,935 for the corresponding period in 2010. It was mainly due to the decrease of promotion fee with the amount of $13,403. At the meanwhile, compared with last period, car expense increased slightly $2,823 and transportation fee increased $439. Other miscellaneous fees increased $3,486.OPERATIONS

28Forward Looking Statements

~~General~~This Annual Report on Form 10-K and ~~administrative~~other ~~expenses~~reports filed by the Company from time to time with the Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to the Company’s industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated believed, estimated, expected, intended, or planned.

~~General~~Although the ~~and~~Company ~~administrative~~believes ~~expenses~~that ~~consist~~the ~~primarily~~expectations ofreflected ~~compensation~~in ~~for~~the ~~personnel,~~forward-looking ~~business~~statements ~~travelling~~are ~~expense~~reasonable, ~~rental and office expense related to ordinary administration and fees for professional services. For~~ the ~~year~~Company ~~ended~~cannot ~~December~~guarantee future 31results, ~~2011,~~levels ~~total~~of ~~general and administrative expenses was $1~~activity,~~312,272,~~ ~~representing an increase of $737~~performance,~~413,~~ or ~~approximately 128~~achievements.~~28%~~ Except as ~~compared~~required toby ~~$574~~applicable law,~~859~~ ~~for~~including the ~~corresponding~~securities laws ~~period~~of ~~in 2010 which due to~~ the ~~salary~~United ~~expense increased $468~~States,~~810;~~ ~~Professional~~the ~~service~~Company ~~fee~~does ~~increased~~not ~~$165,308;~~intend ~~Afforestation~~to ~~fee~~update ~~increased~~any ~~$37,072; Welfare~~of ~~expenses~~the ~~increased~~forward-looking ~~$24,865~~statements ~~and~~to ~~service~~conform ~~fee~~these ~~increased~~statements to ~~$28,161~~actual ~~compared with same periods of 2010, respectively~~results. ~~For~~Readers ~~the~~are ~~increase~~urged ofto ~~salary,~~carefully asreview ~~mentioned~~and inconsider ~~R&D expenses,~~ the ~~Company~~various ~~hired~~disclosures ~~more~~made ~~high~~throughout ~~level staff for~~ the ~~coming~~entirety ~~release~~ of ~~the~~this quarterly ~~games~~report, ~~and~~which ~~Ningbo~~attempt ~~Company’s~~to ~~Beijing~~advise ~~branch’s~~interest ~~operation.~~parties ~~The~~of ~~Company~~the ~~became~~risks ~~listed Company in October 2010,~~ and ~~related~~factors ~~professional~~that ~~fee~~may ~~increased~~affect ~~significantly~~our ~~during the year ended December 31~~business, ~~2011.~~financial ~~Other variances include expenses occurred for social insurance for supporting department~~condition, results ~~communication~~of ~~fee~~operations, and ~~power, etc~~prospects.

~~Deferred~~Our financial ~~tax~~statements ~~expense~~are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which are relied are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by U.S. GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

~~For~~Accounting the year ended December 31, 2011, the deferred tax expense decreased by $610,694 to $0 compared with $610,694 for the corresponding period in 2010. The change in deferred tax benefit was due to the full allowance Policy of ~~the~~Revenue ~~management’s recognition of relevant deferred tax assets at the end of fiscal years 2011 since it is more likely than not that all of the deferred tax assets will not be realized.~~Recognition

~~Net~~The ~~loss~~Company ~~before~~currently ~~noncontrolling~~provides ~~interest~~online game services in the PRC and recognizes revenue in accordance to the criteria of ASC subtopic 605 (“ASC 605”), Revenue Recognition when persuasive evidence of an arrangement exists, the service has been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Online game revenues include our MMOG operations and Co-operation Web-based game revenues.

~~For~~MMOG the year ended December 31, 2011, the net loss before noncontrolling interest increased to $3,774,468 compared with $2,747,489 for the corresponding period in 2010. The increase in net loss before noncontrolling interest was primarily due to increases in R&D expense and general and administrative expense.operations

~~Liquidity~~The Company operates Massively Multiplayer Online Role-Playing Games (“MMORPG”) under a free-to-play model. The online game revenue derives from the sale of in-game virtual items and ~~Capital~~revenue ~~Resources~~was recognized pursuant to the item-based revenue model.

WeUnder ~~anticipate~~the ~~that~~item-based model, players are able to play the ~~existing~~basic ~~cash~~features ~~and~~of ~~cash~~the ~~equivalents~~game onfor ~~hand,~~free. ~~together~~We ~~with~~generate ~~the~~revenues ~~net~~when ~~cash~~players ~~flows~~purchase ~~supported~~virtual byitems ~~owners~~that enhance their playing experience, such as weapons, clothing, accessories and ~~related~~pets. ~~parties~~The ~~will~~item-based berevenue ~~sufficient~~model allows us to ~~meet~~introduce ~~our~~new ~~working~~virtual items ~~capital~~or ~~requirements~~change ~~for~~the ~~our~~features ~~on-going~~or ~~projects~~properties ~~and~~of virtual items to ~~sustain~~enhance ~~the~~game ~~business~~player ~~operations~~interaction ~~for~~and ~~the~~create ~~next~~a ~~twelve~~better ~~months~~game community.

~~Since~~The weCompany ~~initiated~~sells ~~our~~prepaid ~~business~~cards, ~~operations~~in both virtual and physical forms, weto ~~have~~third ~~been~~party ~~funded~~distributors ~~primarily~~who byin ~~related~~turn ~~parties~~sell the prepaid cards to end customers. ~~CixiYide~~The ~~Auto~~prepaid ~~Company~~cards provide ~~(the~~customers ~~“CixiYide”)~~with ~~provided~~a ~~loan~~pre-specified number of ~~$1,577,639~~game points for consumption. All prepaid cards sold to distributors require upfront advance cash payments. The prepaid game cards entitle end users to purchase virtual items in the ~~business~~Company’s ~~initial~~online ~~operations~~games. Prepaid Mrcards will expire two years after the date of card production if they have never been activated. ~~Zhilian~~The ~~Chen~~proceeds isfrom the expired ~~major~~game ~~owner~~cards are recognized as revenue upon expiration of ~~CixiYide~~cards. In contrast, once the prepaid cards are activated and credited to a player’s personal game account, they will not expire as long as the personal game account remains active. The personal game account will always remain active before the game stop operating.

~~Going~~The ~~concern~~end ~~and~~users ~~Liquidity~~also could choose bank recharge method directly to exchange Santaro currency (“Long Bi”) or game currency of 108 warriors (“Silver”) through third-party payment platforms.

2921

~~The~~All ~~accompanying~~proceeds ~~financial~~received ~~statements~~from ~~are~~distributors or ~~presented~~through ondirect aonline ~~going~~payment ~~concern~~systems ~~basis.~~are ~~The~~deferred ~~Company~~when ~~is in a development stage and has not generated any revenue during the period from its inception to December 31~~received, ~~2011,~~revenues ~~has~~are ~~recurring~~recognized ~~net~~over ~~losses~~estimated ~~and~~life ~~negative cash flows from operations and has been dependent on debt and equity financing. The Company has an accumulated deficit~~ of ~~$9,530,323. These conditions raise substantial doubt about~~ the ~~Company’s~~virtual items ability to continue as a going concern. During the year ended December 31, 2011, the Company obtained a funding of $4,750,000 from newly issued 2,375,000 common shares. However, there can be no assurance that ~~the~~game ~~Company~~players ~~will~~purchase ~~be able to obtain debt~~ or ~~equity~~as ~~financing on terms acceptable to it, or if at all. The management plans to fund continuing operations through new financing from related parties and equity financing arrangements. On April 29, 2011,~~ the ~~Company~~virtual ~~entered~~items ~~into~~are ~~an agreement (the “Agreement”) with Mr~~consumed. ~~Zhilian, Chen and CixiYide, whereby, Mr. Zhilian Chen invests $4,460,366 (RMB 29,260,000) into Beijing Santaro as capital injection which is used to pay back the borrowing from CixiYide.~~ The ~~agreement~~below isdescription ~~effective~~are ~~upon completion of~~ the ~~registration~~detailed ofrevenue ~~the~~recognition method ~~capital.~~adopted Atby ~~December 5, 2011,~~ the ~~capital injection has been completed and Beijing Sntaro paid back $4,626,818 (RMB 29,260,000) to CixiYide~~company.

~~Cash~~Instant consumption ~~Flows~~mode is used when users purchase instant services or items with Silver. And as that service or item will be immediately consumed right after the Silver is paid by the user, therefore the reflected RMB value (from equivalent Silver) can be confirmed and recorded as revenue after the completion of the purchase (exchange Long Bi for Silver) by the user.

	Years ended December 31,
	2011				2010
Net cash used in operating activities		$	(3,578,700	)		$	(2,051,345	)
Net cash used in investing activities			(402,008	)			(41,752	)
Net cash provided by financing actives			5,711,309				2,395,303
Effect of foreign currency exchange rate changes on cash and cash equivalents			(22,076	)			5,159
Net increase in cash and cash equivalents		$	1,708,525			$	307,365

Limited consumption mode is used when users purchase the items or services with limited effective time. This type of items or services will be fully consumed by the end of the effective time. Therefore the reflected RMB value of that purchase will be confirmed as revenue after the item or service has been fully consumed (expired).

~~Net~~Apportioned consumption ~~cash~~mode is used infor ~~operating~~perpetual ~~activates:The~~virtual ~~Company~~items ~~had~~and noservices, ~~revenue~~which ~~from~~can ~~its~~be ~~inception~~used inunlimited ~~2006~~times tothrough ~~December~~their ~~31,~~estimated ~~2011~~life spans. ~~Our~~The ~~net~~delivery ~~cash~~criterion ~~used~~for inperpetual ~~Operating~~virtual ~~activities~~items ~~increased~~is ~~$1,527,355~~generally inmet ratably over the ~~year~~expected ~~ended~~delivery ~~December~~obligation 31period, which, ~~2011~~in ~~compared~~this tocase, ~~that~~is in the ~~year~~estimated ~~ended~~life ~~December~~of ~~31,~~the ~~2010.~~perpetual ~~Most~~virtual ~~operating~~items ~~cash~~purchased. ~~flow~~Revenue is ~~the~~recognized ~~result~~proportionately ofover the ~~cash-paid~~estimated ~~expenditure~~life ~~during~~spans ~~operation.~~which ~~The~~are ~~increase~~based ofon ~~net~~data ~~cash~~related ~~used~~to inpaying ~~operating~~game ~~activities~~player ~~was~~usage ~~due~~patterns tofor ~~increasing~~each ~~salary~~category ~~expense~~of ~~and~~virtual ~~rent expense~~item. The ~~Since~~game ~~the~~log, ~~Company~~which ~~will~~records ~~complete~~the ~~its~~whole ~~R&D~~process of ~~Three~~a ~~Kingdoms~~specific ~~Online~~item ~~and~~or ~~108~~service ~~Warriors,~~being ~~the~~purchased ~~Company~~and ~~hired~~consumed, ~~more~~will ~~high~~be ~~level~~used ~~staff~~periodically to ~~for~~readjust the ~~preparation~~estimation ofon ~~R&D~~perpetual ~~and~~virtual ~~operating~~items’ life spans.

~~Net~~Co-operation ~~cash~~Web-based used in investing activities:Our net cash used in investing activities increased $360,256 in the year ended December 31, 2011 compared to that in the year ended December 31, 2010. The increase in net cash used in investing activities was the result of an increase in the purchasing of new equipment, facilities and intangibles during the year ended December 31, 2011.game

~~Net~~As ~~cash~~the ~~provided~~operator, bythe ~~financing~~Company ~~activities:Our~~signed ~~cash~~distribution agreements ~~provided~~with bythird-party ~~financing~~developers ~~activities~~to ~~significantly~~offer ~~increased~~the ~~from~~games ~~$2,395,303~~to ~~for~~users ~~the~~on ~~year~~its ~~ended~~websites ~~December~~or ~~31,~~platforms. ~~2010~~Although tothe ~~$5,711,309~~company ~~for~~is the ~~year~~party that ~~ended~~signs ~~December~~the ~~31,~~user ~~2011,~~agreement ~~representing~~with anits ~~increase~~users ofand ~~138.44%.~~is ~~The~~responsible ~~current~~for ~~financed~~its ~~capital~~users’ ~~could~~experience ~~not~~on ~~support~~its ~~current~~Websites ~~operation~~or platforms, its remaining obligation is deemed to be inconsequential and ~~product~~perfunctory ~~development.~~after ~~CixiYide~~the ~~Auto~~end ~~Company,~~users ~~97%~~recharge ~~controlled~~to byexchange the ~~Company’s~~game ~~controlling~~coins ~~shareholder~~of these web-based games. Besides, ~~continuously~~the ~~provides~~third ~~financial~~party ~~support.~~developers ~~The~~obliged ~~Company~~to ~~also~~provide ~~received~~on-going ~~proceeds~~services ofto ~~$4.75~~users, ~~million~~so ~~upon~~a proportion of the full ~~issuance~~revenue ofreceived ~~2.375~~from ~~million~~end ~~common~~users ~~stocks~~is inrecorded ~~June~~as ~~2011~~revenue ~~and~~according ~~August~~to ~~2011~~the distribution agreements.

30Results of Operations

~~Working~~Because the ~~capital~~Company is in the development stage, our operations have been limited to developing our products. As a result, the Company only has generated an insignificant amount of revenue during the period from August 9, 2006, its inception, through December 31, 2012. The Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC such as changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

~~Working capital is $228,657 as of December 31, 2011 compared with $(4,805,220) as of December 31, 2010.~~ The following ~~significant~~table ~~change~~sets inforth working capital is due to the development stage of the Company’s games. Because the Company’s games are not yet producing any revenue, the Company obtained loans to support daily operations. The Company obtained a ~~loan in the amount of $4~~summary,~~846,184~~ atfor ~~December 31, 2010 from CixiYide Company. As of December 31, 2011,~~ the ~~Company~~periods ~~accumulatively obtained loans in the amount of $1~~indicated,~~577,639~~ ~~from~~our ~~CixiYide~~consolidated ~~Company.~~results On April 29, 2011, the Company entered into an agreement (the “Agreement”) with Mr. Zhilian Chen and CixiYide, whereby, Mr. Zhilian Chen invests $4,460,366 (RMB 29,260,000) into Beijing Sntaro as capital injection which is used to pay back the borrowing from CixiYide. The agreement is effective upon completion of ~~the registration of the capital~~operations. AtOur ~~December~~historical 5,results presented ~~2011,~~below ~~the~~are ~~capital~~not ~~injection~~necessarily ~~has~~indicative ~~been completed and Beijing Sntaro paid back $4,626,818 (RMB 29,260,000) to CixiYide. The Company also received proceeds~~ of ~~$4.75 million upon~~ the ~~issuance~~results ofthat ~~2.375~~may ~~million~~be ~~common~~expected ~~stocks~~for inany ~~June~~future ~~2011 and August 2011~~period.

Description of Property

	Years Ended December 31,
	2012			2011

Revenue	$	27,571		$	-
Cost of revenue		693,059			-
Gross loss		(665,488	)		-

Operating expenses
Research and development expenses		2,683,443			2,439,991
Sales and marketing expenses		362,145			21,280
General and administrative expenses		1,409,898			1,312,272
Total operating expenses		4,455,486			3,773,543

Loss from operations		(5,120,974	)		(3,773,543	)

Gain on deconsolidation of subsidiary		(15,823	)		-
Non-operating (income) expenses		(7,020	)		925

Net loss	$	(5,098,131	)	$	(3,774,468	)

The Company’s property and equipment consists wholly of computer equipment, leasehold improvements, and furniture. The book value of the Company’s property and equipment was $494,412 as of December 31, 2011.22

~~Employees~~Revenue

~~The~~For the ~~Company~~year ~~currently~~ended ~~employs~~December ~~approximately~~31, ~~144~~2012, ~~designers~~revenues ~~and~~were ~~programmers.~~$27,571, ~~The~~representing ~~majority~~an increase of ~~employees~~$27,571, ~~have~~compared ~~three~~to $0 for the corresponding period in 2011.The increase in net revenues from online games was primarily due to ~~five~~the ~~years’~~revenue contribution ~~experience~~from 108 Warriors an MMORPG launched in the ~~online~~third quarter of 2012, with an amount of $19,343. The Company also generated a minor revenue from web games ~~industry~~during the year ended December 31, 2012.

~~Competition~~Cost ~~for~~of talented and well-educated professionals is intense among local online gaming companies. Management has set up an attractive work environment to stimulate employee creativity. A career advancement program has been prepared to provide opportunities for employees to receive additional training and promotion.revenue

~~Recent~~For the ~~issued~~year ~~accounting~~ended ~~pronouncements~~December 31, 2012, cost of revenues were $693,059, representing an increase of $693,059, compared to $0 for the corresponding period in 2011. The increase in cost of revenues from online games was primarily due to the cost from 108 Warriors.

InGross June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company has elected to early adopt this ASU and the adoption did not have a material impact on the Company’s financial statements.loss

As a result of the foregoing, our gross loss for the year ended December 31, 2012 was $(665,488) from $0 in the same period of 2011. The reason for the negative gross profit was due to the new game 108 Warriors. Because the game was in introduction stage, the Company needed to spend more costs to launch and operate this new game. These costs were primary composed by salaries of operation staffs, depreciations of the operation equipments, and advertisement fees.

~~Except~~Research ~~for~~and ~~the~~Development (R&D) ASUs above, in the year ended December 31, 2011, the FASB has issued ASU No. 2011-01 through ASU 2011-12, which is not expected to have a material impact on the consolidated financial statements upon adoption.expenses

~~Off-Balance~~R&D expenses ~~Sheet~~primarily ~~Arrangements~~consist of R&D employee salary, rent expenses, social assurance, depreciation, service fee, property management fee and testing fee for R&D activities. For the year ended December 31, 2012, R&D expenses were $2,683,443, representing an increase of $243,452 or 9.98%, compared to $2,439,991 for the corresponding period in 2011. The increase was primarily because rent expenses increased by $326,814 due to an increase in rental fee charge for a newly rented Beijing office, service fee increased by $155,578, consisting of $150,995 paid for outsourcing services required by “Heroes of Sango, 108 Warriors and Demon Sword” development, depreciation increased by $76,550, property management fee increased by $80,548 and social assurance increased by $30,268 compared to the same period of 2011. R&D employee salary decreased by $396,576 and design fee decreased by $47,139 compared to the corresponding period of 2011, which was due to the Company changed part of “MMORPG” to web games to better meet customer demand, since the technique requirement of Web game is lower than the “MMORPG”, the Company fired several junior technicians to save labor cost and improve operational ability. Other variances include expenses for office, business entertainment, business travelling, communication, water and electricity, sundries, computer accessories, etc., presenting a slight increase, accumulated about $17,409.

~~The~~Sales ~~Company~~and ~~does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, revenues or~~ marketing expenses~~, results of operations, liquidity, capital expenditures or capital resources that are material to investors.~~

~~Additional~~Selling expenses ~~Disclosure~~mainly represented selling employee salaries, advertising & promotion fees and water & electricity fees. For the year ended December 31, 2012, selling expenses were $362,145, representing an increase of $340,865 or 1,601.81% compared to $21,280 for the corresponding period in 2011. The increase was mainly due to increases in selling employee salaries, which increased by $198,171 due to the launch of 108 Warriors, and for the same reason, advertising & promotion fee was also increased by $117,560, besides, water & electricity fee increased by $9,519. Meanwhile, car expenses decreased by $4,903 compared with the corresponding period. Other miscellaneous fees increased by $20,518.

In July 2006, the Ministry of Industry and Information Technology of the PRC, or MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular. The MIIT Circular reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain a business operating license for Internet content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an Internet content provision license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local Internet content provision license holder. Due to a lack of interpretative materials from the regulator, it is unclear what impact the MIIT Circular will have on us or the other Chinese Internet companies that have adopted the same or similar corporate and contractual structures as ours.23

~~On September 28, 2009, the~~ General ~~Administration of Press~~ and Publications, or the GAPP, the National Copyright Administration (hereinafter referred to as “NCA”), and National Office of Combating Pornography and Illegal Publications (hereinafter referred to as “NOCPIP”) jointly published the “Stipulations on ‘Three Provisions’ ” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Online games and the Examination and Approval of Imported Online games (Xin Chu Lian [2009] No. 13), or Circular 13. Circular 13 restates the general principle espoused in recently promulgated regulations that foreign investment is not permitted in online game operating businesses in China. According to the Article IV of Circular 13, foreign investors are prohibited from participating in online game operating businesses via wholly owned, equity joint venture or cooperative joint venture investments in China, and from controlling and participating in such businesses directly or indirectly through contractual or technical support arrangements. In the event of a violation of these provisions, GAPP shall, in conjunction with the relevant government authorities of the PRC, investigate and handle the same in accordance with the law. In serious cases, the relevant licenses and registrations shall be revoked. However, due to the lack of a detailed interpretation of Circular 13, it is not yet clear how it will be implemented. Moreover, Circular 13 was issued solely by GAPP, NCA and NOCPIP, instead of being jointly issued by the publication administration authorities and other government authorities which are in charge of the related business operations, like the Ministry of Commerce, or the MOFCOM, and the MIIT, and the scope, implementation and enforcement of Circular 13 from the views of the above mentioned other authorities remain uncertain.administrative expenses

32General and administrative expenses consisted primarily of G&A employee salaries, professional services fees, social insurance and depreciation. For the year ended December 31, 2012, total general and administrative expenses were $1,409,898, representing an increase of $97,626 or approximately 7.44% as compared to $1,312,272 for the corresponding period in 2011. The increase was due to increases in professional service fee, which increased by $167,476, in communication fee, which increased by $19,636, in depreciation, which increased by $44,823, compared to the same period in 2011, respectively. Meanwhile, office renovation costs decreased by $37,072, service fee decreased by $28,161, social insurance decreased by $27,094, rent expenses decreased by $25,565, and office expenses decreased by $26,051, compared to the same period in 2011, respectively. The increase of $167,476 in professional service fee was due to the payment of audit fees for the Company’s 2011 annual audit and the auditors’ review fees of the Company’s quarterly reports of 2012 and other professional consulting fees paid in connection with the Sarbanes-Oxley Act of 2002 (“SOX”). Other variances include expenses occurred for G&A employee salaries, membership expenses, travelling expenses, and welfare expenses, etc, presenting a slight increase, accumulated at approximately $9,634.

InNet the opinion of Han Kun Law Offices, our PRC legal counsel, subject to the interpretation and implementation of the MIIT Circular and Circular 13, the ownership structure of Ningbo Sntaro and Beijing Sntaro and our contractual arrangements with Beijing Sntaro and its shareholders comply with all existing PRC laws, rules and regulations. However, in the opinion of our PRC legal counsel, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there may be changes and other developments in the PRC laws and regulations or their interpretations. Accordingly, we cannot assure you that Chinese government authorities will ultimately take a view that is consistent with the opinion of our PRC legal counsel.loss

If For the ~~past~~year orended ~~current~~December ~~ownership~~31, ~~structures~~2012, ~~contractual~~net ~~arrangements~~loss ~~and~~increased ~~businesses of our company Beijing Sntaro is found~~ to ~~be in violation of any existing or future PRC laws or regulations~~$5,098,131 ~~including~~from ~~the MIIT Circular and Circular 13~~$3,774,468 for the ~~relevant~~corresponding ~~supervisory~~period ~~authorities~~in ~~would~~2011. ~~have~~The ~~broad~~increase ~~discretion~~ in ~~dealing~~net ~~with~~loss ~~such~~was ~~violations,~~primarily ~~including~~due ~~but not limited~~ to: ~~revoking~~increases ~~our~~in ~~business~~cost ~~and operating licenses; levying fines; confiscating our income or the income~~ of ~~Beijing~~revenues, ~~Sntaro;~~R&D ~~shutting down our servers or blocking our website; imposing conditions or requirements with which we may not be able to comply; requiring us to restructure the relevant ownership structure~~expenses, sales ~~operations or contractual arrangements; restricting or prohibiting our use of the proceeds from our public offering to finance our business~~ and ~~operations~~marketing inexpenses ~~China;~~ and ~~taking~~G&A ~~other regulatory or enforcement actions that could be harmful to our business~~expenses.

~~ITEM~~Liquidity ~~7A. QUANTITATIVE~~and ~~AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Capital Resources

WeFor ~~are~~the afiscal ~~smaller~~years ~~reporting~~2012 ~~company~~and as2011, ~~defined~~we met our working capital requirement mainly by ~~Rule~~using ~~12b-2~~cash offlows from related parties. We anticipate that the ~~Exchange~~existing ~~Act~~cash and ~~are~~cash ~~not~~equivalents ~~required~~on hand, together with the net cash flows supported by related parties, will be sufficient to ~~provide~~meet our working capital requirements for our on-going projects and to sustain the ~~information~~business ~~under~~operations ~~this~~for ~~item~~the next twelve months.

33Since we initiated our business operations, we have been funded primarily by related parties. During the past two years, Mr. Zhilian Chen, our Chairman, and CixiYide Auto Co., Ltd. (“CixiYide”), a company 100% beneficially owned by Mr. Chen, provided continuous financial support to the Company. As of December 31, 2011, the total amount of the balance of the loan that had been provided by CixiYide was $1,577,639, and the balance of the loan from Mr. Zhilian Chen was $154,720. As of December 31, 2012, CixiYide and Mr. Zhilian Chen had provided the Company loans in the aggregate amount of $4,222,732 and $170,589, respectively.

~~ITEM~~Going ~~8. FINANCIAL~~concern ~~STATEMENTS~~and ~~AND SUPPLEMENTARY DATA~~Liquidity

~~SANTARO~~The accompanying ~~INTERACTIVE~~financial ~~ENTERTAINMENT~~statements ~~COMPANY~~are presented on a going concern basis. The Company is in a development stage and only generated an insignificant amount of revenue during the period from its inception (August 9, 2006) to December 31, 2012. The company has recurring net losses and negative cash flows from operations and has been dependent on debt and equity financing. The Company has an accumulated deficit of $14,628,454 as of December 31, 2012. During the year ended December 31, 2011, the Company obtained funding in the amount of $4,750,000 from the issuance of 2,375,000 shares of our common stock, and warrants to purchase a total of 1,187,500 shares of our common stock. On December 5, 2011, Mr. Zhilian Chen converted parts of the loan provided by CixiYide to Beijing Sntaro, i.e., $4,626,818 (RMB 29,260,000), into the registered capital of Beijing Sntaro by the way of subscribing for the increased capital of Beijing Sntaro and then let Beijing Sntaro to pay back the increased capital to CixiYide. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to it, or if at all. Management plans to fund continuing operations through new financing from related parties and equity financing arrangements. These factors raise substantial doubt about our ability to continue as a going concern.

~~CONSOLIDATED AUDITED FINANCIAL STATEMENTS~~24

~~AS OF DECEMBER 31, 2011~~Cash Flows

	Years ended December 31,
	2012			2011

Net cash used in operating activities	$	(4,418,714	)	$	(3,578,700	)
Net cash used in investing activities		(205,565	)		(402,008	)
Net cash provided by financing activities		2,631,412			5,711,309
Effect of foreign currency exchange rate changes on cash and cash equivalents		13,759			(22,076	)
Net (decrease) increase in cash and cash equivalents	$	(1,979,108	)	$	1,708,525

~~SANTARO~~Net cash ~~INTERACTIVE~~used ~~ENTERTAINMENT~~in ~~COMPANY~~operating activities: The Company had insignificant amount of revenue from its inception in 2006 to December 31, 2012. Our net cash used in operating activities increased by $840,014 in the year ended December 31, 2012 compared to that in the year ended December 31, 2011, representing an increase of 23.47%. Most operating cash flow is the result of cash-paid expenditure during operation. The increase of net cash used in operating activities was due to increases in salary expense, rent expense and professional service fee. Since the Company will complete its R&D of Heroes of Sango and Demon Sword, and also in order to cope with the release of the Company’s new game 108 warriors, the Company hired more high level staffs for the preparation of operating. Rent expenses increased due to the payment for a newly rented Beijing office. And professional service fee increased due to the payment of audit fees for the Company’s 2011 annual audit and the auditors’ review fees of the Company’s quarterly reports of 2012 and other professional consulting fees paid in connection with the Sarbanes-Oxley Act of 2002 (“SOX”).

~~AND~~Net cash ~~SUBSIDIARIES~~used in investing activities: Our net cash used in investing activities decreased by $196,443 in the year ended December 31, 2012 compared to that in the year ended December 31, 2011. The decrease in net cash used in investing activities was the result of a decrease in the purchasing of new equipment with an amount of $154,660, and the decrease in intangibles with an amount of $25,960 during the year ended December 31, 2012.

~~CONTENTS~~Net cash provided by financing activities: Our cash provided by financing activities significantly decreased from $5,711,309 for the year ended December 31, 2011 to $2,631,412 for the year ended December 31, 2012, representing a decrease of 53.93%. The current financed capital could not support current operation and product development. Through December 31, 2012, CixiYide Auto Company, which is 100% beneficially owned by Mr. Zhilian Chen, continuously provides financial support.

	Pages
Report of Independent Registered Public Accounting Firm	F1-F2
Consolidated Balance Sheets	F3
Consolidated Statements of Operations and Comprehensive Loss	F4
Consolidated Statements of Stockholders’ Deficiency	F5
Consolidated Statements of Cash Flows	F6
Notes to Consolidated Audited Financial Statements	F7 - F11

Working capital

35We have working capital deficit of $(4,927,588) as of December 31, 2012, compared with working capital of $228,657 as of December 31, 2011, representing an increase of deficit of 2255%. The significant change in working capital is due to the development stage of the Company’s games. Because the Company’s games only produced insignificant amount of revenue, the Company had to obtain loans to support daily operations. Beijing Sntaro, a subsidiary of the Company, obtained loans in the amount of $1,577,639 in the aggregate as of December 31, 2011 from CixiYide. As of December 31, 2012, the Company accumulatively obtained loans in the amount of $4,393,321 from CixiYide and Mr. Zhilian Chen. On December 5, 2011, Mr. Zhilian Chen converted parts of the loan provided by CixiYide to Beijing Sntaro, i.e., $4,626,818 (RMB 29,260,000), into the registered capital of Beijing Sntaro by the way of subscribing for the increased capital of Beijing Sntaro and then let Beijing Sntaro to pay back the increased capital to CixiYide. The Company also received proceeds in the aggregate of $4.75 million upon the issuance of 2.375 million shares of common stock and warrants to purchase up to 1,187,500 shares of our common stock in 2011.

~~Report~~Description of ~~Independent Registered Public Accounting Firm~~Property

ToThe Company’s ~~the~~property ~~Board~~and equipment consisted wholly of ~~Directors~~computer equipment, leasehold improvements, and ~~Shareholders~~furniture. The book value of the Company’s property and equipment was $556,884 as of December 31, 2012.

~~Santaro Interactive Entertainment Company~~25

We have audited the accompanying consolidated balance sheet of Santaro Interactive Entertainment Company and its subsidiaries(A development stage company) (the “Company”) as of December 31, 2011, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the year then ended and for the period from August 9, 2006 (Inception) through December 31, 2011. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.Employees

WeAs ~~conducted~~of ~~our~~December ~~audit~~31, in2012, ~~accordance with~~ the ~~standards of the Public~~ Company ~~Accounting~~employed ~~Oversight~~approximately ~~Board~~103 ~~(United~~designers ~~States). Those standards require that we plan~~ and ~~perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement~~programmers. The ~~Company~~majority isof ~~not~~employees ~~required to~~ have, ~~nor~~three ~~were we engaged~~ to ~~perform,~~five ~~an audit~~ years’ of ~~their~~experience ~~internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate~~ in the ~~circumstances,~~online ~~but~~games ~~not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting~~industry. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

InCompetition for ~~our~~talented ~~opinion,~~and ~~the~~well-educated ~~consolidated~~professionals ~~financial~~is ~~statements~~intense ~~referred~~among tolocal ~~above~~online ~~present~~gaming ~~fairly,~~companies. inManagement ~~all~~has ~~material~~set ~~respects,~~up ~~the~~an ~~consolidated~~attractive work ~~financial~~environment ~~position~~to ofstimulate ~~the~~employee ~~Company~~creativity. asA ofcareer ~~December~~advancement ~~31,~~program ~~2011,~~has ~~and~~been ~~the~~prepared ~~consolidated~~to ~~results~~provide ofopportunities ~~their operations and its cash flows~~ for employees ~~the~~to ~~year~~receive ~~then~~additional ~~ended~~training and ~~for the period from August 9, 2006 (Inception) through December 31, 2011, in conformity with accounting principles generally accepted in the United States of America~~promotion.

~~The~~Recent ~~accompanying~~issued consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 5, the Company has incurred significant losses from operations for the yearended December 31, 2011 and has a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 5. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.accounting pronouncements

~~/S/~~The Company ~~Marcum~~does ~~Bernstein~~not &believe ~~Pinchuk~~any ~~LLP~~recently issued but not yet effective accounting standards, if currently adopted, would have a material effect of the consolidated financial position, results of operation and cash flows.

~~New~~Off-Balance ~~York, New York~~Sheet Arrangements

~~March~~The Company 29does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, ~~2012~~revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material.

~~F-1~~Additional Disclosure

~~Report~~In July 2006, the Ministry of ~~Independent~~Industry ~~Registered~~and ~~Public~~Information ~~Accounting~~Technology ~~Firm~~of the PRC, or MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular. The MIIT Circular reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain a business operating license for Internet content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an Internet content provision license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local Internet content provision license holder. Due to a lack of interpretative materials from the regulator, it is unclear what impact the MIIT Circular will have on us or the other Chinese Internet companies that have adopted the same or similar corporate and contractual structures as ours.

ToOn September 28, 2009, the ~~Board~~General Administration of ~~Directors~~Press and ~~Shareholders~~Publications, or the GAPP, the National Copyright Administration (hereinafter referred to as “NCA”), and National Office of Combating Pornography and Illegal Publications (hereinafter referred to as “NOCPIP”) jointly published the “Stipulations on ‘Three Provisions’ ” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Online games and the Examination and Approval of Imported Online games (Xin Chu Lian [2009] No. 13), or Circular 13. Circular 13 restates the general principle espoused in recently promulgated regulations that foreign investment is not permitted in online game operating businesses in China. According to the Article IV of Circular 13, foreign investors are prohibited from participating in online game operating businesses via wholly owned, equity joint venture or cooperative joint venture investments in China, and from controlling and participating in such businesses directly or indirectly through contractual or technical support arrangements. In the event of a violation of these provisions, GAPP shall, in conjunction with the relevant government authorities of the PRC, investigate and handle the same in accordance with the law. In serious cases, the relevant licenses and registrations shall be revoked. However, due to the lack of a detailed interpretation of Circular 13, it is not yet clear how it will be implemented. Moreover, Circular 13 was issued solely by GAPP, NCA and NOCPIP, instead of being jointly issued by the publication administration authorities and other government authorities which are in charge of the related business operations, like the Ministry of Commerce, or the MOFCOM, and the MIIT, and the scope, implementation and enforcement of Circular 13 from the views of the above mentioned other authorities remain uncertain.

~~Santaro Interactive Entertainment Company~~26

WeIn ~~have~~the ~~audited~~opinion ~~the~~of ~~accompanying~~Han Kun ~~consolidated~~Law ~~balance~~Offices, ~~sheet~~our ofPRC ~~Santaro~~legal ~~Interactive~~counsel, ~~Entertainment~~subject ~~Company~~to the interpretation and ~~its~~implementation ~~subsidiaries(A~~of ~~development~~the ~~stage~~MIIT ~~company)~~Circular (and Circular 13, the ~~“Company”)~~ownership asstructure of ~~December~~Ningbo ~~31,~~Sntaro ~~2010,~~and Beijing Sntaro and ~~the~~our ~~related~~contractual ~~consolidated~~arrangements ~~statements~~with ofBeijing ~~operations~~Sntaro and ~~comprehensive~~its ~~loss,~~shareholders comply ~~changes~~with inall ~~stockholders’~~existing ~~equity~~PRC ~~(deficit)~~laws, rules and ~~cash~~regulations. ~~flows~~However, ~~for~~in the ~~year~~opinion ~~then~~of ~~ended~~our ~~and~~PRC ~~for~~legal counsel, there are substantial uncertainties regarding the ~~period~~interpretation ~~from~~and ~~August~~application 9,of ~~2006~~current ~~(Inception)~~or ~~through~~future ~~December~~PRC ~~31,~~laws ~~2010.~~and ~~The~~regulations ~~Company’s~~and ~~management~~there ismay ~~responsible~~be ~~for~~changes and ~~these~~other ~~consolidated~~developments ~~financial~~in ~~statements~~the PRC laws and regulations or their interpretations. ~~Our~~Accordingly, ~~responsibility~~we iscannot togive ~~express~~assurance anthat ~~opinion~~the Chinese ongovernment ~~these~~authorities ~~financial~~will ~~statements~~ultimately ~~based~~take ona view that is consistent with the opinion of our ~~audit~~PRC legal counsel.

WeIf ~~conducted~~the ~~our~~past ~~audit~~or incurrent ownership ~~accordance~~structures, ~~with~~contractual ~~the~~arrangements ~~standards~~and businesses of ~~the~~our ~~Public~~company ~~Company~~Beijing ~~Accounting~~Sntaro ~~Oversight~~is ~~Board~~found ~~(United~~to ~~States).~~be ~~Those~~in ~~standards~~violation ~~require~~of ~~that~~any existing weor ~~plan~~future ~~and~~PRC ~~perform~~laws ~~the~~or ~~audit~~regulations, toincluding ~~obtain~~the ~~reasonable~~MIIT ~~assurance~~Circular ~~about~~and ~~whether~~Circular 13, the ~~financial~~relevant ~~statements~~supervisory ~~are~~authorities ~~free~~would have ofbroad ~~material~~discretion ~~misstatement.~~in ~~The~~dealing ~~Company~~with issuch ~~not required to have~~violations, ~~nor~~including ~~were~~but wenot ~~engaged~~limited to: ~~perform,~~revoking anour ~~audit~~business ofand ~~their~~operating ~~internal~~licenses; levying ~~control~~fines; ~~over~~confiscating ~~financial~~our ~~reporting.~~income ~~Our~~or ~~audit~~the ~~included~~income ~~consideration~~ of ~~internal~~Beijing ~~control~~Sntaro; ~~over~~shutting ~~financial~~down ~~reporting~~our asservers aor ~~basis~~blocking ~~for~~our ~~designing~~website; ~~audit~~imposing conditions ~~procedures~~or ~~that~~requirements ~~are~~with ~~appropriate~~which inwe ~~the~~may ~~circumstances, but~~ not ~~for~~be ~~the~~able ~~purpose~~to ofcomply; ~~expressing~~requiring anus ~~opinion~~to onrestructure the ~~effectiveness~~relevant ofownership ~~the Company’s internal control over financial reporting. Accordingly~~structure, operations weor ~~express~~contractual noarrangements; ~~such~~restricting ~~opinion.~~or Anprohibiting ~~audit~~our ~~also~~use ~~includes~~of ~~examining,~~the onproceeds afrom ~~test~~our ~~basis,~~public ~~evidence~~offering ~~supporting~~to ~~the~~finance our ~~amounts~~business and ~~disclosures~~operations in ~~the~~China; ~~financial statements, assessing the accounting principles used~~ and ~~significant~~taking ~~estimates~~other ~~made~~regulatory byor ~~management,~~enforcement asactions ~~well as evaluating the overall financial statement presentation. We believe~~ that ~~our~~could ~~audit~~be ~~provides~~harmful ato ~~reasonable basis for~~ our ~~opinion~~business.

InITEM ~~our~~7A. ~~opinion,~~QUANTITATIVE ~~the~~AND ~~consolidated~~QUALITATIVE ~~financial~~DISCLOSURES ~~statements~~ABOUT ~~referred~~MARKET to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2010, and the consolidated results of their operations and its cash flows for the year then ended and for the period from August 9, 2006 (Inception) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.RISK

~~The~~We ~~accompanying~~are ~~consolidated~~a ~~financial~~smaller ~~statements~~reporting ~~have~~company ~~been prepared assuming that the Company will continue~~ as adefined ~~going~~by ~~concern.~~Rule As12b-2 of ~~discussed in Note 5,~~ the ~~Company~~Exchange ~~has~~Act ~~incurred significant losses from operations for the yearended December 31, 2010~~ and ~~has a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters~~ are ~~also described in Note 5. The consolidated financial statements do~~ not ~~include~~required ~~any~~to ~~adjustments~~provide ~~that might result from~~ the ~~outcome~~information ofunder this ~~uncertainty~~item.

~~/S/ Bernstein & Pinchuk LLP~~27

~~New~~ITEM ~~York,~~8. ~~New~~FINANCIAL ~~York~~STATEMENTS AND SUPPLEMENTARY DATA

~~March~~SANTARO ~~30,~~INTERACTIVE ~~2011~~ENTERTAINMENT COMPANY

~~F-2~~CONSOLIDATED AUDITED FINANCIAL STATEMENTS

(AAS ~~Development~~OF ~~Stage~~DECEMBER ~~Company)~~31, 2012

~~Consolidated Balance Sheets~~28

	December 31,
	2011				2010
ASSETS
Current assets
Cash and cash equivalents		$	2,028,612			$	320,087
Prepaid expenses			322,580				47,703
Other receivables			156,268				152,659
Total current assets			2,507,460				520,449
Property and equipment, net			494,412				201,379
Long term investment			644				—
Intangibles			33,272				6,004
Total Assets		$	3,035,788			$	727,832
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Other payables and accrued expenses		$	533,034			$	160,087
Due to shareholders			13,410				—
Due to related parties			1,732,359				5,165,582
Total current liabilities			2,278,803				5,325,669
Commitments and contingencies
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock ($0.001 par value; authorized –75,000,000 shares; issued and outstanding –69,875,000 shares and 67,500,000 shares at December 31, 2011 and December 31, 2010, respectively)			69,875				67,500
Additional paid-in capital			10,578,169				1,203,726
Deficit accumulated during the development stage			(9,530,323	)			(5,755,855	)
Accumulated other comprehensive loss			(360,736	)			(113,208	)
Total stockholders’ equity (deficit)			756,985				(4,597,837	)
Total Liabilities and Stockholders’ Equity (Deficit )		$	3,035,788			$	727,832

SANTARO INTERACTIVE ENTERTAINMENT COMPANY

~~See~~AND ~~notes to the consolidated audited financial statements~~SUBSIDIARIES

· None of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 2).CONTENTS

F-3

	Pages
Report of Independent Registered Public Accounting Firm	F1
Consolidated Balance Sheets	F2
Consolidated Statements of Operations and Comprehensive Loss	F3
Consolidated Statements of Changes in Stockholders' Equity (Deficit)	F4
Consolidated Statements of Cash Flows	F5
Notes to Consolidated Audited Financial Statements	F6 - F19

~~Santaro Interactive Entertainment Company~~29

(AReport ~~Development~~of ~~Stage~~Independent ~~Company)~~Registered Public Accounting Firm

~~Consolidated~~To ~~Statements~~the Board of ~~Operations~~Directors and ~~Comprehensive~~Shareholders ~~Loss~~of

	Years Ended December 31,
	2011				2010			August 9, 2006 (inception of Beijing Sntaro) through December 31, 2011
Operating expenses
Research and development expenses		$	2,439,991		$	1,532,966		$	6,373,211
Sales and marketing expenses			21,280			27,935			186,776
General and administrative expenses			1,312,272			574,859			3,102,655
Loss from operations			(3,773,543	)		(2,135,760	)		(9,662,642	)
Non-operating expenses			925			1,035			440,500
Loss before income tax benefit and non-controlling interest be expense and noncontrolling interest			(3,774,468	)		(2,136,795	)		(10,103,142	)
Deferred tax			-			610,694			-
Net loss before non-controlling interest			(3,774,468	)		(2,747,489	)		(10,103,142	)
Less: Net loss attributable to the Non-controlling interests			-			(239,775	)		(572,819	)
Net loss attributable to the Company			(3,774,468	)		(2,507,714	)		(9,530,323	)
Other comprehensive loss
Net loss			(3,774,468	)		(2,747,489	)		(10,103,142	)
Foreign currency translation adjustment			(247,528	)		(130,863	)		(360,736	)
Comprehensive loss			(4,021,996	)		(2,878,352	)		(10,463,878	)
Less: Comprehensive loss attributable to the non-controlling interest			-			(239,775	)		(572,818	)
Comprehensive loss attributable to the Company		$	(4,021,996	)	$	(2,638,577	)	$	(9,891,060	)
Loss per share:
Basic and diluted			(0.06	)		(0.04	)
Weighted average number of common shares outstanding – basic and diluted			68,470,959			67,500,000

Santaro Interactive Entertainment Company

~~See~~We ~~notes~~have toaudited the accompanying consolidated balance ~~audited~~sheets of Santaro Interactive Entertainment Company and its subsidiaries (A development stage company) (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for the years then ended and for the period from August 9, 2006 (Inception) through December 31, 2012. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

~~F-4~~We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~Santaro~~In ~~Interactive~~our ~~Entertainment~~opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2012 and 2011, and the consolidated results of their operations and its cash flows for the years then ended and for the period from August 9, 2006 (Inception) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

(AThe ~~Development~~accompanying ~~Stage~~consolidated financial statements have been prepared assuming that the Company) will continue as a going concern. As discussed in Note 2, the Company has incurred significant losses from operations for the years ended December 31, 2012 and 2011, and has a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Consolidated~~/S/ ~~Statements~~Marcum ofBernstein ~~Changes~~& inPinchuk ~~Stockholders’ Equity (Deficit)~~LLP

	Common Stock
	Share		$0.001 Par Value		Additional Paid-In Capital			Deficit accumulated during development stage			Accumulated other comprehensive income (loss)			Total deficit of the Company’s stockholders			Non-controlling interest			Total deficit
Balance at August 9, 2006		55,670,000	$	55,670	$	(55,670	)	$	-		$	-		$	-		$	-		$	-
Net (loss)						-			(21,583	)		-			(21,583	)		-			(21,583	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			884			884			-			884
Inject paid-in capital						139,580			-			-			139,580			-			139,580
Balance at December 31, 2006		55,670,000		55,670		83,910			(21,583	)		884			118,881			-			118,881
Net (loss)						-			(483,001	)		-			(483,001	)		-			(483,001	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			10,100			10,100			-			10,100
Inject paid-in capital						492,141			-			-			492,141			-			492,141
Balance at December 31, 2007		55,670,000		55,670		576,051			(504,584	)		10,984			138,121			-			138,121
Net (loss)						-			(805,983	)		-			(805,983	)		-			(805,983	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			6,693			6,693			-			6,693
Inject paid-in capital						739,775			-			-			739,775			-			739,775
Balance at December 31, 2008		55,670,000		55,670		1,315,826			(1,310,567	)		17,677			78,606			-			78,606
Net (loss)						-			(1,937,574	)		-			(1,937,574	)		(333,044	)		(2,270,618	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(22	)		(22	)		-			(22	)
Inject paid-in capital						-			-			-			-			437,771			437,771
Balance at December 31, 2009		55,670,000		55,670		1,315,826			(3,248,141	)		17,655			(1,858,990	)		104,727			(1,754,263	)
Net (loss)						-			(2,507,714	)		-			(2,507,714	)		(239,775	)		(2,747,489	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(130,863	)		(130,863	)		-			(130,863	)
Effect of reverse acquisition		11,830,000		11,830		(112,100	)		-			-			(100,270	)		135,048			34,778
Balance as of December 31, 2010		67,500,000		67,500		1,203,726			(5,755,855	)		(113,208	)		(4,597,837	)		-			(4,597,837	)
Net (loss)						-			(3,774,468	)		-			(3,774,468	)		-			(3,774,468	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(247,528	)		(247,528	)		-			(247,528	)
Common stock issued for cash June 27,2011		1,000,000		1,000		1,999,000			-			-			2,000,000			-			2,000,000
Common stock issued for cash August 29, 2011		1,375,000		1,375		2,748,625			-			-			2,750,000			-			2,750,000
Capital contribution						4,626,818			-			-			4,626,818			-			4,626,818
Balance as of December 31, 2011		69,875,000	$	69,875	$	10,578,169		$	(9,530,323	)	$	(360,736	)	$	756,985		$	-		$	756,985

New York, New York

~~See~~March ~~notes~~29, ~~to the consolidated audited financial statements~~2013

F-51

Santaro Interactive Entertainment Company

(A Development Stage Company)

Consolidated Balance ~~Statements of Cash Flows~~Sheets

	Years Ended December 31,
		December 31,
	2011				2010				August,2006 (inception of Beijing Sntaro) through December 31,2011
		2012				2011
Cash flows from operating activities:
ASSETS
Net loss		$	(3,774,468	)		$	(2,747,489	)		$	(10,103,142	)
Current assets
Adjustments to reconcile net loss before non-controlling interests to net cash used by operating activities:
Cash and cash equivalents		$	49,504			$	2,028,612
Depreciation			87,605				83,281				305,221
Prepaid expenses			4,751				322,580
Amortization of intangible assets			7,291				306				7,597
Other receivables			10,592				156,268
Deferred tax asset			—				610,694				—
Total current assets			64,847				2,507,460
Changes in operating assets and liabilities:
Property and equipment, net			556,884				494,412
Prepaid expense			(269,305	)			(10,816	)			(314,681	)
Long term investment			644				644
Other receivable			(94,014	)			(100,113	)			(234,557	)
Intangibles, net			31,575				33,272
Other payables and accrued expenses			446,373				103,394				592,301
Total Assets		$	653,950			$	3,035,788
Due to shareholders			13,184				—				13,184
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Due to related parties			4,634			9,398					32,877
Current liabilities
Net cash used in operating activities			(3,578,700	)			(2,051,345	)			(9,701,200	)
Advance from Customers		$	79,861			$	-
Cash flows from investing activities:
Taxes payable			737				-
Purchase of property and equipment			(368,010	)			(35,442	)			(774,169	)
Deferred revenue			17,461				-
Purchase of intangibles			(33,998	)			(6,310	)			(40,308	)
Other payables and accrued expenses			467,976				533,034
Net cash used in investing activities			(402,008	)			(41,752	)			(814,477	)
Due to related parties			4,426,400				1,745,769
Cash flows from financing activities:
Total current liabilities			4,992,435				2,278,803
Proceeds from sale of stock			4,750,000				34,778				6,156,274
Commitments and contingencies
Paid-in capital injection			4,626,818				—				4,626,818
STOCKHOLDERS’ (DEFICIT) EQUITY
Capital contributed by non-controlling interest owner			—				—				428,290
Common stock ($0.001 par value; authorized –100,000,000 shares; issued and outstanding –69,875,000 shares at December 31, 2012 and 2011, respectively)			69,875				69,875
Loan from a related party			1,121,302				2,360,525				6,052,994
Additional paid-in capital			10,578,169				10,578,169
Repayment of related parties loan			(4,786,811	)			—				(4,786,811	)
Deficit accumulated during the development stage			(14,628,454	)			(9,530,323	)
Net cash provided by financing activities			5,711,309				2,395,303				12,477,565
Accumulated other comprehensive loss			(358,075	)			(360,736	)
Effect of exchange rate changes on cash and cash
Total stockholders’ (deficit) equity			(4,338,485	)			756,985
equivalents			(22,076	)			5,159				66,724
Total Liabilities and Stockholders’ (Deficit) Equity		$	653,950			$	3,035,788
Net increase in cash and cash equivalents			1,708,525				307,365				2,028,612
Cash and cash equivalents at the beginning of year			320,087				12,722				—
Cash and cash equivalents at the end of year		$	2,028,612			$	320,087			$	2,028,612
Supplemental disclosure for cash flow
information
Interest paid		$	—			$	—			$	—
Income taxes paid		$	—			$	—			$	—

See notes to the consolidated ~~audited~~ financial statements

~~F-6~~* None of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets (Note 3).

~~Santaro Interactive Entertainment Company~~F-2

(ASantaro ~~Development~~Interactive ~~Stage~~Entertainment Company)

~~Notes~~(A toDevelopment ~~Consolidated~~Stage ~~Audited Financial Statements~~Company)

1.Consolidated ~~ORGANIZATION~~Statements ~~AND~~of ~~DESCRIPTION~~Operations OFand Comprehensive ~~BUSINESS~~Loss

Santaro Interactive Entertainment Company (“the Company”) was incorporated on December 30, 2009 in the State of Nevada. The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States of America (U.S GAAP), and the Company’s fiscal year end is December 31.

	Years Ended December 31,
	2012			2011			August 9, 2006 (inception of Beijing Sntaro) through December 31, 2012

Revenue	$	27,571		$	-		$	27,571
Cost of revenue		693,059			-			693,059
Gross loss		(665,488	)		-			(665,488	)

Operating expenses
Research and development expenses		2,683,443			2,439,991			9,056,654
Sales and marketing expenses		362,145			21,280			548,921
General and administrative expenses		1,409,898			1,312,272			4,512,553
Total operating expenses		4,455,486			3,773,543			14,118,128

Loss from operations		(5,120,974	)		(3,773,543	)		(14,783,616	)

Gain on deconsolidation of subsidiary		(15,823	)		-			(15,823	)
Non-operating (income) expenses		(7,020	)		925			433,480

Loss before non-controlling interest		(5,098,131	)		(3,774,468	)		(15,201,273	)

Less: loss attributable to the non-controlling interests		-			-			(572,819	)

Net loss attributable to the Company		(5,098,131	)		(3,774,468	)		(14,628,454	)

Other comprehensive loss
Net loss		(5,098,131	)		(3,774,468	)		(15,201,273	)
Foreign currency translation adjustment		2,661			(247,528	)		(358,075	)
Comprehensive loss		(5,095,470	)		(4,021,996	)		(15,559,348	)
Less: Comprehensive loss attributable to the non-controlling interest		-			-			(572,819	)

Comprehensive loss attributable to the Company	$	(5,095,470	)	$	(4,021,996	)	$	(14,986,529	)

Loss per share:

Basic and diluted		(0.07	)		(0.06	)

Weighted average number of common shares outstanding – basic and diluted		69,875,000			68,470,959

~~The~~See ~~accompanying~~notes ~~consolidated~~to ~~financial statements include~~ the ~~accounts~~consolidated ~~of the following entities, and all significant intercompany transactions and balances have been eliminated in consolidation as of December 31, 2011 and 2010:~~financial statements

Consolidated entity name:	Percentage of ownership
Santaro Holdings, Ltd (“SHL”)	100%
Santaro Investments, Ltd. (“Santaro HK”)	100%
Ningbo Sntaro Network Technology Co., Ltd. (“Ningbo Sntaro”)	100%
Beijing Sntaro Technology Co., Ltd. (“Beijing Sntaro”)	Variable Interest Entity
Beijing Sntaro Freeland Network Co., Ltd. (“FL Network”)	100% subsidiary of Beijing Sntaro

F-3

~~On October 12, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with~~ Santaro ~~Holdings,~~Interactive ~~Ltd.,~~Entertainment a limited liability company organized under the laws of British Virgin Islands, (“SHL”), and the shareholders of SHL (collectively the “SHL Shareholders”). Pursuant to the terms of the Exchange Agreement, the SHL Shareholders transferred to the Company 100% of the outstanding shares of SHL in exchange for the newly issued 55,670,000 restricted shares of the common stock of the Company. SHL is a holding company which has a 100% ownership interest in Santaro Investments, Ltd., a Hong Kong company which in turn has a 100% ownership interest in Ningbo Sntaro Network Technology Co., Ltd, a Wholly Foreign Owned Enterprise (“WFOE”) established in the People’s Republic of China. Through control of the WFOE, the Company controls Beijing Sntaro Technology Co., Ltd, a company organized under the laws of the People’s Republic of China and engaged in the development and operation of online games. As a result of the transactions described above, the Company became the record and beneficial owner of 100% of the share capital of SHL and therefore owns 100% of the share capital of its subsidiaries and Variable Interest Entities indirectly.

~~Santaro Holdings, Ltd.~~ (~~“SHL”)~~A isDevelopment aStage limited liability company organized under the laws of British Virgin Islands incorporated on December 2, 2009.100 shares with par value $1.00 were issued and outstanding, although no capital was paid in as of December 31, 2011.Company)

AsConsolidated aStatements holding company, SHL has one wholly owned subsidiary, Santaro Investments, Ltd. (“Santaro HK”), a Hong Kong corporation set up by SHL on January 27, 2010. On July 13, 2010, Santaro HK set up a wholly owned subsidiary, Ningbo Sntaro Network Technology Co., Ltd. (“Ningbo Sntaro”), a Wholly Foreign Owned Enterprise (WFOE) organized under the laws of ~~the~~Changes People’s Republic of China (“PRC”). Ningbo Sntaro exercises control through a series of agreements over Beijing Sntaro Technology Co., Ltd. (“Beijing Sntaro”), an operating company organized under the laws of the PRC, and principally engaged in ~~the~~Stockholders’ Equity ~~development and operation of online games. Beijing Sntaro has 100% ownership interest in Beijing Sntaro Freeland Network Co., Ltd.~~ (~~the “FL Network”~~Deficit), a company organized under the laws of the PRC. The beneficial controlling stockholders of the Company own all the outstanding shares of Beijing Sntaro. In addition, SHL is the indirect parent of Ningbo Sntaro and controls this entity through its ownership of Santaro HK.

F-7

	Common Stock				Additional			Deficit accumulated			Accumulated other			Total deficit of
			$0.001 Par		Paid-In			during development			comprehensive			the Company’s			Non-controlling
	Share		Value		Capital			stage			income (loss)			stockholders			interest			Total deficit

Balance at August 9, 2006		55,670,000	$	55,670	$	(55,670	)	$	-		$	-		$	-		$	-		$	-
Net (loss)						-			(21,583	)		-			(21,583	)		-			(21,583	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			884			884			-			884
Inject paid-in capital						139,580			-			-			139,580			-			139,580
Balance at December 31, 2006		55,670,000		55,670		83,910			(21,583	)		884			118,881			-			118,881
Net (loss)						-			(483,001	)		-			(483,001	)		-			(483,001	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			10,100			10,100			-			10,100
Inject paid-in capital						492,141			-			-			492,141			-			492,141
Balance at December 31, 2007		55,670,000		55,670		576,051			(504,584	)		10,984			138,121			-			138,121
Net (loss)						-			(805,983	)		-			(805,983	)		-			(805,983	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			6,693			6,693			-			6,693
Inject paid-in capital						739,775			-			-			739,775			-			739,775
Balance at December 31, 2008		55,670,000		55,670		1,315,826			(1,310,567	)		17,677			78,606			-			78,606
Net (loss)						-			(1,937,574	)		-			(1,937,574	)		(333,044	)		(2,270,618	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(22	)		(22	)		-			(22	)
Inject paid-in capital						-			-			-			-			437,771			437,771
Balance at December 31, 2009		55,670,000		55,670		1,315,826			(3,248,141	)		17,655			(1,858,990	)		104,727			(1,754,263	)
Net (loss)						-			(2,507,714	)		-			(2,507,714	)		(239,775	)		(2,747,489	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(130,863	)		(130,863	)		-			(130,863	)
Effect of reverse acquisition		11,830,000		11,830		(112,100	)		-			-			(100,270	)		135,048			34,778
Balance as of December 31, 2010		67,500,000		67,500		1,203,726			(5,755,855	)		(113,208	)		(4,597,837	)		-			(4,597,837	)
Net (loss)						-			(3,774,468	)		-			(3,774,468	)		-			(3,774,468	)
Foreign currency exchange translation adjustment, net of nil income taxes						-			-			(247,528	)		(247,528	)		-			(247,528	)
Common stock issued for cash June 27,2011		1,000,000		1,000		1,999,000			-			-			2,000,000			-			2,000,000
Common stock issued for cash August 29, 2011		1,375,000		1,375		2,748,625			-			-			2,750,000			-			2,750,000
Capital contribution						4,626,818									4,626,818						4,626,818
Balance as of December 31, 2011		69,875,000		69,875		10,578,169			(9,530,323	)		(360,736	)		756,985			-			756,985
Net (loss)				-		-			(5,098,131	)		-			(5,098,131	)		-			(5,098,131	)
Foreign currency exchange translation adjustment, net of nil income taxes				-		-			-			2,661			2,661			-			2,661
Balance as of December 31, 2012		69,875,000	$	69,875	$	10,578,169		$	(14,628,454	)	$	(358,075	)	$	(4,338,485	)	$	-		$	(4,338,485	)

OnSee ~~July~~notes ~~18,~~to 2011, Santaro HK established Outlets Internet Sale Limited jointly with New Select Group Limited (BVI), each party holds 50% shares of this newly established entity. The primary objective of this JV establishment is for the ~~further~~consolidated ~~extension and development of on-line business of “Outlet” in PRC China.~~financial statements

~~Beijing Sntaro was organized under the laws of People’s Republic of China (the “PRC”) on August 9, 2006 with paid~~F-in capital of $139,580, which was 80% owned by Mr. Zhilian Chen, Beijing Sntaro’s chairman; the other 20% of the equity was held by Mr. Wenjie Lu. Beijing Sntaro is engaged in the development and operation of online games, investment in online games project. At present, Beijing Sntaro has been in development stage and does not conduct any substantive sale of its online games.4

~~Beijing~~Santaro ~~Sntaro~~Interactive ~~completed~~Entertainment a series of changes in ownership which were necessary to comply with its development. In April, 2007, pursuant to a Board of Directors’ resolution, Beijing Sntaro changed its equity ownership as follows; Mr. Zhilian Chen, Mr. Xiaobo Li and Mr. Wenjie Lu became the owners of Beijing Sntaro, with the percentage of ownership of 60%, 20%, and 20% respectively, and paid-in capital of $379,033, $126,344, and $126,344, respectively.Company

In(A ~~May~~Development ~~2008,~~Stage Beijing Sntaro entered into its second change of equity ownership. According to the equity agreement in May 2008, Mr. Zhilian Chen, Mr. Xiaobo Li, Mr. Xianhua Shen and Miss Yingnv Sun became the owners of Beijing Sntaro, with the percentage of ownership of 60%, 20%, 10%, and 10%, respectively, and paid in capital of $822,897, $274,299, $137, 150, and $137,150, respectively.Company)

OnConsolidated ~~March~~Statements ~~9, 2009, Beijing Sntaro established FL Network, a subsidiary that is engaged in the business~~ of ~~online~~Cash ~~games development and operation, mainly focuses on technology research, FL Network is 70% owned by Beijing Sntaro, and 30% owned by Beijing East Free Land Media & Film Co., Ltd (the “FL Media”).~~Flows

In April 2010, Beijing Sntaro entered into its third change of equity ownership. According to an amended equity agreement in December 2009, Mr. Xiaobo Li transferred his ownership in Beijing Sntaro to Mr. Zhilian Chen, another owner of Beijing Sntaro, and increased Mr. Chen’s percentage of ownership to 80%, with paid-in of capital $1,097,196. Mr. Xianhua Shen’s and Ms. Yingnv Sun’s equity remained unchanged, with their percentage of ownership at 10%, and 10%, respectively, and paid-in capital of $137,150, and $137,150, respectively.

	Years Ended December 31,
	2012			2011			August, 2006 (inception of Beijing Sntaro) through December 31, 2012
Cash flows from operating activities:
Net loss	$	(5,098,131	)	$	(3,774,468	)	$	(15,201,273	)
Adjustments to reconcile net loss before non-controlling interests to net cash used by operating activities:
Depreciation		223,138			87,605			528,359
Amortization of intangible assets		9,991			7,291			17,588
Gain on deconsolidation of subsidiary		(15,823	)		—			(15,823	)
Changes in operating assets and liabilities:
Prepaid expenses		319,750			(269,305	)		5,069
Other receivables		146,065			(94,014	)		(88,492	)
Advance from customers		79,814			—			79,814
Taxes payable		737			—			737
Deferred revenue		17,450			—			17,450
Other payables and accrued expenses		(137,081	)		446,373			455,220
Due to related parties		35,376			17,818			81,437
Net cash used in operating activities		(4,418,714	)		(3,578,700	)		(14,119,914	)

Cash flows from investing activities:
Purchase of property and equipment		(213,350	)		(368,010	)		(987,519	)
Purchase of intangibles		(8,038	)		(33,998	)		(48,346	)
Cash effect on deconsolidation of subsidiary		15,823			—			15,823
Net cash used in investing activities		(205,565	)		(402,008	)		(1,020,042	)

Cash flows from financing activities:
Proceeds from sale of stock		—			4,750,000			6,156,274
Paid-in capital injection		—			4,626,818			4,626,818
Capital contributed by non-controlling interest owner		—			—			428,290
Loan from a related party		2,631,412			1,121,302			8,684,406
Repayment of related parties loan		—			(4,786,811	)		(4,786,811	)
Net cash provided by financing activities		2,631,412			5,711,309			15,108,977
Effect of exchange rate changes on cash and cash equivalents		13,759			(22,076	)		80,483
Net (decrease) increase in cash and cash equivalents		(1,979,108	))		1,708,525			49,504
Cash and cash equivalents at the beginning of year		2,028,612			320,087			—
Cash and cash equivalents at the end of year	$	49,504		$	2,028,612		$	49,504
Supplemental disclosure for cash flow information
Interest paid	$	—		$	—		$	—
Income taxes paid	$	—		$	—		$	—

InSee ~~December~~notes ~~2011, Beijing Sntaro entered into its fourth change of equity ownership. According~~ to anthe ~~amended~~consolidated equity agreement in December 2011, Mr. Zhilian Chen increased his register capital US$4,626,818, after this newly capital injection, Mr. Zhilian Chen’s, Mr. Xianhua Shen’s and Ms. Yingnv Sun’s equity changed, with their percentage of ownership at 95.4%, 2.3%, and 2.3%, respectively, and paid-in capital of $5,724,014, $137,150, and $137,150, respectively.financial statements

~~On June 20, 2010, the FL Network, the subsidiary of Beijing Sntaro, also completed a change in its ownership. Ms. Yu Bai was transferred 2.~~F-5~~% ownership by Beijing Sntaro and 2.5% shares by FL Media for free. And Ms. Yu Bai became ownership percentage from 70% and 30% to 67.5% and 27.5%, respectively.~~

OnSantaro Interactive ~~October~~Entertainment ~~12, 2010, within the Exchange Agreement described above, the~~ Company used 8,400,000 shares out of the newly issued 55,670,000 shares to exchange the 32.5% noncontrolling interests in FL Network from FL Media and Ms. Yu Bai and gave the interests to Beijing Sntaro, who had 67.5% ownership interest in FL Network. As of December 31, 2010, Beijing Sntaro has 100% ownership interest in the FL Network.

~~F-8~~(A Development Stage Company)

~~The~~Notes to ~~Company~~Consolidated isFinancial principally engaged in the development and operation of online games, and has a core product development team that is responsible for developing new games. Three Kingdoms Online and 108 Warriors are the two Massive Multiplayer Online Role Playing Game (“MMORPG”) games that will be launched when finished.Statements

21. ~~Variable~~ORGANIZATION AND ~~Interest~~DESCRIPTION ~~Entities~~OF ~~(VIEs)~~BUSINESS

~~PRC~~Santaro Interactive ~~regulations~~Entertainment ~~prohibit~~Company ~~direct~~(“the ~~foreign~~Company”) ~~ownership~~was ofincorporated ~~business~~on ~~entities~~December ~~providing internet content~~30, or2009 ~~ICP, services~~ in the ~~PRC~~State ~~such as the business~~ of ~~providing online games~~Nevada. InThe Company’s ~~September~~accounting ~~2010,~~and areporting ~~series~~policies ofconform ~~contractual~~to ~~arrangements~~accounting ~~were~~principles ~~entered~~generally ~~between~~accepted ~~Ningbo~~in ~~Sntaro~~the ~~and~~United ~~Beijing~~States ~~Sntaro~~of ~~and its individual owners~~America (U.S ~~Pursuit to the agreements~~GAAP), ~~Ningbo Sntaro provides exclusive technical consulting~~ and ~~management services to Beijing Sntaro. A summary of~~ the ~~major~~Company’s ~~terms~~fiscal ofyear ~~the~~end ~~agreements~~ is asDecember ~~follows:~~31.

(1)	Ningbo Sntaro has the sole discretion to determine the amount of the fees it will receive and it intends to transfer substantially all of the economic benefits of Beijing Sntaro to Ningbo Sntaro;
(2)	The equity owners irrevocably granted the Ningbo Sntaro the right to make all operating and business decisions for Beijing Sntaro on behalf of the equity owners;
(3)	All equity owned by the three equity owners were pledged to Ningbo Sntaro as a collateral against the service fee payable to Ningbo Sntaro;
(4)	The equity owners may not dispose of or enter into any other agreements involving the common shares without prior agreement by Ningbo Sntaro;
(5)	Ningbo Sntaro bears Beijing Sntaro’s operating risk.

The accompanying consolidated financial statements include the accounts of the following entities, and all significant intercompany transactions and balances have been eliminated in consolidation as of December 31, 2012 and 2011:

Because the above arrangement, which assigned all of Beijing Sntaro’s equity owners' rights and obligations to Ningbo Sntaro resulting in the equity owners lacking the ability to make decisions that have a significant effect on Beijing Sntaro's operations and Ningbo Sntaro's ability to extract the profits from the operation of Beijing Sntaro, and assume the Beijing Sntaro's residual benefits. Because the Ningbo Sntaro and its indirect parent are the sole interest holders of Beijing Sntaro, the Company consolidates Beijing Sntaro from its inception consistent with the provisions of FASB Accounting Standards Codification ("ASC") 810-10.

Consolidated entity name:	Percentage of ownership
Santaro Holdings, Ltd (“SHL”)	100	%
Santaro Investments, Ltd. (“Santaro HK”)	100	%
Ningbo Sntaro Network Technology Co., Ltd. (“Ningbo Sntaro”)	100	%
Beijing Sntaro Technology Co., Ltd. (“Beijing Sntaro”)	Variable Interest Entity
Beijing Sntaro Freeland Network Co., Ltd. (“FL Network”) (only through December 31, 2012)	100% subsidiary of Beijing Sntaro

InFL ~~addition,~~Network aswas ~~all~~a of100% ~~these~~subsidiary ~~contractual arrangements are governed by PRC law and provide for the resolution~~ of ~~disputes~~Beijing Sntaro ~~through~~until ~~either~~December ~~arbitration~~31, ~~or litigation in the PRC~~2012, ~~they~~when ~~would~~we beceased ~~interpreted~~to inhave ~~accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in~~ the ~~PRC~~power isto ~~not~~direct asits ~~developed~~activities asfollowing ina ~~other~~change ~~jurisdictions,~~of ~~such as the United States~~ownership. As a result, ~~uncertainties~~of insuch ~~the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore~~change, ~~these~~FL ~~contracts~~Network ~~may~~ceased not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to ~~enforce these contractual arrangements, it may not~~ be ~~able~~our tosubsidiary ~~exert~~starting ~~effective~~December ~~control over the VIEs~~31, ~~and its ability to conduct its business may be materially and adversely affected~~2012.

~~None~~On October 12, 2010, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”), with Santaro Holdings, Ltd., a limited liability company organized under the laws of British Virgin Islands, (“SHL”), and the ~~assets~~shareholders of SHL (collectively the “SHL Shareholders”). Pursuant to the terms of the ~~VIEs~~Exchange ~~can~~Agreement, bethe ~~used~~SHL ~~only~~Shareholders transferred to ~~settle~~the ~~obligations~~Company 100% of the ~~consolidated~~outstanding ~~VIEs~~shares of SHL in exchange for the newly issued 55,670,000 restricted shares of the common stock of the Company. ~~Conversely~~SHL is a holding company which has a 100% ownership interest in Santaro Investments, ~~liabilities~~Ltd., a ~~recognized~~Hong asKong company which in turn has a ~~result~~100% ofownership ~~consolidating~~interest ~~these~~in ~~VIEs~~Ningbo doSntaro ~~not~~Network ~~represent~~Technology ~~additional~~Co., ~~claims~~Ltd, ona Wholly Foreign Owned Enterprise (“WFOE”) established in the People’s Republic of China. Through control of the WFOE, the Company controls Beijing Sntaro Technology Co., Ltd, a company organized under the laws of the People’s ~~general~~Republic ~~assets~~of China and engaged in the development and operation of online games. As a result of the transactions described above, the Company became the record and beneficial owner of 100% of the share capital of SHL and therefore owns 100% of the share capital of its subsidiaries and Variable Interest Entities indirectly.

~~Most~~Santaro Holdings, ofLtd. ~~our~~(“SHL”) ~~operations~~is ~~are~~a ~~conducted~~limited ~~through~~liability ~~our~~company ~~affiliated~~organized ~~companies~~under ~~which~~ the ~~Company~~laws ~~controls through contractual agreements in the form~~ of ~~variable~~British ~~interest~~Virgin ~~entities.~~Islands ~~Current~~incorporated on ~~regulations~~December ~~in China permit our PRC subsidiaries to pay dividends to us only out of its accumulated distributable profits~~2, if2009.100 ~~any,~~shares ~~determined in accordance~~ with ~~their~~par ~~articles~~value ~~of association and PRC accounting standards and regulations~~$1.00 ~~The~~were ~~ability~~issued ~~of these Chinese affiliates to make dividends~~ and ~~other~~outstanding, ~~payments~~although tono uscapital ~~may~~was bepaid ~~restricted by factors that include changes~~ in ~~applicable~~as ~~foreign~~of ~~exchange~~December 31, ~~and other laws and regulations~~2012.

F-96

AAs a holding company, SHL has one wholly owned subsidiary, Santaro Investments, Ltd. ~~Under~~(“Santaro ~~PRC~~HK”), ~~law~~a Hong Kong corporation set up by SHL on January 27, ~~our~~2010. On July 13, 2010, Santaro HK set up a wholly owned subsidiary, ~~may~~Ningbo ~~only~~Sntaro ~~pay~~Network ~~dividends~~Technology Co., ~~after~~Ltd. ~~10%~~(“Ningbo Sntaro”), a Wholly Foreign Owned Enterprise (WFOE) organized under the laws of ~~its~~the ~~after-tax~~People’s Republic ~~profits~~of ~~have~~China ~~been~~(“PRC”). ~~set~~Ningbo ~~aside~~Sntaro asexercises ~~reserve~~control ~~funds~~through a series of agreements over Beijing Sntaro Technology Co., ~~unless~~Ltd. ~~such~~(“Beijing ~~reserves~~Sntaro”), ~~have~~an ~~reached~~operating atcompany ~~least~~organized 50under the laws of the PRC, and principally engaged in the development and operation of online games. Beijing Sntaro has 100% ownership interest in Beijing Sntaro Freeland Network Co., Ltd. (the “FL Network”) until December 31, 2012, a company organized under the laws of ~~its~~the ~~registered~~PRC. ~~capital~~The beneficial controlling stockholders of the Company own all the outstanding shares of Beijing Sntaro. In addition, ~~Such~~SHL ~~cash~~is ~~reserve~~the ~~may~~indirect ~~not~~parent beof ~~distributed~~Ningbo asSntaro ~~cash~~and ~~dividends~~controls this entity through its ownership of Santaro HK.

B.On ~~The~~July ~~PRC~~18, ~~Income~~2011, ~~Tax~~Santaro ~~Law~~HK ~~also~~established Outlets ~~imposes~~Internet aSale ~~10%~~Limited ~~withholding~~jointly ~~income~~with ~~tax~~New onSelect ~~dividends~~Group ~~generated~~Limited ~~on or after January 1~~(BVI), ~~2008~~each ~~and~~party ~~distributed~~holds by50% ashares ~~resident~~of ~~enterprise~~this tonewly ~~its~~established entity. ~~foreign~~The ~~investors,~~primary ifobjective ~~such~~of ~~foreign~~this ~~investors~~JV ~~are considered as non-resident enterprise without any~~ establishment oris ~~place~~for ~~within China or if~~ the ~~received~~further ~~dividends~~extension ~~have~~and nodevelopment ~~connection~~of ~~with~~on-line ~~such~~business ~~foreign investors’ establishment or place within China, unless such foreign investors’ jurisdiction~~ of ~~incorporation~~“Outlet” in ~~has~~PRC ~~a tax treaty with~~ China ~~that provides for a different withholding arrangement~~.

AsBeijing Sntaro was organized under the laws of ~~December~~People’s 31Republic of China (the “PRC”) on August 9, ~~2011~~2006 with paid-in capital of $139,580, ~~there~~which ~~were~~was 80% owned by Mr. Zhilian Chen, Beijing Sntaro’s chairman; the other 20% of the equity was held by Mr. Wenjie Lu. Beijing Sntaro is engaged in the development and operation of online games, investment in online games project. As of the end of fiscal 2012, Beijing Sntaro has been in development stage and does not conduct any ~~such~~substantive ~~retained~~sale ~~earnings~~of ~~available~~its ~~for distribution~~online games.

~~The~~Beijing Sntaro ~~following~~completed ~~financial~~a ~~statement~~series ~~amounts~~of ~~and~~changes ~~balances~~in ownership which were necessary to comply with its development. In April, 2007, pursuant to a Board of ~~the~~Directors’ ~~VIEs~~resolution, ~~were~~Beijing ~~included~~Sntaro inchanged its equity ownership as follows; Mr. Zhilian Chen, Mr. Xiaobo Li and Mr. Wenjie Lu became the ~~accompanying~~owners ~~consolidated~~of ~~financial~~Beijing ~~statements~~Sntaro, aswith the percentage of ownership of 60%, 20%, and ~~for~~20% ~~the~~respectively, ~~year~~and paid-in ~~ended~~capital ~~December~~of ~~31:~~$379,033, $126,344, and $126,344, respectively.

	December 31,			December 31,
	2011			2010
Total assets		$	198,095		$	401,034
Total liabilities		$	1,927,064		$	4,981,927

In May 2008, Beijing Sntaro entered into its second change of equity ownership. According to the equity agreement in May 2008, Mr. Zhilian Chen, Mr. Xiaobo Li, Mr. Xianhua Shen and Miss Yingnv Sun became the owners of Beijing Sntaro, with the percentage of ownership of 60%, 20%, 10%, and 10%, respectively, and paid in capital of $822,897, $274,299, $137, 150, and $137,150, respectively.

	Year Ended December 31,
	2011			2010
Revenues		$	-		$	-
Net loss		$	1,541,019		$	2,453,314

On March 9, 2009, Beijing Sntaro established FL Network (only through December 31, 2012), a subsidiary that is engaged in the business of online games development and operation, mainly focuses on technology research, FL Network is 70% owned by Beijing Sntaro, and 30% owned by Beijing East Free Land Media & Film Co., Ltd (the “FL Media”).

~~Most~~In April 2010, Beijing Sntaro entered into its third change of ~~our~~equity ~~net~~ownership. ~~revenues~~According ~~will~~to bean ~~generated~~amended equity agreement in ~~Renminbi~~December 2009, ~~when~~Mr. ~~operations~~Xiaobo ~~start~~Li ~~after~~transferred ~~development~~his ~~stage.~~ownership ~~Any~~in ~~future~~Beijing ~~restrictions~~Sntaro onto ~~currency~~Mr. ~~exchanges~~Zhilian ~~may~~Chen, ~~limit~~another ~~our~~owner ~~ability~~of toBeijing ~~use~~Sntaro, ~~net~~and ~~revenues~~increased Mr. ~~generated~~Chen’s inpercentage ~~Renminbi~~of ownership to ~~make~~80%, ~~dividends~~with orpaid-in ~~other~~of ~~payments~~capital in$1,097,196. UMr.S Xianhua Shen’s and Ms. ~~dollars~~Yingnv orSun’s equity ~~fund~~remained ~~possible~~unchanged, ~~business~~with ~~activities~~their ~~outside~~percentage ~~China~~of ownership at 10%, and 10%, respectively, and paid-in capital of $137,150, and $137,150, respectively.

~~Foreign~~In December ~~currency~~2011, ~~exchange~~Beijing ~~regulation~~Sntaro inentered ~~China~~into isits ~~primarily~~fourth ~~governed~~change byof equity ownership. According to the ~~following~~shareholders ~~rules:~~resolutions and amendments to the articles of association of Beijing Sntaro dated December 5, 2011, Mr. Zhilian Chen subscribed for $4,626,818 of the increased registered capital of Beijing Sntaro. After this newly capital injection, Mr. Zhilian Chen’s, Mr. Xianhua Shen’s and Ms. Yingnv Sun’s equity in Beijing Sntaro changed, with their percentage of ownership at 95.4%, 2.3%, and 2.3%, respectively, and paid-in capital of $5,724,014, $137,150, and $137,150, respectively.

·	Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;
·	Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

On June 20, 2010, the FL Network (only through December 31, 2012), the subsidiary of Beijing Sntaro, also completed a change in its ownership. Ms. Yu Bai was transferred 2.5% ownership by Beijing Sntaro and 2.5% shares by FL Media for free. And Ms. Yu Bai became ownership percentage from 70% and 30% to 67.5% and 27.5%, respectively.

Under the Administration Rules, RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. ForeignF-invested enterprises like ours that need foreign exchange for the distribution of profits to their shareholders may affect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.7

~~F-10~~On October 12, 2010, within the Exchange Agreement described above, the Company used 8,400,000 shares out of the newly issued 55,670,000 shares to exchange the 32.5% noncontrolling interests in FL Network from FL Media and Ms. Yu Bai and gave the interests to Beijing Sntaro, who had 67.5% ownership interest in FL Network. As of December 31, 2010, Beijing Sntaro has 100% ownership interest in the FL Network until December 31, 2012.

3The Company is principally engaged in the development and operation of online games, and has a core product development team that is responsible for developing new games. ~~SUMMARY~~Three OFKingdoms ~~SIGNIFICANT~~Online ~~ACCOUNTING~~and ~~POLICIES~~108 Warriors are the two Massive Multiplayer Online Role Playing Game (“MMORPG”) games. 108 Warriors was launched in the third quarter of 2012 . UU World is another MMORPG of the Company, which was also under development, but this game has been suspended right now, because the management considered this game is not suitable for current customer’s needs. In order to better meet the market demand, the company decided to search a proper opportunity to transfer this game into another kind of product.

~~Principles~~2. ofGOING ~~consolidation~~CONCERN AND ~~and basis of presentation~~LIQUIDITY

The accompanying ~~audited consolidated~~ financial statements ~~have~~are ~~been~~presented ~~prepared~~on ina ~~accordance~~going ~~with~~concern ~~accounting~~basis. ~~principles~~The ~~generally~~Company ~~accepted~~is in ~~the~~a ~~United~~development ~~States~~stage and only generated an insignificant amount of ~~America~~revenue during the period from its inception (~~“U.S.~~August ~~GAAP”~~9, 2006) to December 31, 2012. InThe ~~the~~Company ~~opinion~~has recurring ofnet ~~management,~~losses ~~all~~and ~~adjustments~~negative ~~(which~~cash ~~include~~flows ~~normal~~from ~~recurring~~operations ~~adjustments)~~and ~~necessary~~has tobeen ~~present~~dependent aon ~~fair~~debt ~~statement~~and ofequity ~~the~~financing. ~~financial~~The ~~position~~Company has an accumulated deficit of $14,628,454 as of December 31, ~~2011~~2012. ~~and~~These ~~2010,~~conditions ~~and~~raise substantial doubt about the ~~results~~Company’s ofability ~~operations~~to ~~and~~continue ~~cash~~as ~~flows~~a ~~for~~going concern. During the ~~years~~year ended December 31, 2011, the Company obtained a funding in the aggregate $4,750,000 from the issuance of 2,375,000 shares of our common stock, and ~~2010~~warrants to purchase a total of 1,187,500 ~~have~~shares ~~been~~of ~~made~~our common stock. ~~The~~On ~~Company~~December is5, ~~considered~~2011, toMr. beZhilian inChen ~~the~~converted ~~development~~parts ~~stage~~of asthe ~~defined~~loan provided inby ~~Accounting~~CixiYide, ~~Standards~~a ~~Codification~~related party (~~ASC~~Note 13), ~~915~~to ~~“Development~~Beijing ~~Stage~~Sntaro, ~~Entities”~~i.e., ~~The~~$4,626,818 ~~Company~~(RMB is29,260,000), ~~devoting~~into ~~substantially~~the ~~all~~registered capital of ~~its~~Beijing ~~efforts~~Sntaro onby the ~~development~~way ~~and~~of ~~operation~~subscribing for the increased capital of ~~online~~Beijing ~~games~~Sntaro and then let Beijing Sntaro to pay back the increased capital to CixiYide. There can be no assurance that the Company will be able to obtain additional debt or equity financing on terms acceptable to it, or if at all. Management plans to fund continuing operations through new financing from related parties and equity financing arrangements.

The accompanying audited consolidated financial statements as of December 31, 2011 and 2010, and for the years then ended include the Company, SHL, Santaro HK, Ningbo Sntaro, Beijing Sntaro and FL Network3. ~~All~~VARIABLE ~~inter-company~~INTEREST ENTITIES ~~transactions and balances have been eliminated in consolidation.~~(VIES)

~~Use~~Regulations of the People’s Republic of ~~Estimates~~China (“PRC”) prohibit direct foreign ownership of business entities providing internet content, or ICP, services in the PRC such as the business of providing online games. In September 2010, a series of contractual arrangements were entered between Ningbo Sntaro and Beijing Sntaro and its individual owners. Pursuant to the agreements, Ningbo Sntaro provides exclusive technical consulting and management services to Beijing Sntaro. A summary of the major terms of the agreements is as follows:

~~The~~(1) ~~preparation~~Ningbo ofSntaro ~~consolidated~~has ~~financial~~a ~~statements~~decisive inright ~~conformity with the U.S. GAAP requires management~~ to ~~make~~determine ~~estimates and assumptions that affect~~ the ~~reported~~amount ~~amounts~~ of ~~assets liabilities and disclosures of contingent assets and liabilities at~~ the ~~date~~fees ofit ~~the~~will ~~consolidated~~receive ~~financial statements~~ and ~~the~~it ~~reported~~intends ~~amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject~~ to ~~such~~transfer ~~estimates~~substantially ~~and~~all ~~assumptions include the useful lives~~ of ~~fixed assets;~~ the fair value determination of financial and equity instruments, the realization of deferred tax assets and; the recoverability of intangible assets and property and equipment; and accruals for income tax uncertainties and other contingencies. The current economic ~~environment~~benefits ~~has increased the degree~~ of ~~uncertainty~~Beijing ~~inherent~~Sntaro into ~~those~~Ningbo ~~estimates and assumptions.~~Sntaro;

~~Foreign~~(2) ~~Currency~~The ~~Translation~~equity owners of Beijing Sntaro irrevocably granted the Ningbo Sntaro the right to make all operating and ~~transaction~~business decisions for Beijing Sntaro on behalf of the equity owners;

~~The Company maintains its books and accounting records in People’s Republic of China~~ (~~the “PRC”~~3) ~~currency~~All ~~"Renminbi"~~equity ~~("RMB"),~~owned ~~which~~by ~~is determined as~~ the ~~functional~~three ~~currency.~~equity ~~The~~owners ~~Company’s financial statements are translated into the reporting currency, the United States Dollar (“US$”). Assets and liabilities~~ of ~~the~~Beijing ~~Company~~Sntaro ~~are~~shall ~~translated~~be atpledged ~~the~~to ~~prevailing~~Ningbo ~~exchange~~Sntaro ~~rate~~as ata ~~each~~collateral ~~reporting~~against ~~period end. Contributed capital accounts are translated using~~ the ~~historical~~service ~~rate~~fee ofpayable ~~exchange~~to ~~when~~Ningbo ~~capital~~Sntaro; ~~is injected. Income~~ and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these financial statements are reflected as accumulated other comprehensive income (loss) in the stockholders’ equity.

~~Translation~~(4) ~~adjustments~~The ~~resulting~~equity ~~from~~owners ~~this~~of ~~process~~Beijing ~~are~~Sntaro ~~included~~may innot ~~accumulated~~dispose ~~other comprehensive loss in the consolidated statement~~ of ~~operations~~or ~~and~~enter ~~comprehensive~~into ~~loss~~any ~~and~~other ~~amounted~~agreements toinvolving ~~$360,736~~all ~~as of December 31, 2011,~~ and ~~$113,208~~any as of ~~December 31, 2010. The balance sheet amounts with~~ the ~~exception of~~ equity atinterest ~~December~~of ~~31,~~Beijing ~~2011~~Sntaro ~~were~~without ~~translated~~prior atagreement ~~6.3647~~by ~~RMB~~Ningbo ~~to $1~~Sntaro.00 USD as compared to 6.6118 RMB at December 31, 2010. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the years ended December 31, 2011 and 2010 were 6.47390 RMB and 6.77875 RMB, respectively.

~~F-11~~Pursuant to the above arrangements, all of the equity owners' rights and obligations of Beijing Sntaro were assigned to Ningbo Sntaro, which resulted in the equity owners of Beijing Sntaro lacking the ability to make decisions that have a significant effect on Beijing Sntaro's operations, and enable Ningbo Sntaro to extract the profits from the operation of Beijing Sntaro, and assume the Beijing Sntaro's residual benefits. Because the Ningbo Sntaro and its indirect parent are the sole interest holders of Beijing Sntaro, the Company consolidates Beijing Sntaro from its inception consistent with the provisions of FASB Accounting Standards Codification ("ASC") 810.

~~Statement of Cash Flows~~F-8

In addition, ~~accordance~~as ~~with~~all ~~FASB~~of ~~guidance,~~these ~~“Statement~~contractual arrangements are governed by PRC law and provide for the resolution of ~~Cash~~disputes ~~Flows,”~~through ~~cash~~either arbitration ~~flows~~or ~~from~~litigation in the ~~Company’s~~PRC, ~~operations~~they iswould ~~calculated~~be ~~based~~interpreted ~~upon~~in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the ~~functional~~PRC ~~currency~~is not as developed as in other jurisdictions, such as the United States. As a result, ~~amounts~~uncertainties ~~related~~in the PRC legal system could further limit the Company’s ability to ~~assets~~enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and ~~liabilities~~regulations ~~reported~~or onare otherwise not enforceable for public policy reasons. In the ~~statement~~event ofthe ~~cash~~Company ~~flows~~is unable to enforce these contractual arrangements, it may not ~~necessarily~~be ~~agree~~able ~~with~~to ~~changes~~exert ineffective control over the ~~corresponding~~VIEs, ~~balances~~and onits ~~the~~ability ~~balance~~to ~~sheet~~conduct its business may be materially and adversely affected.

~~Fair~~None of ~~Value~~the assets of ~~Measurements~~the variable interest entities (the “VIEs”) can be used only to settle obligations of the consolidated VIEs. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.

~~ASC~~Most of ~~820~~our ~~establishes~~operations aare ~~common~~conducted ~~definition~~through ~~for~~our ~~fair~~affiliated ~~value~~companies which the Company controls through contractual agreements in the form of VIEs. Current regulations in China permit our PRC subsidiaries to bepay ~~applied~~dividends to ~~existing~~us ~~generally~~only ~~accepted~~out ~~accounting~~of ~~principles~~its ~~that~~accumulated ~~require~~distributable profits, ~~the~~if ~~use~~any, determined in accordance with their articles of ~~fair~~association ~~value~~and ~~measurements~~PRC ~~establishes~~accounting astandards ~~framework~~and ~~for~~regulations. ~~measuring~~The ability ~~fair~~of ~~value~~these Chinese affiliates to make dividends and ~~expands~~other ~~disclosure~~payments ~~about~~to ~~such~~us ~~fair~~may ~~value~~be ~~measurements~~restricted by factors that include changes in applicable foreign exchange and other laws and regulations.

~~ASC~~A. ~~820~~Under ~~defines~~PRC ~~fair~~law, ~~value~~our assubsidiary ~~the~~may ~~price~~only ~~that~~pay ~~would~~dividends beafter ~~received~~10% ~~upon sale~~ of anits ~~asset~~after-tax orprofits ~~paid~~have tobeen ~~transfer~~set aaside ~~liability~~as inreserve anfunds, ~~orderly~~unless ~~transaction~~such ~~between~~reserves ~~market~~have ~~participants~~reached at ~~the~~least ~~measurement~~50% ~~date. Additionally, ASC 820 requires the use~~ of ~~valuation~~its ~~techniques~~registered ~~that~~capital. ~~maximize~~Such ~~the~~cash ~~use~~reserve ofmay ~~observable~~not ~~inputs~~be ~~and~~distributed ~~minimize~~as ~~the~~cash ~~use of unobservable inputs~~dividends. ~~These inputs are prioritized below:~~

Level 1:	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2:	Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3:	Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The PRC Income Tax Law also imposes a 10% withholding income tax on dividends generated on or after January 1, 2008 and distributed by a resident enterprise to its foreign investors, if such foreign investors are considered as non-resident enterprise without any establishment or place within China or if the received dividends have no connection with such foreign investors’ establishment or place within China, unless such foreign investors’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement.

~~Cash~~As of ~~and~~December ~~cash equivalents~~31, ~~accounts due from and to related parties~~2012, ~~other~~ ~~payables~~there ~~and~~were ~~accrued~~no ~~expenses~~such ~~are~~retained ~~carried~~earnings atavailable ~~cost~~for ~~on the balance sheets and the carrying amount approximates their fair value because of the short-term nature of these financial instruments~~distribution.

~~Cash~~The following financial statement amounts and ~~Cash~~balances ~~Equivalents~~of the VIEs were included in the accompanying consolidated financial statements as of and for the year ended December 31:

Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less at the time of purchase.

	December 31,		December 31,
	2012		2011
Total assets	$	123,052	$	198,095

Total liabilities	$	2,682,517	$	1,927,064

The Company maintains cash deposits in financial institutions or state-owned banks within the PRC that are not covered by insurance. Non-performance by these institutions could expose the Company to losses for amounts in excess of insured balances. As of December 31, 2011 and December 31, 2010, the Company’s bank balances exceeded government-insured limits by approximately $2,028,608 and $320,083, respectively. To date, the Company has not experienced any losses in such accounts.

	Year Ended December 31,
	2012		2011
Revenues	$	27,571	$	-

Net loss	$	256,072	$	1,541,019

~~Property~~All of ~~and~~our ~~equipment~~current revenue is generated in PRC currency Renminbi (“RMB”). Any future restrictions on currency exchanges may limit our ability to use net revenues generated in Renminbi to make dividends or other payments in U.S. dollars or fund possible business activities outside China.

~~Property~~Foreign currency ~~and~~exchange ~~equipment~~regulation ~~are~~in ~~stated~~China ~~at cost less accumulated depreciation. Depreciation~~ is ~~computed~~primarily ~~using~~governed ~~the~~by ~~straight-line method over~~ the following ~~estimated useful lives~~rules:

~~F-12~~· Foreign Exchange Administration Rules (1996), as amended in August 2008, or the Exchange Rules;

Computer equipment	3-5 years
Leasehold improvements	3 years
Furniture and fixtures	3-5 years

F-9

~~The~~· ~~Company~~Administration ~~recognizes~~Rules ~~website~~of ~~and~~the ~~internally used software development costs in accordance with ASC Topic 350: Intangibles - Goodwill and Other. As such~~Settlement, ~~the~~Sale ~~Company expenses all costs that are incurred in connection with the planning~~ and ~~implementation~~Payment ~~phases~~ of ~~development~~Foreign ~~and~~Exchange ~~costs~~(1996), ~~that are associated with repair~~ or ~~maintenance of~~ the ~~existing~~Administration ~~websites and software~~Rules. Costs incurred subsequent to establishing technological feasibility are capitalized and amortized over the estimated product life. Since the inception of Beijing Sntaro, the amount of costs qualifying for capitalization has been insignificant and as a result all website and internally used software development costs have been expensed as incurred.

~~Research~~Under the Administration Rules, RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and ~~development~~service ~~expenses~~related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of China, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. Foreign-invested enterprises like ours that need foreign exchange for the distribution of profits to their shareholders may affect payment from their foreign exchange accounts or purchase and pay foreign exchange rates at the designated foreign exchange banks to their foreign shareholders by producing board resolutions for such profit distribution. Based on their needs, foreign-invested enterprises are permitted to open foreign exchange settlement accounts for current account receipts and payments of foreign exchange along with specialized accounts for capital account receipts and payments of foreign exchange at certain designated foreign exchange banks.

~~Costs~~4. ~~incurred~~SUMMARY ~~for~~OF ~~the~~SIGNIFICANT ACCOUNTING development of online game products prior to the establishment of technological feasibility and costs incurred for maintenance after the online game products are available for marketing are expensed when incurred and are included in research and product development expenses.POLICIES

~~Income~~Principles of ~~taxes~~consolidation and basis of presentation

~~Income~~The accompanying ~~taxes~~consolidated ~~are~~financial ~~accounted~~statements ~~for~~have ~~under~~been ~~the~~prepared ~~asset~~in ~~and~~accordance ~~liability~~with ~~method.~~accounting ~~Deferred~~principles ~~tax~~generally ~~assets~~accepted ~~and liabilities are recognized for~~ in the ~~future~~United ~~tax~~States ~~consequences~~of ~~attributable~~America to(“U.S. ~~differences~~GAAP”). ~~between~~In the ~~financial~~opinion ~~statement~~of ~~carrying~~management, ~~amounts~~all ofadjustments ~~existing~~(which ~~assets~~include ~~and~~normal ~~liabilities~~recurring adjustments) ~~and~~necessary ~~their~~to ~~respective~~present ~~tax~~a ~~bases~~fair ~~and~~statement ~~tax~~of ~~loss~~the ~~and~~financial ~~tax~~position ~~credit~~as ~~carry~~of ~~forwards.~~December ~~Deferred~~31, ~~tax~~2012 ~~assets~~ and ~~liabilities~~2011, ~~are~~and ~~measured~~the ~~using~~results of ~~enacted~~operations ~~tax~~and ~~rates~~cash ~~expected~~flows tofor ~~apply to taxable income in~~ the years inended ~~which~~December ~~those~~31, ~~temporary~~2012 ~~differences~~and ~~are~~2011, ~~expected~~have tobeen ~~be recovered or settled~~made. The ~~effect~~Company onis ~~deferred~~considered ~~tax~~to ~~assets~~be ~~and liabilities of a change~~ in ~~tax rates is recognized in~~ the ~~consolidated~~development ~~statements~~stage ofas ~~income~~defined in ~~the~~Accounting ~~period~~Standards ~~that~~Codification ~~includes~~(ASC) ~~the~~915 ~~enactment~~“Development ~~date~~Stage Entities”. AThe ~~valuation allowance~~ Company is ~~provided~~devoting tosubstantially ~~reduce~~all ~~the amount~~ of ~~deferred~~its ~~tax~~efforts ~~assets~~on ifthe itdevelopment isand ~~considered~~operation ~~more likely than not that some portion or all~~ of ~~the~~online ~~deferred tax assets will not be realized~~games.

~~ASC~~The accompanying ~~740-10-25 clarifies the accounting for uncertain tax positions and requires that an entity recognizes in the~~ consolidated financial statements ~~the~~as ~~impact~~ of aDecember ~~tax position~~31, if2012 ~~that~~and ~~position is more likely than not of being sustained upon examination~~2011, ~~based~~and onfor the ~~technical~~years ~~merits~~then ofended ~~the~~include ~~position. Recognized income tax positions are measured at~~ the ~~largest~~Companies, SHL, ~~amount~~Santaro ~~that~~HK, isNingbo ~~greater~~Sntaro, ~~than~~Beijing ~~50%~~Sntaro ~~likely~~and ofFL ~~being~~Network ~~realized.~~(only ~~Changes~~through inDecember ~~recognition~~31, ~~or measurement are reflected in the period in which the change in judgment occurs~~2012). All ~~The~~inter-company ~~Company~~transactions ~~has elected to classify interest~~ and ~~penalties~~balances ~~related~~have tobeen ~~unrecognized~~eliminated ~~tax benefits, if and when required, as a component of income tax expense~~ in ~~the consolidated statements of income~~consolidation.

~~Recent~~Use of ~~issued accounting pronouncements~~Estimates

InThe preparation ~~June~~of ~~2011,~~consolidated ~~the~~financial ~~FASB~~statements ~~issued~~in ~~ASU~~conformity ~~No.~~with ~~2011-05,~~the ~~“Presentation~~U.S. ofGAAP ~~Comprehensive~~requires ~~Income”.~~management ~~Under~~to ~~the~~make ~~amendments~~estimates inand ~~this~~assumptions that ~~ASU,~~affect anthe ~~entity~~reported ~~has~~amounts ~~two~~of ~~options~~assets, ~~for~~liabilities ~~presenting~~and ~~its~~disclosures ~~total~~of ~~comprehensive~~contingent ~~income:~~assets toand ~~present~~liabilities ~~total~~at ~~comprehensive~~the ~~income~~date ~~and~~of ~~its~~the consolidated ~~components~~financial ~~along~~statements ~~with~~and the ~~components~~reported amounts of ~~net~~revenue ~~income~~and inexpenses aduring ~~single~~the ~~continuous~~reporting ~~statement,~~period. orActual inresults could ~~two~~differ ~~separate~~from ~~but~~those ~~consecutive statements~~estimates. ~~The~~Significant ~~amendments~~items insubject ~~this~~to ~~ASU~~such ~~are~~estimates ~~required~~and toassumptions beinclude ~~applied~~the ~~retrospectively~~useful ~~and~~lives ~~are~~of ~~effective~~fixed assets; ~~for~~the ~~fiscal~~fair ~~years,~~value ~~and~~determination ~~interim~~of ~~periods~~financial ~~within~~and ~~those~~equity ~~years~~instruments, ~~beginning~~the ~~after~~realization ~~December~~of ~~15,~~deferred ~~2011,~~tax ~~with~~assets ~~early~~and; ~~adoption~~the ~~permitted.~~recoverability of ~~The~~intangible ~~Company~~assets ~~has~~and ~~elected~~property toand ~~early~~equipment; ~~adopt~~and ~~this~~accruals ~~ASU~~for ~~and~~income ~~the~~tax ~~adoption~~uncertainties ~~did~~and ~~not~~other ~~have~~contingencies. aThe ~~material~~current economic ~~impact~~environment onhas increased the ~~Company’s~~degree ~~financial~~of ~~statements~~uncertainty inherent in those estimates and assumptions.

~~F-13~~Foreign Currency Translation and transaction

~~Except~~The Company ~~for~~maintains ~~the~~its ~~ASUs~~books ~~above,~~and accounting records in RMB, which is determined as the ~~year~~functional ~~ended~~currency. ~~December~~The ~~31,~~Company’s financial ~~2011~~statements are translated into the reporting currency, the ~~FASB~~United ~~has~~States ~~issued~~Dollar ~~ASU~~(“USD”). NoAssets and liabilities of the Company are translated at the prevailing exchange rate at each reporting period end. ~~2011-01~~Contributed ~~through~~capital ~~ASU~~accounts ~~2011-12,~~are ~~which~~translated using the historical rate of exchange when capital is ~~not~~injected. ~~expected~~Income toand ~~have~~expense aaccounts ~~material~~are ~~impact~~translated onat the ~~consolidated~~average rate of exchange during the reporting period. Translation adjustments resulting from translation of these financial statements ~~upon~~are ~~adoption~~reflected as accumulated other comprehensive income (loss) in stockholders’ equity (deficit).

4Translation adjustments resulting from this process are included in accumulated other comprehensive loss in the consolidated statement of operations and comprehensive loss and amounted $358,075 as of December 31, 2012, and $360,736 as of December 31, 2011. The ~~EARNINGS~~balance ~~PER~~sheet amounts ~~SHARE~~with the exception of equity at December 31, 2012 were translated at 6.3161 RMB to $1.00 USD as compared to 6.3647 RMB at December 31, 2011. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the years ended December 31, 2012 and 2011 were 6.3198 RMB and 6.4739 RMB, respectively.

The FASB’s accounting standard for earnings per share requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Warrants issued on June 27, 2011 and August 29, 2011 to purchase a total of 1,187,500 shares of its common stock was not recorded in the diluted calculation since the stock’s average market price did not exceed the exercise price.F-10

~~The~~Statement ~~following is a reconciliation~~ of ~~the~~Cash ~~basic and diluted earnings per share computations for the years ended December 31, 2011 and 2010:~~Flows

	2011				2010
Net loss for basic and diluted earnings per share		$	3,774,468			$	2,507,714
Weighted average shares used in basic and diluted computation			68,470,959				67,500,000
Earnings per share:
Basic and diluted		$	(0.06	)		$	(0.04	)

In accordance with FASB guidance, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon the functional currency. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

5.Fair ~~GOING~~Value ~~CONCERN~~of ~~AND LIQUIDITY~~Measurements

~~The~~ASC 820 ~~accompanying~~establishes ~~financial statements are presented on~~ a ~~going~~common ~~concern~~definition ~~basis.~~for ~~The~~fair ~~Company~~value ~~is in a development stage and has not generated any revenue during the period from its inception~~ to ~~December~~be ~~31,~~applied 2011, has recurring net losses and negative cash flows from operations and has been dependent on debt and equity financing. The Company has an accumulated deficit of $9,530,323. These conditions raise substantial doubt about the Company’s ability to ~~continue~~existing asgenerally aaccepted ~~going~~accounting ~~concern.~~principles ~~During the year ended December 31, 2011, the Company obtained a funding of $4,750,000 from newly issued 2,375,000 common shares. However, there can be no assurance~~ that require the ~~Company~~use will be able to obtain debt or equity financing on terms acceptable to it, or if at all. The management plans to fund continuing operations through new financing from related parties and equity financing arrangements. On April 29, 2011, the Company entered into an agreement (the “Agreement”) with Mr. Zhilian, Chen and CixiYide, whereby, Mr. Zhilian Chen invests $4,460,366 (RMB 29,260,000) into Beijing Sntaro as capital injection which is used to pay back the borrowing from CixiYide. The agreement is effective upon completion of ~~the~~fair ~~registration~~value ~~of the capital. At December 5~~measurements, ~~2011,~~establishes ~~the~~a ~~capital~~framework ~~injection~~for ~~has~~measuring ~~been~~fair ~~completed~~value and ~~Beijing~~expands ~~Sntaro~~disclosure ~~paid~~about ~~back~~such ~~$4,626,818~~fair ~~(RMB 29,260,000) to CixiYide~~value measurements.

~~F-14~~ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

6. OTHER RECEIVABLES

Level 1:	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2:	Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3:	Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

~~Other~~There ~~receivables~~were ofno ~~$156,268~~transfers ~~and~~between ~~$152,659~~level ~~as of December 31~~1, level ~~2011~~2 ~~and~~or ~~2010~~level ~~consisted~~3 ofmeasurements ~~cash advances given to certain employees~~ for ~~use~~the ~~during~~year ~~business~~ended ~~operations~~December ~~and~~31, ~~are recognized as General and Administration expenses when expenses are incurred~~2012. ~~It also includes certain rental deposit.~~

7.As ~~PROPERTY~~of ~~AND~~December ~~EQUIPMENT~~31, 2012, none of the Company’s nonfinancial assets or liabilities was measured at fair value on a nonrecurring basis.

~~Property~~Cash and cash equivalents, accounts due from and ~~equipment~~to related parties, other payables and accrued expenses are ~~summarized~~carried asat ~~follows:~~cost on the balance sheets and the carrying amount approximates their fair value because of the short-term nature of these financial instruments.

	December 31,				December 31,
	2011				2010
Computer equipment		$	414,922			$	306,849
Furniture and fixtures			190,417				54,678
Leasehold improvement			214,721				67,551
			820,060				429,078
Less: Accumulated depreciation			(325,648	)			(227,699	)
Property and equipment, net		$	494,412			$	201,379

Cash and Cash Equivalents

~~Depreciation~~Cash and ~~expenses~~cash ~~for~~equivalents ~~the~~include ~~years~~cash ~~ended~~on ~~December 31~~hand, ~~2011~~deposits ~~and~~in ~~2010~~banks ~~were~~with ~~$87~~maturities of three months or less,~~605~~ and ~~$83~~all highly liquid investments which are unrestricted as to withdrawal or use,~~281~~ ~~respectively~~and which have original maturities of three months or less at the time of purchase.

8The Company maintains cash deposits in financial institutions or state-owned banks within the PRC that are not covered by insurance. Non-performance ~~LONG~~by ~~TERM~~these ~~INVESTMENT~~institutions could expose the Company to losses. To date, the Company has not experienced any losses in such accounts.

OnProperty ~~July 18, 2011, Santaro HK~~ and a non-related company New Select Group Limited (BVI) established a legal entity named Outlets Internet Sale Limited, of which each party having a 50% interest was formed for the purpose of the development of an online outlet business that will mutually benefit both parties. Management has classified the investment as a joint venture and will account for the investment under the equity-method of accounting since each investor may participate, directly or indirectly, in the overall management of the joint venture and has joint control in accordance with the provisions of Accounting Standards Codification (ASC) 323 “Investments - Equity Method and Joint Ventures”.equipment

~~Other~~Property and ~~payables~~equipment ~~and~~are ~~accrued~~stated ~~expenses~~at ~~consist~~cost ofless accumulated depreciation. Depreciation is computed using the straight-line method over the following estimated useful lives:

		December 31,		December 31,
Computer equipment	3-5 years
		2011		2010
Leasehold improvements	3 years
Other payables		$	454,117	$	160,087
Furniture and fixtures	3-5 years
Accrued salaries			78,917		-
Total		$	533,034	$	160,087

~~Other Payable of $454,117 as of December 31, 2011 consisted of the interest~~F-~~free loan of $235,675 from Ningbo Jufeng Textile Co., Ltd, a third party of the Company. The loan is unsecured, payable on demand, and was outstanding.~~11

10Expenditures for maintenance and repairs are expensed as incurred. ~~INCOME~~Gain ~~TAX~~or ~~EXPENSES~~loss on the disposal of property and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of operations and comprehensive income.

~~The~~Revenue ~~Company and its subsidiaries file income tax returns separately.~~recognition

The ~~United~~Company ~~States~~currently provides online game services in the PRC and recognizes revenue in accordance to the criteria of ~~America~~ASC subtopic 605 (“ASC 605”), Revenue Recognition when persuasive evidence of an arrangement exists, the service has been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Online game revenues include our MMOG operations and Co-operation Web-based game revenues.

~~Santaro~~MMOG Interactive Entertainment Company is incorporated in the State of Nevada in the U.S., and is subject to a gradual U.S. federal corporate income tax of 15% to 35%. The State of Nevada does not impose any corporate state income tax.operations

FThe Company operates Massively Multiplayer Online Role-15Playing Games (“MMORPG”) under a free-to-play model. The online game revenue derives from the sale of in-game virtual items and revenue was recognized pursuant to the item-based revenue model.

~~British~~Under ~~Virgin~~the ~~Islands~~item-based model, players are able to play the basic features of the game for free. We generate revenues when players purchase virtual items that enhance their playing experience, such as weapons, clothing, accessories and pets. The item-based revenue model allows us to introduce new virtual items or change the features or properties of virtual items to enhance game player interaction and create a better game community.

~~Santaro~~The ~~holdings~~Company ~~Ltd~~sells ~~(the~~prepaid ~~“SHL”)~~cards, ~~was~~in ~~incorporated~~both virtual and physical forms, to third party distributors who in turn sell the ~~British~~prepaid ~~Virgin~~cards ~~Islands~~to onend ~~December~~customers. 2,The ~~2009~~prepaid ~~(“SHL”)~~cards provide customers with a pre-specified number of game points for consumption. ~~Under~~All prepaid cards sold to distributors require upfront advance cash payments. The prepaid game cards entitle end users to purchase virtual items in the ~~current~~Company’s ~~laws~~online ofgames. Prepaid cards will expire two years after the ~~British~~date ~~Virgin~~of ~~Islands,~~card ~~SHL~~production isif ~~not~~they ~~subject~~have tonever ~~tax~~been onactivated. ~~income~~The orproceeds ~~capital~~from ~~gains~~the expired game cards are recognized as revenue upon expiration of cards. In ~~addition~~contrast, ~~upon~~once ~~payments~~the ofprepaid ~~dividends~~cards byare ~~SHL~~activated and credited to a player’s personal game account, nothey ~~British~~will ~~Virgin~~not ~~Islands~~expire ~~withholding~~as ~~tax~~long isas ~~imposed~~the personal game account remains active. The personal game account will always remain active before the game stop operating.

~~Hong~~The ~~Kong~~end users also could choose bank recharge method directly to exchange Santaro currency (“Long Bi”) or game currency of 108 warriors (“Silver”) through third-party payment platforms.

~~Santaro~~All ~~Investments,~~proceeds ~~Ltd.,~~received ~~was~~from ~~incorporated~~distributors or inthrough ~~Hong~~direct ~~Kong~~online onpayment ~~January~~systems ~~27,~~are ~~2010.~~deferred ~~Santaro~~when HKreceived, ~~did~~revenues ~~not~~are ~~earn~~recognized ~~any~~over ~~income~~estimated ~~that~~life ~~was~~of ~~derived in Hong Kong for~~ the ~~year~~virtual items ~~ended~~that ~~December~~game ~~31,~~players ~~2011~~purchase ~~and~~or ~~therefore~~as ~~was~~the ~~not~~virtual ~~subject~~items toare ~~Hong Kong Profits Tax~~consumed. The ~~payments~~below ofdescription ~~dividends by Hong Kong companies~~ are ~~not~~the ~~subject~~detailed torevenue ~~any~~recognition method ~~Hong~~adopted ~~Kong~~by ~~withholding~~the ~~tax~~company.

~~PRC~~Instant consumption mode is used when users purchase instant services or items with Silver. And as that service or item will be immediately consumed right after the Silver is paid by the user, therefore the reflected RMB value (from equivalent Silver) can be confirmed and recorded as revenue after the completion of the purchase (exchange Long Bi for Silver) by the user.

~~Ningbo~~Limited consumption ~~Sntaro,~~mode ~~Beijing~~is ~~Sntaro~~used ~~and~~when FLusers ~~Network~~purchase ~~were~~the ~~all~~items ~~organized~~or ~~under~~services ~~the~~with ~~laws~~limited ofeffective ~~the~~time. ~~People’s~~This ~~Republic~~type of ~~China~~items ~~(“PRC”)~~or ~~which~~services will ~~are~~be ~~subject~~fully toconsumed ~~Enterprise~~by ~~Income~~the ~~Tax~~end ~~(“EIT”)~~of on the ~~taxable~~effective ~~income~~time. asTherefore ~~reported in their respective statutory financial statements adjusted in accordance with~~ the ~~Enterprise~~reflected ~~Income~~RMB ~~Tax~~value ~~Law.~~of ~~Pursuant~~that topurchase ~~the~~will ~~PRC~~be ~~Income~~confirmed ~~Tax~~as revenue ~~Laws,~~after the ~~Company~~item ~~and~~or ~~subsidiary~~service ~~are~~has ~~subject~~been tofully ~~EIT~~consumed ~~at a statutory rate of 25%~~(expired).

~~Deferred~~Apportioned consumption ~~Tax~~mode ~~Assets~~is used for perpetual virtual items and services, which can be used unlimited times through their estimated life spans. The delivery criterion for perpetual virtual items is generally met ratably over the expected delivery obligation period, which, in this case, is the estimated life of the perpetual virtual items purchased. Revenue is recognized proportionately over the estimated life spans which are based on data related to paying game player usage patterns for each category of virtual item. The game log, which records the whole process of a specific item or service being purchased and consumed, will be used periodically to readjust the estimation on perpetual virtual items’ life spans.

In assessing the realization of deferred tax assets, the Company considers projected future taxable income and tax planning strategies in making its assessment, as of December 31, 2011 and 2010, for PRC income tax purposes.F-12

~~Ningbo~~Co-operation ~~Sntaro had deferred tax assets of approximately $519,763 and $0 as of December 31, 2011 and December 31, 2010, which consisted of a tax loss carry~~Web-~~forward~~based of $2,046,088 and $0, respectively. Ningbo Sntaro had no other temporary differences as of December 31, 2011 and December 31, 2010. Management determines it is more likely than not that all deferred tax asset could not be recognized, so full allowance was provided in 2011. The deferred tax assets begin to expire from 2014.game

~~Beijing~~As ~~Sntaro~~the ~~had~~operator, ~~deferred~~the ~~tax~~Company ~~assets~~signed ofdistribution agreements ~~approximately~~with ~~$1,155,274~~third-party ~~and~~developers ~~$824,525~~to asoffer ofthe ~~December~~games ~~31,~~to ~~2011~~users ~~and~~on ~~December~~its ~~31,~~websites ~~2010,~~or ~~which~~platforms. ~~consisted~~Although ofthe acompany ~~tax~~is ~~loss~~the ~~carry-forward~~party that ofsigns ~~$4,731,783~~the ~~and~~user ~~$3,431,104,~~agreement ~~respectively.~~with ~~Beijing~~its ~~Sntaro~~users ~~had~~and nois ~~other~~responsible ~~temporary~~for ~~differences~~its asusers’ ofexperience ~~December~~on 31its Websites or platforms, ~~2011~~its remaining obligation is deemed to be inconsequential and ~~December~~perfunctory ~~31,~~after ~~2010.~~the ~~Management~~end ~~determines~~users itrecharge isto ~~more~~exchange ~~likely~~the ~~than~~game ~~not~~coins ~~that~~of these ~~all~~web-based ~~deferred~~games. ~~tax~~Besides, ~~asset~~the ~~could~~third ~~not~~party bedevelopers ~~recognized~~obliged to provide on-going services to users, so ~~full~~a ~~allowances~~proportion ~~were~~of ~~provided~~the full ~~for~~revenue ~~both~~received ~~2011~~from ~~and~~end ~~2010.~~users ~~The~~is ~~deferred~~recorded ~~tax~~as ~~assets~~revenue ~~begin~~according to ~~expire~~the ~~from~~distribution ~~2011~~agreements.

FLCost ~~Network had deferred tax assets~~ of approximately $759,661 and $698,545 as of December 31, 2011 and December 31, 2010, which consisted of tax loss carry-forwards of $3,034,520 and $2,794,180, respectively. It had no other temporary differences as of December 31, 2011 and December, 31, 2010. Management determines it is more likely than not that all deferred tax asset could not be recognized, so full allowances were provided for both 2011 and 2010. The deferred tax assets begin to expire from 2014.revenue

~~During~~Cost of ~~2011,~~revenue anconsists ~~aggregated~~primarily ~~valuation~~of ~~allowance~~service offee, $2depreciation,~~434,698~~ ~~was~~salary ~~provided~~and ~~since~~social ~~management~~insurance ~~determines~~and itother isexpenses ~~more~~incurred ~~likely~~by ~~than~~the ~~not~~Company and ~~that~~are ~~all~~recorded ~~deferred~~on ~~tax~~an ~~asset~~accrual ~~could not be recognized~~basis.

~~11.~~Costs incurred ~~EMPLOYEE~~for ~~BENEFITS~~maintenance after the online games are available for marketing are expensed when incurred and are included in product cost of revenues.

~~The full-time employees~~ Cost of ~~the~~revenue ~~Company~~also ~~and~~includes ~~its~~business ~~subsidiary~~tax ~~that are incorporated in the PRC are entitled to staff welfare benefits, including medical care, unemployment insurance~~ and ~~pension~~surcharges ~~benefits.~~with ~~The Company is required to accrue for these benefits based on percentages of 10~~5.60%, 1%tax ~~and~~rate. ~~12%~~Business oftax ~~the local employees’ average salaries in accordance with the relevant regulations,~~ and tosurcharges ~~conduct~~for ~~contributions to~~ the ~~state-sponsored~~year ~~medical plans, unemployment insurance and pension benefits. For the years~~ ended December 31, ~~2011~~2012 and ~~2010,~~2011 ~~total~~were ~~amounts expensed for such employee benefits amounted to~~ $~~195~~1,~~513~~717 and $~~111~~0,~~679,~~ respectively. ~~The PRC government is responsible for the medical benefits and ultimate pension liability to these employees.~~

~~F-16~~Research and development expenses

12For software development costs, including online games, to be sold or marketed to customers, the Company expenses software development costs incurred prior to reaching technological feasibility. ~~RELATED~~Once ~~PARTY~~a ~~TRANSACTIONS~~software ~~AND~~product ~~BALANCES~~has reached technological feasibility, all subsequent software costs for that product are capitalized until that product is released for marketing. After an online game is released, the capitalized product development costs are amortized over the estimated product life. To date, the Company has essentially completed its software development concurrently with the establishment of technological feasibility. As of December 31, 2012, no costs have been capitalized.

~~The~~Research and ~~Company is in a~~ development ~~stage~~expenses ~~and~~consist ~~has~~primarily noof ~~revenue~~outsourced toresearch ~~date~~and ~~during~~development ~~the period from its inception to December 31~~expenses, ~~2011. CixiYide Auto Company (the “CixiYide”)~~payroll, adepreciation ~~company~~charge ~~97% owned by the Company’s director~~ and ~~95.4%~~other overhead ~~ultimate~~expenses ~~shareholder Mr. Zhilian Chen, provides continuous financial support~~ for ~~Beijing Sntaro and Ningbo Sntaro’s business and operation. By~~ the ~~end~~development of ~~2010, CixiYide and Mr. Zhilian Chen have provided a loan of $4,846,184. During~~ the ~~year ended December 31 2011, CixiYide made an additional loan of $1,358,273 to the~~ Company.’s Atproprietary ~~December 5~~games, ~~2011, Mr. Zhilian Chen invests $4,626,818 (RMB 29,260,000) into Beijing Sntaro as capital injection which is used to pay back the borrowing from CixiYide. The total amount due to CixiYide~~ and ~~Mr.~~are ~~Zhilian~~recorded ~~Chen~~on isan ~~$1,577,639~~accrual ~~as of December 31, 2011~~basis.

~~Santaro~~Sales HK signed a loan agreement with Mr. Zhilian Chen on August 2, 2010 for $310,000 for the payment of Ningbo Sntaro’s registered Paid-In-Capital in accordance with Chinese legal requirements. Santaro HK received this loan in September 2010. This loan decreased US$159,993 in this year and ~~at December 31, 2011; the carrying amount of this loan was $150,007 accordingly.~~marketing expenses

InSales and marketing expenses consist primarily of salary, advertising and promotion fee, and other expense incurred by the Company’s sales and marketing personnel. Sales and marketing expenses are recorded on an accrual basis. Sales and marketing expenses for the year ended December 31, ~~2011,~~2012 ~~Mr.~~and ~~Zhilian~~2011 ~~Chen~~were ~~provided~~ $4362,~~713~~145 ~~loan~~and to$ ~~the~~21,280, ~~Ningbo Sntaro~~respectively.

AsGain ofon ~~December~~deconsolidation ~~31, 2011, the total balance~~ of ~~loans from CixiYide and Mr. Zhilian Chen was $1,732,359. The loans are unsecured and interest free, payable on demand, and were outstanding.~~subsidiary

InThe Company ~~the~~accounts ~~year~~for ~~ended~~deconsolidation ~~December~~of ~~31,~~subsidiaries ~~2011,~~in ~~Mr.~~accordance ~~Mingyang~~with LiASC ~~who~~Topic is810 ~~the~~“Consolidation”. ~~company’s~~In ~~CEO,~~accordance with ~~provided~~ASC aTopic $7810,~~856~~ ~~loan~~the toparent ~~Beijing~~shall ~~Sntaro~~account ~~and~~for ~~provided~~the adeconsolidation ~~$5,554 loan to Ningbo Sntaro. As~~ of ~~December~~a ~~31,~~subsidiary ~~2011,~~by ~~the~~recognizing ~~total~~a ~~balance~~gain ofor ~~loans~~loss ~~from~~in ~~Mr.~~net ~~Mingyang~~income attributable Lito ~~was~~the ~~$13~~parent,~~410. The~~ ~~loans~~measured ~~are~~as ~~unsecured~~the ~~and~~difference ~~interest free, payable on demand, and were outstanding.~~between:

13a. The ~~LEASE~~aggregate ~~COMMITMENTS~~of all of the following:

1. The ~~Company~~fair ~~has~~value ~~entered into operating lease arrangements mainly relating to its office premises which will all end in December 26, 2014. Future minimum lease payments for non-cancelable operating leases as~~ of ~~December~~any ~~31,~~consideration ~~2011 are as follows:~~received;

	Rental
Fiscal Year	Commitments
2012		$	523,864
2013			515,455
2014			509,728
Total		$	1,549,047

2. The fair value of any retained non-controlling investment in the former subsidiary at the date the subsidiary is deconsolidated;

~~Total~~3. The ~~rental~~carrying ~~expenses~~amount ~~are~~of ~~US$264,445~~any ~~and~~non-controlling ~~US$196,654~~interest ~~for~~in the ~~years~~former ~~ended~~subsidiary ~~December~~(including ~~31,~~any ~~2011~~accumulated ~~and~~other ~~2010,~~comprehensive ~~respectively~~income attributable to the non-controlling interest) at the date the subsidiary is deconsolidated.

~~F-17~~b. The carrying amount of the former subsidiary’s assets and liabilities.

~~14. SALE OF COMMON STOCK AND WARRANTS~~F-13

On June 27, 2011, the Company entered into Subscription Agreements with certain institutional investors (collectively, the “Buyers”) to sell an aggregate of one million shares of its common stock, and warrants to purchase a total of five hundred thousand shares of its common stock (the “Warrants”) to the Buyers for gross proceeds of $2,000,000 before deducting fees and expenses. The Warrants mature in three years and have a strike price of $5.00 per share.Income taxes

OnIncome taxes ~~August~~are ~~29,~~accounted ~~2011,~~for under the ~~Company~~asset ~~entered~~and ~~into~~liability ~~Subscription~~method. ~~Agreements~~Deferred ~~with~~tax ~~certain~~assets ~~institutional~~and ~~investors~~liabilities ~~(collectively,~~are recognized for the ~~"Buyers")~~future tax consequences attributable to ~~sell~~differences anbetween ~~aggregate~~the offinancial ~~one~~statement ~~million~~carrying ~~three~~amounts ~~hundred~~of ~~seventy~~existing ~~five~~assets ~~thousand~~and ~~(1,375,000)~~liabilities and ~~shares~~their ofrespective ~~its~~tax ~~common~~bases ~~stock,~~and tax loss and ~~warrants~~tax tocredit ~~purchase~~carry aforwards. ~~total~~Deferred oftax ~~six~~assets ~~hundred~~and ~~eighty~~liabilities ~~seven~~are ~~thousand~~measured ~~five~~using enacted ~~hundred~~tax ~~(687,500)~~rates ~~shares~~expected ofto ~~its~~apply ~~common~~to ~~stock~~taxable (income in the ~~"Warrants")~~years in which those temporary differences are expected to ~~the~~be ~~Buyers~~recovered or ~~for~~settled. ~~gross~~The ~~proceeds~~effect on deferred tax assets and liabilities of ~~$2,750,000~~a ~~before~~change ~~deducting~~in ~~fees~~tax ~~and~~rates ~~expenses~~is ~~and~~recognized ~~excluding~~in the ~~proceeds,~~consolidated ifstatements of ~~any,~~income ~~from~~in the ~~exercise~~period ofthat includes the ~~Warrants~~enactment date. ~~The~~A ~~Warrants~~valuation ~~mature~~allowance inis ~~three~~provided ~~years~~to ~~and~~reduce ~~have~~the aamount ~~strike~~of ~~price~~deferred tax assets if it is considered more likely than not that some portion or all of ~~$5.00~~the ~~per~~deferred ~~share~~tax assets will not be realized.

~~All~~ASC 740 ~~warrants~~clarifies ~~were~~the ~~evaluated~~accounting for ~~liability~~uncertain ~~treatment~~tax positions and ~~were~~requires ~~determined~~that an entity recognizes in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to beclassify ~~equity~~interest ~~instruments~~and penalties related to unrecognized tax benefits, if and when required, as a component of income tax expense in the consolidated statements of income.

~~Above~~Recent issued ~~two~~accounting ~~transactions have been completed as of December 31, 2011.~~pronouncements

~~15.~~The Company ~~CONTINGENCIES~~does not believe any recently issued but not yet effective accounting standards, if currently adopted, would have a material effect of the consolidated financial position, results of operation and cash flows.

In July 2006, the Ministry of Industry and Information Technology of the PRC, or MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular5. ~~The~~EARNINGS ~~MIIT~~(LOSS) PER Circular reiterated the regulations on foreign investment in telecommunications businesses, which require foreign investors to set up foreign-invested enterprises and obtain a business operating license for Internet content provision to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds an Internet content provision license is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China. Furthermore, the relevant trademarks and domain names that are used in the value-added telecommunications business must be owned by the local Internet content provision license holder. Due to a lack of interpretative materials from the regulator, it is unclear what impact the MIIT Circular will have on us or the other Chinese Internet companies that have adopted the same or similar corporate and contractual structures as ours.SHARE

OnThe FASB’s ~~September~~accounting ~~28,~~standard ~~2009,~~for ~~the~~earnings ~~General Administration of Press and Publications, or the GAPP, the National Copyright Administration~~ (~~hereinafter referred to as “NCA”~~loss), ~~and~~per ~~National~~share ~~Office~~requires presentation of ~~Combating~~basic ~~Pornography~~ and ~~Illegal~~diluted ~~Publications~~earnings (~~hereinafter~~loss) ~~referred~~per toshare asin ~~“NOCPIP”)~~conjunction ~~jointly~~with ~~published~~ the ~~“Stipulations on ‘Three Provisions’ ”~~ disclosure of the ~~State~~methodology ~~Council~~used ~~and~~in ~~the~~computing ~~Relevant~~such ~~Interpretations~~earnings of(loss) ~~the~~per ~~State~~share. ~~Commission~~Basic ~~Office~~earnings (loss) ~~for~~per ~~Public~~share ~~Sector~~excludes ~~Reform~~dilution and ~~the~~is ~~Further~~computed ~~Strengthening~~by ofdividing ~~the~~income ~~Administration~~available ofto ~~Pre-examination~~common stockholders ~~and~~by ~~Approval of Online games and~~ the ~~Examination~~weighted ~~and~~average ~~Approval~~common ofshares ~~Imported~~outstanding ~~Online~~during ~~games~~the ~~(Xin~~period. ~~Chu~~Diluted ~~Lian~~earnings ~~[2009] No. 13~~(loss), orper share ~~Circular~~takes ~~13.~~into ~~Circular~~account ~~13 restates~~ the ~~general~~potential ~~principle~~dilution ~~espoused in recently promulgated regulations~~ that ~~foreign~~could ~~investment~~occur isif ~~not~~securities ~~permitted~~or inother ~~online~~contracts ~~game operating businesses in China. According~~ to ~~the~~issue ~~Article~~common IVstock ofwere ~~Circular~~exercised and ~~13,~~converted ~~foreign~~into ~~investors~~common ~~are~~stock. ~~prohibited~~Warrants ~~from~~issued ~~participating~~on inJune ~~online game operating businesses via wholly owned~~27, ~~equity~~2011 ~~joint~~and ~~venture~~August ~~or cooperative joint venture investments in China~~29, ~~and~~2011 ~~from~~to ~~controlling~~purchase ~~and participating in such businesses directly or indirectly through contractual or technical support arrangements. In the event of~~ a ~~violation~~total of ~~these provisions~~1, ~~GAPP shall~~187,500 inshares ~~conjunction~~of common ~~with~~stock ~~the relevant government authorities~~ of the ~~PRC,~~Company ~~investigate~~were ~~and~~not ~~handle~~included ~~the same~~ in ~~accordance with~~ the ~~law.~~diluted Incalculation ~~serious~~since ~~cases,~~our ~~the~~common ~~relevant~~stock’s ~~licenses~~average ~~and~~market ~~registrations~~price ~~shall~~did not beexceed ~~revoked. However, due to~~ the ~~lack~~warrant ofexercise ~~a detailed interpretation of Circular 13, it is not yet clear how it will be implemented~~price. ~~Moreover,~~In ~~Circular 13 was issued solely by GAPP~~addition, ~~NCA and NOCPIP, instead of being jointly issued by~~ the ~~publication~~Company ~~administration~~had ~~authorities~~a ~~and~~net ~~other~~loss ~~government~~during ~~authorities~~current ~~which~~period ~~are~~so indilutive ~~charge~~securities ofwould decrease ~~the~~negative ~~related~~EPS ~~business operations, like the Ministry of Commerce, or the MOFCOM,~~ and ~~the~~have ~~MIIT,~~an ~~and~~anti-dilutive ~~the scope, implementation and enforcement of Circular 13 from the views of the above mentioned other authorities remain uncertain~~effect.

~~F-18~~The following is a reconciliation of the basic and diluted earnings (loss) per share computations for the years ended December 31, 2012 and 2011:

In the opinion of Han Kun Law Offices, our PRC legal counsel, subject to the interpretation and implementation of the MIIT Circular and Circular 13, the ownership structure of Ningbo Sntaro and Beijing Sntaro and our contractual arrangements with Beijing Sntaro and its shareholders comply with all existing PRC laws, rules and regulations. However, in the opinion of our PRC legal counsel, there are substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations and there may be changes and other developments in the PRC laws and regulations or their interpretations. Accordingly, we cannot assure you that Chinese government authorities will ultimately take a view that is consistent with the opinion of our PRC legal counsel.

	2012			2011

Net loss for basic and diluted earnings (loss) per share	$	(5,098,131	)	$	(3,774,468	)

Weighted average shares used in basic and diluted computation		69,875,000			68,470,959
Earnings (loss) per share:
Basic and diluted	$	(0.07	)	$	(0.06	)

If6. ~~the~~OTHER past or current ownership structures, contractual arrangements and businesses of our company Beijing Sntaro is found to be in violation of any existing or future PRC laws or regulations, including the MIIT Circular and Circular 13, the relevant supervisory authorities would have broad discretion in dealing with such violations, including but not limited to: revoking our business and operating licenses; levying fines; confiscating our income or the income of Beijing Sntaro; shutting down our servers or blocking our website; imposing conditions or requirements with which we may not be able to comply; requiring us to restructure the relevant ownership structure, operations or contractual arrangements; restricting or prohibiting our use of the proceeds from our public offering to finance our business and operations in China; and taking other regulatory or enforcement actions that could be harmful to our business.RECEIVABLES

16Other receivables of $10,592 and $156,268 as of December 31, 2012 and 2011 consisted of cash advances given to certain employees for use during business operations and are recognized as general and administration expenses when expenses are incurred. ~~SUBSEQUENT~~It ~~EVENT~~also includes certain rental deposit.

Management has considered all events occurring through the date the financial statements have been issued, and has determined that there are no such events that are material to the financial statements, or all such material events have been fully disclosed.F-14

~~F-19~~7. PROPERTY AND EQUIPMENT

~~ITEM~~Property and ~~9. CHANGES~~equipment INare ~~AND~~summarized ~~DISAGREEMENTS~~as ~~WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.~~follows:

On January 10, 2011, the Registrant dismissed its independent registered public accounting firm, Child, Van Wagoner & Bradshaw, PLLC (“CVB”).

	December 31,			December 31,
	2012			2011

Computer equipment	$	670,268		$	414,922
Furniture and fixtures		221,666			190,417
Leasehold improvement		216,373			214,721
		1,108,307			820,060
Less: Accumulated depreciation		(551,423	)		(325,648	)

Property and equipment, net	$	556,884		$	494,412

~~CVB~~Depreciation expenses ~~audited the Registrant’s financial statements as of February 28, 2010 and~~ for the ~~period~~years ofended December 3031, ~~2009~~2012 ~~(date of inception) to February 28, 2010. The report of CVB dated March 23, 2010 on those financial statements did not contain an adverse opinion or a disclaimer of opinion,~~ and ~~was~~2011 ~~not~~were ~~qualified or modified as to uncertainty~~$223,138 ~~audit scope, or accounting principles. However, the Registrant’s audited financial statements contained in its registration statement on Form S-1 as of February 28, 2010~~ and ~~for the period of December 30~~$87,605 ~~2009 (date of inception) to February 28, 2010, contained an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern~~respectively.

~~During~~8. ~~the~~LONG ~~period~~TERM from the Registrant’s inception on December 30, 2009 through its fiscal year ended February 28, 2010 and subsequent interim period through January 10, 2011, there were no disagreements with the Registrant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of CVB, would have caused CVB to make reference to the subject matter of such disagreements in connection with its report on the Company's financial statements. INVESTMENT

~~Effective~~On ~~November~~July 318, ~~2010~~2011, ~~the~~Santaro ~~Company~~HK ~~engaged~~and ~~Bernstein~~a &non-related company, ~~Pinchuk~~New Select Group Limited (BVI), ~~LLP~~established a legal entity named Outlets Internet Sale Limited. Each party holds a 50% interest in Outlets Internet Sale Limited that was formed for the purpose of the development of an online outlet business. Management has classified the investment as a joint venture and will account for the ~~Registrant’s~~investment ~~independent~~under ~~registered~~the ~~public~~equity-method of accounting ~~firm~~since each investor may participate, directly or indirectly, in the overall management of the joint venture and has joint control in accordance with the provisions of Accounting Standards Codification (ASC) 323 “Investments - Equity Method and Joint Ventures”. There was no activity during the year ended December 31, 2012.

~~For~~9. ~~the~~DECONSOLIDATION OF ~~period~~FL ~~from November 3, 2010 through January 10, 2011 the Company engaged both Child, Van Wagoner & Bradshaw, PLLC and Bernstein & Pinchuk, LLP.~~NETWORK

~~During~~FL network was incorporated on March 9, 2009 by Beijing Santaro and a third party FL media where Beijing Santaro held 70% ownership interest. On October 12, 2010, Beijing Santaro completed purchasing the ~~period~~rest ~~from~~30% interest of FL Network who became the ~~Registrant~~Company’s wholly ~~inception~~held onsubsidiary through December 3031, ~~2009~~2012. ~~through~~On ~~its~~December ~~fiscal~~31, ~~year~~2012, ~~ended~~an ~~February~~independent 28third party bought 100% equity interest of FL network with a cash consideration of approximately US$15,800 ~~2010~~(RMB100,000). ~~and~~The ~~subsequent~~deconsolidation ~~interim~~of ~~periods~~FL ~~prior~~network towas accounted for in accordance with ASC Topic 810 “Consolidation”. The Company recognized a gain of approximately $15,800 upon deconsolidation of FL network, which has been recorded as a gain on deconsolidation of subsidiaries in the ~~Registrant~~Company’s ~~engagement~~consolidated statements of ~~Bernstein~~income &and ~~Pinchuk,~~comprehensive ~~LLP,~~income. This gain represents the ~~Registrant~~difference ~~did~~between ~~not~~the ~~consult~~fair ~~Bernstein~~value &of ~~Pinchuk,~~consideration ~~LLP~~received ~~regarding:~~and the carrying amount of the former subsidiary's assets and liabilities as of the date of deconsolidation. The operating activities of FL network in 2012 are insignificant.

~~(i)~~10. ~~The~~OTHER ~~application~~PAYABLES AND ofACCRUED accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant's financial statements, and either a written report was provided to the Registrant or oral advice was provided that the new accountant concluded was an important factor considered by the Registrant in reaching a decision as to the accounting, auditing or financial reporting issue; orEXPENSES

~~(ii)~~Other payables ~~Any~~and ~~matter~~accrued ~~that~~expenses ~~was~~consist ~~either the subject~~ of ~~a disagreement (as defined in paragraph (a)(1)(iv) and~~ the ~~related instructions to Item 304 of Regulation S-K) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).~~ following:

	December 31,		December 31,
	2012		2011

Other payables	$	447,147	$	454,117
Accrued salaries		20,829		78,917

Total	$	467,976	$	533,034

Effective April 14, 2011, the practice of Bernstein & Pinchuk LLP (“B&P”), independent registered public accounting firm of Santaro Interactive Entertainment Company (the “Company”), entered into a joint venture agreement with Marcum LLP and formed Marcum Bernstein & Pinchuk LLP (“MarcumBP”) in a transaction pursuant to which B&P merged its China operations into MarcumBP and certain of the professional staff of B&P joined MarcumBP as employees of MarcumBP. Accordingly, effective April 14, 2011, B&P effectively resigned as the Company's independent registered public accounting firm and MarcumBP became the Company's independent registered public accounting firm. B&P’s resignation was communicated to the Company on April 18, 2011 via letter dated April 14, 2011, The change in the Company's independent registered public accounting firm was approved by the Audit Committee of the Company's Board of Directors on April 22, 2011.F-15

~~The~~Other Payable ~~audit reports~~ of ~~B&P~~$447,147 onas ~~the financial statements~~ of ~~the Company for the two fiscal years ended~~ December 31, ~~2010~~2012 ~~and~~consisted ~~2009~~of ~~did~~the ~~not~~interest-free ~~contain~~loan ~~an adverse opinion or a disclaimer~~ of ~~opinion~~ $237,488 ~~and~~from ~~were~~Ningbo ~~not~~Jufeng ~~qualified~~Textile ~~or modified as to uncertainty~~Co., ~~audit scope or accounting principles. However~~Ltd, ~~the~~a ~~audit~~third ~~reports~~party of ~~B&P for~~ the ~~financial~~Company. ~~statements~~Other Payable of ~~the~~$454,117 ~~Company~~ as of December 31, ~~2010~~2011 ~~and~~consisted of ~~2009~~the ~~indicated~~interest-free ~~uncertainty~~loan asof to$235,675 ~~the~~from ~~Company’s~~Ningbo ~~ability~~Jufeng toTextile ~~continue~~Co., asLtd. aThe ~~going~~loan ~~concern~~is ~~due~~unsecured, topayable ~~the~~on ~~significant~~demand, ~~losses from operations~~ and ~~the~~is ~~working capital deficiency~~outstanding.

~~During~~11. ~~the~~INCOME ~~Company’s~~TAX two fiscal years ended December 31, 2010 and 2009 and through April 14, 2011, there were no disagreements with B&P on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of B&P would have caused it to make reference to the subject matter of the disagreement in their reports on the Company’s financial statements for such years, and no there were no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.EXPENSES

~~During~~The Company ~~the years ended December 31, 2010~~ and ~~2009~~its ~~and~~subsidiaries ~~through~~file ~~April~~income ~~14,~~tax ~~2011,~~returns the Company did not consult with Marcum BP on (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-Kseparately.

~~ITEM~~The United ~~9A. CONTROLS~~States ~~AND~~of ~~PROCEDURES.~~America

~~Evaluation~~Santaro Interactive Entertainment Company is incorporated in the State of ~~Disclosure~~Nevada ~~Controls~~in the U.S., and ~~Procedures~~is subject to a gradual U.S. federal corporate income tax of 15% to 35%. The State of Nevada does not impose any corporate state income tax.

WeBritish Virgin maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were not effective as of the end of the period covered by this report due to a material weakness in internal control over financial reporting as discussed in Management's Report on Internal Control over Financial Reporting referred to below.Islands

37Santaro holdings Ltd (the “SHL”) was incorporated in the British Virgin Islands on December 2, 2009 (“SHL”). Under the current laws of the British Virgin Islands, SHL is not subject to tax on income or capital gains. In addition, upon payments of dividends by SHL, no British Virgin Islands withholding tax is imposed.

~~Changes in Internal Controls~~Hong Kong

WeSantaro Investments, ~~have~~Ltd., ~~also~~was ~~evaluated~~incorporated ~~our~~in ~~internal~~Hong ~~controls~~Kong ~~for~~on ~~financial~~January ~~reporting~~27, ~~and~~2010. ~~there~~Santaro ~~have~~HK ~~been~~did ~~significant~~not ~~changes~~earn inany ~~our~~income ~~internal~~that ~~controls~~was ~~during~~derived in Hong Kong for the ~~most~~year ~~recent~~ended ~~fiscal~~December ~~quarter~~31, or2012 inand ~~other~~therefore ~~factors~~was ~~that~~not ~~could~~subject ~~materially~~to ~~affect,~~Hong orKong isProfits ~~reasonably~~Tax. ~~likely~~The topayments ~~materially~~of ~~affect~~dividends ~~internal~~by Hong ~~control~~Kong ~~over~~companies ~~financial~~are ~~reporting~~not subject to any Hong Kong withholding tax.

~~Limitations on the Effectiveness of Controls~~PRC

~~Our management~~Ningbo Sntaro, ~~including~~Beijing ~~our~~Sntaro ~~CEO~~ and ~~CFO,~~FL ~~does~~Network ~~not~~(only ~~expect~~through ~~that~~December ~~our~~31, ~~Disclosure~~2012) ~~Controls~~were ~~and internal controls will prevent~~ all ~~errors~~organized ~~and~~under ~~all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that~~ the ~~objectives~~laws of the ~~control~~People’s Republic ~~system are met. Further, the design~~ of aChina ~~control~~(“PRC”) ~~system~~which ~~must~~are ~~reflect~~subject ~~the~~to ~~fact~~Enterprise ~~that~~Income ~~there~~Tax ~~are~~(“EIT”) ~~resource~~on ~~constraints, and~~ the ~~benefits~~taxable ofincome ~~controls~~as ~~must~~reported in ~~be considered relative to~~ their ~~costs.~~respective ~~Because~~statutory offinancial ~~the~~statements ~~inherent~~adjusted ~~limitations~~ in ~~all~~accordance ~~control~~with ~~systems,~~the noEnterprise ~~evaluation~~Income ofTax ~~controls~~Law. ~~can~~Pursuant ~~provide~~to ~~absolute~~the ~~assurance~~PRC Income ~~that~~Tax ~~all control issues and instances of fraud~~Laws, ~~if any, within~~ the Company ~~have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty,~~ and ~~that~~subsidiary ~~breakdowns~~are ~~can~~subject ~~occur~~to ~~because~~EIT ofat a ~~simple~~statutory ~~error~~rate ~~or mistake. Additionally, controls can be circumvented by the individual acts~~ of ~~some persons, by collusion of two or more people, or by management or board override of the control~~25%.

~~The~~Deferred Tax design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.Assets

~~CEO~~In assessing the realization of deferred tax assets, the Company considers projected future taxable income and ~~CFO~~tax ~~Certifications~~planning strategies in making its assessment, as of December 31, 2012 and 2011, for PRC income tax purposes.

38Ningbo Sntaro had deferred tax assets of approximately $1,666,526 and $519,763 as of December 31, 2012 and 2011, which consisted of a tax loss carry-forward of $6,630,454 and $2,046,088, respectively. Ningbo Sntaro had no other temporary differences as of December 31, 2012 and 2011. Management determines it is more likely than not that all deferred tax asset could not be recognized, so full allowances were provided as of December 31, 2012 and 2011. The deferred tax assets begin to expire in 2016.

~~Appearing~~Beijing Sntaro ~~immediately~~had ~~following~~deferred ~~the~~tax ~~Signatures~~assets ~~section~~ of ~~this~~approximately ~~report~~$2,006,076 ~~there~~and ~~are~~$1,155,274 ~~Certifications~~as of ~~the~~December ~~CEO~~31, 2012 and ~~the~~2011, ~~CFO.~~which ~~The~~consisted ~~Certifications~~of a ~~are~~tax ~~required~~loss incarry-forward ~~accordance~~of ~~with~~$8,133,000 ~~Section~~and ~~302~~$4,731,783, ofrespectively. ~~the~~Beijing ~~Sarbanes-Oxley~~Sntaro ~~Act~~had ofno ~~2002~~other ~~(the~~temporary ~~Section~~differences ~~302~~as ~~Certifications)~~of December 31, 2012 and 2011. ~~This~~Management ~~Item~~determines ofit ~~this~~is ~~report,~~more ~~which~~likely ~~you~~than ~~are~~not ~~currently~~that ~~reading~~all isdeferred ~~the~~tax ~~information~~asset ~~concerning~~could ~~the~~not ~~Evaluation~~be ~~referred~~recognized, toso infull allowances ~~the~~were ~~Section~~provided ~~302~~as ~~Certifications~~of December 31, 2012 and ~~this~~2011. ~~information~~The deferred ~~should~~tax beassets ~~read~~begin to expire in ~~conjunction~~2012. ~~with~~The ~~the~~deferred ~~Section~~tax ~~302~~assets ~~Certifications~~of ~~for~~approximately a$6,751 ~~more~~began ~~complete~~to ~~understanding~~expire in 2012, which consisted of ~~the~~a ~~topics~~tax ~~presented~~loss of $27,002 in year 2006.

FL Network had deferred tax assets of approximately $759,661 as of December 31, 2011, which consisted of tax loss carry-forwards of $3,034,520. It had no other temporary differences as of December 31, 2011. Management’s ~~Report~~determines it is more likely than not that all deferred tax asset could not be recognized, so full allowances were provided as of December 31, 2011. Since the FL network was deconsolidated on ~~Internal~~December ~~Control~~31, ~~over~~2012, ~~Financial~~deferred ~~Reporting~~tax asset was $0 as of December 31, 2012.

~~Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a~~F-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.16

~~Our~~As of ~~internal~~December ~~control~~31, ~~over~~2012 ~~financial reporting includes those policies~~ and ~~procedures~~2011, ~~that~~an ~~(i)~~aggregated ~~pertain~~valuation toallowance ~~the maintenance~~ of ~~records that~~$3, ~~in reasonable detail~~672,602 ~~accurately~~ and ~~fairly~~$2,434,698 ~~reflect~~was ~~the~~provided ~~transactions~~since ~~and~~management ~~dispositions~~determines it ofis ~~the~~more ~~assets~~likely ofthan ~~the~~not ~~Company; (ii) provide reasonable assurance~~ that ~~transactions~~all ~~are~~deferred ~~recorded~~tax asasset ~~necessary~~could tonot ~~permit~~be ~~preparation~~recognized. ofAs ~~financial~~a ~~statements~~result ~~in accordance with accounting principles generally accepted in the United States~~ of ~~America, and that receipts and expenditures of~~ the ~~Company~~100% ~~are~~reserve ~~being made only in accordance with authorizations~~ of ~~management and directors of~~ the ~~Company;~~deferred tax ~~and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition~~assets, ~~use, or disposition of~~ the ~~Company’s~~effective ~~assets~~tax ~~that~~rate ~~could~~differs ~~have~~from ~~a material effect on~~ the ~~financial~~statutory ~~statements~~tax rate.

~~Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements~~12. ~~All~~EMPLOYEE internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.BENEFITS

~~Our~~The full-time ~~management~~employees ~~assessed~~of the ~~effectiveness~~Company ofand ~~our~~its ~~internal~~subsidiary ~~control~~that ~~over~~are ~~financial~~incorporated ~~reporting~~in asthe ofPRC ~~December~~are ~~31,~~entitled ~~2011.~~to ~~Based~~staff onwelfare ~~our assessment~~benefits, including wemedical ~~believe that~~care, asunemployment ofinsurance ~~December~~and ~~31,~~pension ~~2011,~~benefits. ~~the~~The ~~accounting~~Company ~~department~~is ~~personnel’s~~required ~~limited~~to ~~knowledge~~accrue ~~and~~for ~~experience~~these inbenefits ~~U.S.~~based on ~~GAAP~~percentages ~~constituted~~of a10%, ~~material~~1% ~~weakness,~~and ~~particularly~~12% asof the ~~Company~~local ~~transitions~~employees’ ~~from~~average ~~its~~salaries ~~status~~in asaccordance ~~smaller~~with ~~reporting~~the ~~company~~relevant regulations, and to ~~accelerated~~conduct ~~filer. In~~contributions ~~order~~ to ~~improve and strengthen~~ the ~~Company’s~~state-sponsored ~~internal~~medical ~~control~~plans, ~~over~~unemployment ~~financial~~insurance ~~reporting~~and ~~pursuant~~pension ~~to U~~benefits.S. ~~GAAP,~~For ~~beginning in~~ the ~~first~~years ~~quarter~~ended December of31, 2012 weand ~~will~~2011, ~~hire~~total ~~additional~~amounts ~~personnel~~expensed ~~with~~for ~~sufficient~~such ~~knowledge~~employee ~~and~~benefits ~~experience~~amounted into ~~U.S. GAAP~~$198,687 and ~~provide~~$195,513, ~~ongoing training in U~~respectively.S. The ~~GAAP~~PRC togovernment ~~existing~~is ~~personnel,~~responsible ~~including~~for ~~our Chief Financial Officer and~~ the ~~Financial~~medical ~~Controller. We~~benefits ~~will continue to monitor~~ and ~~assess~~ultimate ~~our~~pension ~~remediation~~liability ~~initiatives~~ to ~~ensure~~these ~~that the weakness in our internal control over financial reporting is remedied~~employees.

3913. RELATED PARTY TRANSACTIONS AND BALANCES

~~This~~The Company ~~annual~~is ~~report~~in ~~does~~a ~~not~~development ~~include~~stage and only has an ~~attestation~~insignificant ~~report~~amount of ~~our~~revenue ~~registered~~to ~~public~~date ~~accounting~~during ~~firm~~the ~~regarding~~period ~~internal~~from ~~control~~its ~~over~~inception (August ~~financial~~9, ~~reporting~~2006) to December 31, 2012. ~~Management~~CixiYide is a company 100% beneficially owned by Mr. Zhilian Chen, the Company’s ~~report~~Chairman and ~~was~~major ~~not~~stockholder. ~~subject~~CixiYide toprovides ~~attestation~~continuous byfinancial ~~our~~support ~~registered~~for ~~public~~Beijing ~~accounting~~Sntaro’s ~~firm~~business ~~pursuant~~and operation. By the end of 2011, CixiYide had provided loans to ~~temporary~~Beijing ~~rules~~Sntaro in the aggregate amount of $1,577,639. During the ~~Securities~~year ~~and~~ended December ~~Exchange~~31, ~~Commission~~2012, ~~that~~CixiYide ~~permit~~made usan additional loan of $957,343 to ~~provide~~Beijing ~~only~~Sntaro. ~~management’s~~The ~~report~~total inamount ~~this~~due ~~annual~~to ~~report~~CixiYide from Beijing Sntaro is $2,534,982 as of December 31, 2012.

~~The~~Santaro HK ~~design~~entered ofinto ~~any~~a ~~system~~loan ofagreement ~~controls~~with ~~also~~Mr. isZhilian ~~based~~Chen inon ~~part~~August ~~upon~~2, ~~certain~~2010 ~~assumptions~~for ~~about~~$310,000 for the ~~likelihood~~payment of ~~future~~Ningbo ~~events,~~Sntaro’s registered ~~and there can be no assurance that any design will succeed~~ paid-in-capital ~~achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes~~ in ~~conditions,~~accordance ~~or the degree of compliance~~ with ~~the~~Chinese ~~policies~~legal ~~or procedures may deteriorate~~requirements. ~~Because~~Santaro ofHK received the ~~inherent~~loan ~~limitations~~ in aSeptember ~~cost-effective~~2010. ~~control~~At ~~system~~December 31, ~~misstatements~~2012, ~~due~~the tocarrying ~~error~~amount orof ~~fraud~~the ~~may~~loan ~~occur~~was ~~and not be detected~~$150,007.

WeBy the ~~have~~end ~~also~~of ~~evaluated~~2011, ~~our~~Mr. ~~internal~~Zhilian ~~controls~~Chen ~~for~~has ~~financial~~provided ~~reporting~~loans asin the amount of $4,713 to Ningbo Sntaro. During the year ended December 31, ~~2011~~2012, ~~and~~Mr. ~~concluded~~Zhilian ~~that~~Chen made ~~the~~an ~~Company~~additional ~~had~~loan ~~the~~of ~~following~~$15,869 ~~weakness:~~to ~~the~~Ningbo ~~Company’s~~Sntaro. ~~accounting~~The ~~department~~total ~~personnel~~amount ~~have~~due ~~limited~~to ~~knowledge~~Mr. ~~and~~Zhilian ~~experience~~Chen infrom ~~U.S.~~Ningbo ~~GAAP. In~~Sntaro ~~order~~was $20,582 toas ~~improve~~of ~~and~~December ~~strengthen~~31, 2012. During the ~~Company’s~~year ~~internal~~ended ~~control~~December ~~over~~31, ~~financial~~2012, ~~reporting~~CixiYide made ~~pursuant~~an additional loan in the amount of $1,687,750 to UNingbo Sntaro.S. ~~GAAP,~~The wetotal ~~are~~amount ~~going~~due to ~~undertake~~CixiYide ~~the~~from ~~following~~Ningbo ~~remediation~~Sntaro ~~initiatives:~~was $1,687,750 as of December 31, 2012.

·As of ~~Hiring~~December ~~additional~~31, ~~personnel~~2012, ~~with~~the ~~sufficient~~total ~~knowledge~~balance ~~and~~of ~~experience~~loans indue ~~U.S.~~to ~~GAAP;~~CixiYide and ·Mr. ~~Providing~~Zhilian ~~ongoing~~Chen ~~training~~from inthe Ucompany was $4,393,321.S. ~~GAAP~~The toloans are ~~existing~~unsecured ~~personnel,~~and ~~including~~interest ~~our~~free, ~~Chief~~payable ~~Financial~~on ~~Officer~~demand, and ~~the~~are ~~Financial Controller~~outstanding.

~~These~~During the ~~new~~year ~~remediation~~ended ~~initiatives~~December ~~will~~31, be2011, ~~put~~Mr. ~~into~~Mingyang ~~place~~Li, ~~from~~the Company’s CEO, provided a loan in the ~~first~~amount ~~quarter~~of $7,856 to Beijing Sntaro and a loan in the amount of ~~2012~~$5,554 to Ningbo Sntaro. WeThese ~~will~~loans ~~continue~~increased toby ~~monitor~~$8,689 and ~~assess~~$10,980 ~~our~~during ~~remediation~~the ~~initiatives~~year toended ~~ensure~~December 31, ~~that~~2012, respectively. As of December 31, 2012, the ~~weakness~~total inbalance ~~our~~of ~~internal~~loans ~~control~~from ~~over~~Mr. ~~financial~~Mingyang ~~reporting~~Li iswas ~~remedied~~$33,079. The loans are unsecured and interest free, payable on demand, and are outstanding.

~~ITEM 9B~~14. ~~OTHER~~ ~~INFORMATION~~LEASE COMMITMENTS

~~None~~The Company has entered into operating lease arrangements mainly relating to its office premises which will end on December 26, 2014. Future minimum lease payments for non-cancelable operating leases as of December 31, 2012 are as follows:

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

	Rental
Fiscal Year	Commitments

2013	$	519,421
2014		513,650

Total	$	1,033,071

~~Directors and Executive Officers~~F-17

~~The~~Total ~~Company’s~~rental ~~management~~expenses are ~~team is highly qualified~~$565,695 ~~with most members having previously worked in leading foreign or domestic online games~~ and~~/or~~ IT$264,445 ~~companies.~~for ~~The~~the ~~majority of senior staff members bring more than 10~~ years’ ~~individual~~ended ~~professional~~December ~~team~~31, ~~management~~2012 ~~experience. The Directors~~ and ~~Executive~~2011, ~~Officers responsible for the day-to-day operations of the Company are listed in the table below~~respectively.

Position	Name	Age
Chairman	Chen Zhi Lian	46
Chief Executive Officer (CEO)	Li Mingyang	35
Chief Financial Officer (CFO)	Yan Dong	30
Chief Operating Officer (COO)	Sixiao Yan	44
Marketing and Sales Manager	Jiang Baochun	34

15. SALE OF COMMON STOCK AND WARRANTS

~~Chen~~On June ~~Zhi~~27, ~~Lian~~2011, –the ~~Chairman.~~Company ~~Mr.~~entered ~~Chen~~into ~~founded~~subscription ~~Sntaro~~agreements inwith ~~2006~~certain ~~and~~institutional isinvestors ato ~~member~~sell ofan ~~the~~aggregate ~~Board~~ of ~~Directors.~~one million ~~Born in 1965~~(1,000,000) Mrshares Chen is an experienced and successful professional and has maintained several positions as Legal Representative throughout his career. Mr Chen commenced his professional career in 1985 in the supply and marketing department of aits ~~collective~~common ~~enterprise in Cixi~~stock, ~~Zhejiang~~and ~~Province.~~warrants Into ~~1991,~~purchase ~~he established~~ a ~~Sino-foreign~~total ~~joint~~of ~~venture~~five ~~Xinlian~~hundred ~~Clothing~~thousand ~~and Shoes Co.~~(500,000) ~~Ltd~~shares inof ~~Ningbo,~~its common ~~Zhejiang~~stock ~~Province, whose products were exported~~ to ~~over~~the 20buyers ~~countries. In~~for ~~2001,~~gross heproceeds ~~founded Shente Chemical Fiber Co., Ltd in Zhejiang Province. As one~~ of ~~the top hundred enterprises in Cixi City~~$2,000,000 ~~the~~before ~~company~~deducting ~~today~~fees ~~mainly~~and ~~focuses on chemical fiber production~~expenses. InThe ~~2004,~~warrants Mrmature ~~Chen invested~~ in ~~the~~three ~~largest motor sales company in Cixi City: Yide Bus Service Co., Ltd. During 2005~~ years and ~~2006,~~have hea ~~established~~strike ~~BMW~~price ~~Auto~~of ~~Sales shop, Toyota Auto Sales shop and Volkswagen Auto Sales shop~~$5.00 ~~These~~per ~~auto sales ventures now sell over 9,000 vehicles annually~~share.

40On August 29, 2011, the Company entered into subscription agreements with certain institutional investors to sell an aggregate of one million three hundred seventy five thousand (1,375,000) shares of its common stock, and warrants to purchase a total of six hundred eighty seven thousand five hundred (687,500) shares of its common stock to the buyers for gross proceeds of $2,750,000 before deducting fees and expenses and excluding the proceeds, if any, from the exercise of the warrants. The warrants mature in three years and have a strike price of $5.00 per share.

LiAll warrants ~~Mingyang~~were -evaluated ~~Chief~~for ~~Executive~~liability ~~Officer~~treatment ~~(CEO). Mr Li joined Santaro in September 2007 as CEO. His role involves many key tasks, such as strategic planning (operational~~ and ~~financial),~~were ~~setting~~determined ~~up and modernizing the management system, managing various departments and their annual budgets as well as performance and resources planning. Prior~~ to ~~joining~~be ~~Sntaro,~~equity ~~Mr Li worked from November 2006 to August 2007 for Western Union (France) and was involved in the R&D of several key projects such as the discount card program~~instruments. Mr Li began his professional working career as an intern in the Purchasing Department of France’s automobile company Renault Group in May 2005. Mr Li has a PhD from Institut European des Affaires (IEDA) in France and a Master’s Degree from INSEEC, one of the top business schools in France.

~~Ms.~~Above two ~~Yan~~transactions ~~Dong~~have -been ~~Chief~~completed ~~Financial Officer (CFO). Ms. Yan Dong graduated from Ji Nan University with the bachelor degree in 2003. Her first job is in Lament Brown Financial Consultant Co.~~ as anof ~~assistant.~~December ~~From 2005 to 2009~~31, ~~she worked for Erisson Great China Corporation as an accounting assistant manager~~2011. ~~Before she enjoined Santaro in July 2010, she worked for Bayer Science China Corporation as accounting manager.~~

Mr16. Sixiao Yan - Chief Operating Officer (COO). Mr. Sixiao Yan was born Jan. 18, 1967. He graduated from the mechanic and engineering department of Taiwan Chiao Tung University with Bachelor degree in 1990 and graduated from the material and engineering institute, Taiwan Qinghua University with Master degree in 1993. After he graduated, his first job is in the Hi-Sincerity Micro-Electricity Corporation as an engineer in 1993-1995. He also worked for Bate Computer co. and Jia Lei Information company as an engineer and manager respectively in 1995-1997. He worked for Air Liquide Co. Ltd as quality controller and information program planner. In 2000, He jointed the Larger Network Corporation and started his work in online game field. From that time, he has undertaken the deferent position such as game programmer game QA designer producer CEO and vice-president in the LARGER NETWORK CORPORATION.CONTINGENCIES

~~Jiang~~In July ~~Baochun~~2006, –the ~~Marketing~~Ministry of Industry and ~~Sales~~Information ~~Manager.~~Technology Mrof ~~Jiang~~the ~~has~~PRC, aor ~~strong~~MIIT, ~~background~~issued inthe Circular on Strengthening the ~~online~~Administration of ~~gaming~~Foreign ~~industry,~~Investment ~~with~~in ~~six~~and ~~years~~Operation of ~~R&D~~Value-added ~~and~~Telecommunications 5Business, ~~years~~or ofthe ~~management~~MIIT ~~experience~~Circular. HeThe ~~joined~~MIIT ~~Santaro~~Circular inreiterated the ~~November~~regulations ~~2009~~on asforeign ~~COO~~investment ~~and~~in hetelecommunications isbusinesses, ~~also~~which ~~responsible~~require ~~for~~foreign ~~the~~investors ~~marketing~~to set up foreign-invested enterprises and ~~sales~~obtain ofa ~~its~~business ~~two~~operating ~~key~~license ~~online~~for ~~games:~~Internet ~~Three~~content ~~Kingdoms~~provision ~~Online~~to ~~and~~conduct UUany ~~World~~value-added telecommunications business in China. ~~Prior~~ toUnder ~~joining~~the ~~Sntaro~~MIIT Circular, Mra ~~Jiang~~domestic ~~was~~company ~~responsible~~that ~~for~~holds ~~the~~an ~~operations~~Internet ofcontent ~~two~~provision ~~games~~license –is ~~Kusomania~~prohibited ~~and~~from leasing, ~~The~~transferring ~~Lord~~or ofselling ~~Dragon~~the atlicense ~~Beijing~~to ~~Huanyu~~foreign ~~Kongjian~~investors ~~Tech~~in ~~Co.~~any ~~Ltd.~~form, Inand ~~February~~from ~~2007~~providing any assistance, Mrincluding ~~Jiang~~providing resources, ~~was~~sites ~~employed~~or byfacilities, ~~Beijing~~to ~~Xinyu~~foreign ~~Brother~~investors ~~Tech~~that Coconduct value-added telecommunications business illegally in China. Furthermore, the ~~Ltd~~relevant ~~where~~trademarks heand ~~negotiated~~domain ~~business~~names ~~deals~~that ~~for~~are ~~overseas~~used ~~web~~in ~~games. Mr~~the ~~Jiang’s~~value-added ~~professional~~telecommunications ~~career~~business ~~also~~must ~~includes~~be ~~stints~~owned atby ~~Shanghai~~the ~~Ruanjin~~local Internet ~~Tech~~content Coprovision license holder., ~~Ltd;~~Due ~~Dalian~~to ~~Zhuoao~~a ~~Tech~~lack ~~Co.,~~of ~~Ltd;~~interpretative ~~Beijing~~materials ~~Kingsoft~~from ~~Co.~~the regulator, ~~Ltd;~~it ~~and~~is ~~Guoji~~unclear ~~(Zhongshan)~~what ~~Electronic~~impact the ~~Co.,~~MIIT ~~Ltd. Mr~~Circular ~~Jiang~~will ~~holds~~have aon ~~bachelor’s~~us ~~degree~~or inthe ~~manufacturing~~other ~~and~~Chinese ~~automation~~Internet ~~from~~companies ~~Jilin~~that ~~University~~have adopted the same or similar corporate and contractual structures as ours.

41On September 28, 2009, the General Administration of Press and Publications, or the GAPP, the National Copyright Administration (hereinafter referred to as “NCA”), and National Office of Combating Pornography and Illegal Publications (hereinafter referred to as “NOCPIP”) jointly published the “Stipulations on ‘Three Provisions’ ” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Online games and the Examination and Approval of Imported Online games (Xin Chu Lian [2009] No. 13), or Circular 13. Circular 13 restates the general principle espoused in recently promulgated regulations that foreign investment is not permitted in online game operating businesses in China. According to the Article IV of Circular 13, foreign investors are prohibited from participating in online game operating businesses via wholly owned, equity joint venture or cooperative joint venture investments in China, and from controlling and participating in such businesses directly or indirectly through contractual or technical support arrangements. In the event of a violation of these provisions, GAPP shall, in conjunction with the relevant government authorities of the PRC, investigate and handle the same in accordance with the law. In serious cases, the relevant licenses and registrations shall be revoked. However, due to the lack of a detailed interpretation of Circular 13, it is not yet clear how it will be implemented. Moreover, Circular 13 was issued solely by GAPP, NCA and NOCPIP, instead of being jointly issued by the publication administration authorities and other government authorities which are in charge of the related business operations, like the Ministry of Commerce, or the MOFCOM, and the MIIT, and the scope, implementation and enforcement of Circular 13 from the views of the above mentioned other authorities remain uncertain.

Three of the directors, Mr. David Cohen, Mr. Ji Chen and Mr. Yanjie Shao are independent directors. Mr. David Cohen and Mr. Yanjie Shao comprise the Audit Committee (Mr. Cohen Chairman); Mr. David Cohen and Mr. Ji Chen comprise the Compensation Committee (Mr. Ji Chen Chairman); and Mr. Ji Chen and Mr. Yanjie Shao comprise the Nomination Committee (Mr. Yanjie Shao Chairman).F-18

~~Mr.~~In the ~~Yanjie~~opinion ~~Shao~~of -Han ~~Independent~~Kun ~~Director.~~Law ~~Mr.~~Offices, ~~Yanjie~~our ~~Shao~~PRC ~~born~~legal ~~Sept. 20~~counsel, ~~1939,~~subject Heto ~~graduated~~the ~~from~~interpretation and implementation of the ~~Liaoning~~MIIT ~~Finance~~Circular and ~~college~~Circular 13, the ownership structure of Ningbo Sntaro and Beijing Sntaro and our contractual arrangements with ~~economic~~Beijing ~~bachelor~~Sntaro and ~~degree~~its inshareholders ~~1965.~~comply Hewith ~~worked~~all asexisting ~~the~~PRC ~~director~~laws, ofrules and regulations. However, in the ~~department~~opinion of ~~technical~~our ~~transformation~~PRC legal counsel, there ~~headquarters~~are ofsubstantial ~~Industrial~~uncertainties ~~and~~regarding ~~Commercial~~the ~~Bank~~interpretation ofand ~~China~~application ~~from~~of ~~1984~~current toor ~~1988.~~future ~~From~~PRC ~~1988~~laws toand ~~1997,~~regulations and ~~Mr.~~there ~~Shao~~may ~~was~~be ~~promoted~~changes toand ~~president~~other ofdevelopments in the ~~Beijing~~PRC ~~branch~~laws ofand ~~ICBC~~regulations or their interpretations. ~~After~~Accordingly, ~~his~~we ~~employment~~cannot give atassurance ~~ICBC,~~that Hethe ~~serviced~~Chinese ingovernment ~~Shanghai~~authorities ~~Pudong~~will ~~Development~~ultimately ~~Bank~~take asa view that is consistent with the ~~Vice-Chairman.~~opinion Heof ~~retired~~our inPRC legal ~~2004~~counsel.

~~Mr.~~If the Jipast ~~Chen~~or -current ~~Independent~~ownership ~~Director. Mr.~~structures, Jicontractual ~~Chen~~arrangements ~~was~~and ~~born~~businesses ~~March~~of ~~16,~~our ~~1952.~~company HeBeijing ~~graduated~~Sntaro ~~from~~is ~~Beijing~~found ~~Normal~~to ~~University~~be in ~~with~~violation of any existing or future PRC laws or regulations, including the ~~bachelor~~MIIT ~~degree~~Circular and Circular 13, the relevant supervisory authorities would have broad discretion in ~~1976~~dealing with such violations, including but not limited to: revoking our business and operating ~~graduated~~licenses; ~~from~~levying fines; confiscating our income or the income of Beijing ~~Administrative~~Sntaro; ~~College~~shutting down our servers or blocking our website; imposing conditions or requirements with ~~master~~which ~~degree~~we inmay ~~1998.~~not ~~From~~be ~~1988~~able to ~~1995~~comply; requiring us to restructure the relevant ownership structure, ~~Mr.~~operations ~~Chen~~or ~~works~~contractual asarrangements; ~~chief~~restricting ~~editor~~or prohibiting our use of the ~~Beijing~~proceeds ~~Youth~~from ~~Daily.~~our ~~From~~public offering ~~1995~~to ~~until~~finance ~~the~~our ~~present,~~business ~~Mr.~~and ~~Chen~~operations ~~provided~~in ~~services~~China; ~~for~~and ~~Beijing~~taking ~~Star~~other ~~Group~~regulatory ~~Corporation~~or asenforcement ~~the~~actions ~~Company’s~~that ~~vice-president~~could be harmful to our business.

Mr17. ~~David~~SUBSEQUENT Cohen - Independent Director. David Cohen is a licensed Attorney who has been a Member of the New York State Bar Association for the last 25 years. For the last 5 years he has been a sole practitioner with a general business law practice with a specialty in litigation and creditors’ issues. Previously, David managed the bankruptcy practice at Herzfeld & Rubin, P.C. and prior to that was a partner at Cohen & Lippman, LLP a law firm with primarily a business law practice. From 2001 to 2004, David Cohen has served as an independent Director of Laidlaw Global Corporation, a Financial Holding company with multiple subsidiaries while the Company was listed on the American Stock Exchange and for a time on the OTC Bulletin-Board. In that function, he served as an independent Director and Member of the Audit Committee and the Compensation Committee. Prior to becoming a lawyer, Mr. Cohen was a Senior Executive for an Aviation company headquartered in Vienna, Austria. Earlier Mr. Cohen served in the United States military in a communication unit based in Germany. Mr. Cohen is a Graduate of New York Law School.EVENT

~~KEY~~Management has ~~EMPLOYEES~~ considered all events occurring through the date the financial statements have been issued, and has determined that there are no such events that are material to the financial statements, or all such material events have been fully disclosed.

~~Fu Qiang~~ F- Deputy Program Director. Fu Qiang graduated from Peking University and earned a Bachelor's degree in Biotechnology. Since 2000, Fu Qiang has had 10 years of software development experience, and is familiar with industrial process and system architecture. In 2004, Fu Qiang joined Beijing Dawawa Tech Co. Ltd, and participated in the development of “Magic Forest”( MMORPG). Subsequent to “Magic Forest”, Fu Qiang has had an additional 6 years of R&D experience with MMORPG, and has become familiar with several Game Engine such as OGRE, Unreal, Torque, etc. and has design a proprietary MMORPG Game Engine.19

FuITEM ~~Qiang~~9. ~~worked~~CHANGES inIN ~~the~~AND ~~Game~~DISAGREEMENTS ~~College~~WITH asACCOUNTANTS ~~director~~ON ofACCOUNTING ~~online~~AND ~~game~~FINANCIAL ~~department, responsible for development of game training course system and teacher training work.~~DISCLOSURE

FuOn ~~Qiang~~January ~~joined~~10, ~~Santaro~~2011, asthe ~~Vice~~Registrant ~~Program~~dismissed ~~Director~~its inindependent registered ~~2010, and~~public isaccounting ~~responsible~~firm, ~~for~~Child, ~~the~~Van RWagoner &D ofBradshaw, ~~its~~PLLC ~~online game: 108 Warriors~~(“CVB”).

42CVB audited the Registrant’s financial statements as of February 28, 2010 and for the period of December 30, 2009 (date of inception) to February 28, 2010. The report of CVB dated March 23, 2010 on those financial statements did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles. However, the Registrant’s audited financial statements contained in its registration statement on Form S-1 as of February 28, 2010 and for the period of December 30, 2009 (date of inception) to February 28, 2010, contained an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern.

~~Dong~~During ~~Rui~~the -period ~~Deputy~~from ~~General~~the ~~Manager~~Registrant’s ~~and~~inception ~~Game~~on ~~Producer. Dong~~December 30, ~~Rui~~2009 ~~has~~through ~~worked~~its infiscal ~~the~~year ~~Gaming~~ended ~~Industry~~February ~~since 2000~~28, ~~has~~2010 11and ~~years~~subsequent ofinterim ~~R&D~~period ~~experience~~through ~~and~~January 10, ~~years~~2011, ofthere ~~management~~were ~~experience.~~no disagreements ~~Dong~~with ~~Rui~~the ~~worked~~Registrant inon ~~Kingsoft~~any ~~Ltd,~~matter ~~Game~~of ~~College,~~accounting ~~and~~principles ~~Coslight~~or ~~Ltd~~practices, ~~and~~financial ~~was~~statement ~~responsible~~disclosure, ~~for~~or ~~JianWang~~auditing scope ~~(MMORPG)~~or procedures, ~~YeSe~~which ~~(MMORPG)~~disagreements, ~~JuLong~~if ~~(MMORPG)~~not resolved to the satisfaction of CVB, ~~etc. Dong~~would ~~Rui~~have ~~joined~~caused ~~Santaro~~CVB asto ~~program~~make ~~manager~~reference to the subject matter of such disagreements in ~~2010,~~connection ~~and~~with isits ~~responsible~~report ~~for~~on the ~~MMORPG~~Company's ~~named~~financial ~~“108 Warriors”~~statements.

LiEffective ~~Xuepeng~~November -3, ~~Chief~~2010, ~~Design Officer. Li Xuepeng joined~~ the ~~gaming~~Company ~~industry~~engaged inBernstein ~~2005, has 6 years of R~~&~~D experience~~ Pinchuk, ~~and~~LLP ~~worked for Giant,Mop，~~as ~~well~~the asRegistrant’s ~~for~~independent ~~Perfect~~registered ~~World~~public asaccounting ~~Master of Planning~~firm. Li Xuepeng has extensive experience in game design and team management. Li Xuepeng participated in development of “zhizun”, “tumo”, “King of kings 3” ( MMORPG). Li Xuepeng joined in Santaro as Planning Director, and is responsible for the R&D of “108 Warriors”.

~~Song~~For ~~Hang - Chief Art Officer. Song Hang joined~~ the ~~gaming~~period ~~industry~~from inNovember ~~2003~~3, ~~has~~ 82010 ~~years~~through ofJanuary ~~R&D experience~~10, ~~and~~2011 the ~~worked~~Company ~~for~~engaged ~~Ladder~~both ~~Tech Co.~~Child, ~~Ltd.;~~Van ~~Possodility~~Wagoner ~~Space~~& ~~Co.~~Bradshaw, ~~Ltd.;~~PLLC and ~~Cross~~Bernstein ~~Light~~& ~~Tech Co.~~Pinchuk, ~~Ltd~~LLP. as Art Director. Song Hang participated in the development of “Warrior Epic” and “Galaxy”. Song Hang has extensive project experience, and excellent design and management capabilities. Song Hang joined Santaro as Art Director, and is responsible for the R&D of “108 Warriors”.

~~Yang~~During ~~Jian~~the -period ~~Chief~~from ~~Technology Officer. Yang Jian joined~~ the ~~gaming~~Registrant’s ~~industry~~inception inon ~~2003~~December 30, ~~has~~ 82009 ~~years~~through ofits ~~R&D~~fiscal ~~experience,~~year ~~and~~ended ~~has~~February ~~worked for IDN; Ladder Tech Co.~~28, ~~Ltd;~~2010 ~~Tsinghua Unisplendour Tech Co., Ltd;~~ and ~~Cross~~subsequent ~~Light~~interim ~~Tech~~periods ~~Co.,~~prior ~~Ltd.~~to ~~Yang Jian participated in~~ the ~~development~~Registrant’s engagement of aBernstein ~~variety~~& ofPinchuk, ~~online~~LLP, ~~game productions. Yang Jian has extensive project experience and mastered~~ the ~~core~~Registrant ~~technology~~did ofnot ~~development~~consult inBernstein ~~related fields. Yang Jian joined Santaro as Program Director, and is responsible for the R~~&D ~~of “108 Warriors”. Yang Jian graduated from Tianjin Normal University~~Pinchuk, ~~Computer~~LLP ~~Science and Technology.~~regarding:

~~Involvement~~(i) The application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Registrant's financial statements, and either a written report was provided to the Registrant or oral advice was provided that the new accountant concluded was an important factor considered by the Registrant in ~~Certain~~reaching ~~Legal~~a ~~Proceedings~~decision as to the accounting, auditing or financial reporting issue; or

To the best of our knowledge, none of our directors or executive officers, during the past ten years, has been involved in any legal proceeding of the type required to be disclosed under applicable SEC rules, including:29

1.(ii) Any ~~petition~~matter ~~under~~that ~~the~~was ~~Federal~~either ~~bankruptcy laws or any state insolvency law being filed by or against, or a receiver, fiscal agent or similar officer being appointed by a court for~~ the ~~business~~subject ~~or property~~ of ~~such~~a ~~person,~~disagreement (as ordefined ~~any partnership~~ in ~~which~~paragraph ~~he was~~ (a)(1)(iv) ~~general~~and ~~partner~~the atrelated orinstructions ~~within~~to ~~two~~Item ~~years~~304 ~~before the time~~ of ~~such~~Regulation ~~filing,~~S-K) or ~~any~~a ~~corporation~~reportable orevent ~~business~~(as ~~association~~described in ofparagraph ~~which~~(a)(1)(v) heof ~~was~~Item an304 ~~executive officer at or within two years before the time~~ of ~~such~~Regulation ~~filing;~~S-K).

43Effective April 14, 2011, the practice of Bernstein & Pinchuk LLP (“B&P”), independent registered public accounting firm of Santaro Interactive Entertainment Company (the “Company”), entered into a joint venture agreement with Marcum LLP and formed Marcum Bernstein & Pinchuk LLP (“MarcumBP”) in a transaction pursuant to which B&P merged its China operations into MarcumBP and certain of the professional staff of B&P joined MarcumBP as employees of MarcumBP. Accordingly, effective April 14, 2011, B&P effectively resigned as the Company's independent registered public accounting firm and MarcumBP became the Company's independent registered public accounting firm. B&P’s resignation was communicated to the Company on April 18, 2011 via letter dated April 14, 2011, The change in the Company's independent registered public accounting firm was approved by the Audit Committee of the Company's Board of Directors on April 22, 2011.

2.The ~~Conviction~~audit inreports of B&P on the financial statements of the Company for the two fiscal years ended December 31, 2010 and 2009 did not contain an adverse opinion or a ~~criminal~~disclaimer ~~proceeding~~of opinion, and were not qualified or ~~being~~modified aas ~~named~~to ~~subject~~uncertainty, audit scope or accounting principles. However, the audit reports of B&P for the financial statements of the Company as of December 31, 2010 and 2009 indicated uncertainty as to the Company’s ability to continue as a ~~pending~~going ~~criminal~~concern ~~proceeding~~due ~~(excluding~~to ~~traffic~~the ~~violations~~significant losses from operations and ~~other~~the ~~minor~~working ~~offenses);~~capital deficiency.

3.During ~~Being~~ the ~~subject~~Company’s oftwo ~~any~~fiscal ~~order,~~years ~~judgment,~~ended orDecember ~~decree~~31, 2010 ~~not~~and ~~subsequently~~2009 ~~reversed,~~and ~~suspended~~through orApril ~~vacated~~14, ~~of any court of competent jurisdiction~~2011, ~~permanently~~there orwere ~~temporarily~~no ~~enjoining~~disagreements ~~him~~with ~~from,~~B&P oron otherwise limiting, the following activities: i. Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any ~~other~~matter ~~person regulated by the Commodity Futures Trading Commission, or an associated person~~ of ~~any~~accounting ofprinciples ~~the foregoing,~~ or ~~as an investment adviser~~practices, financial ~~underwriter,~~statement ~~broker or dealer in securities~~disclosure, or asauditing anscope ~~affiliated person, director~~ or ~~employee of any investment company~~procedures, ~~bank,~~which ~~savings and loan association or insurance company~~disagreements, orif ~~engaging~~not inresolved orto ~~continuing any conduct or practice in connection with such activity; ii. Engaging in any type of business practice; or iii. Engaging in any activity in connection with~~ the ~~purchase~~satisfaction ~~or sale~~ of ~~any~~B&P would ~~security~~have orcaused ~~commodity~~it orto inmake ~~connection~~reference ~~with~~to ~~any violation of Federal or State securities laws or Federal commodities laws; 4. Being~~ the subject ofmatter ~~any order, judgment or decree, not subsequently reversed, suspended or vacated,~~ of ~~any Federal or State authority barring, suspending or otherwise limiting for more than 60 days~~ the ~~right~~disagreement ~~of such person to engage~~ in ~~any~~their ~~activity~~reports ~~described~~on inthe ~~paragraph~~Company’s ~~(3)(i)~~financial statements offor ~~this section, or to be associated with persons engaged in any~~ such ~~activity; 5. Being found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any Federal or State securities law~~years, and ~~the~~no ~~judgment~~there inwere ~~such~~no ~~civil~~reportable ~~action~~events orwithin ~~finding by~~ the ~~Commission~~meaning ~~has~~set ~~not~~forth ~~been subsequently reversed, suspended, or vacated; 6. Being found by a court of competent jurisdiction~~ in aItem civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; 7. Being the subject of, or 304(a)(1)(v) ~~party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation~~ of: i. Any Federal or State securities or commodities law or regulation; or ii. Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent ceaseRegulation S-~~and-desist order, or removal or prohibition order; or~~K.

44During the years ended December 31, 2010 and 2009 and through April 14, 2011, the Company did not consult with Marcum BP on (i) the application of accounting principles to a specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements; or (iii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

	iii.	Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
	8.	Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

~~Audit~~ITEM ~~Committee~~9A. ~~and~~CONTROLS ~~Charter~~AND PROCEDURES

~~Mr.~~Evaluation ~~David Cohen and Mr. Yanjie Shao, both independent directors~~ of ~~the~~Disclosure ~~Company,~~Controls ~~comprise our Audit Committee. Our audit committee is responsible for: (1) selection~~ and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of our audit committee charter is filed as an exhibit to this report.Procedures

~~Audit~~We ~~Committee~~maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial ~~Expert~~Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

~~None~~Changes ofin ~~our~~Internal ~~directors~~Control orover ~~officers~~Financial ~~has~~Reporting ~~the~~and Remediation qualifications or experience to be considered a financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.Activities

~~Code~~The Company, with the assistance of ~~Ethics~~our independent internal controls consultant, has for some time now proceeded to remediate and improve the deficiencies of our internal controls identified in last 10-K and 10-Qs. The Company has continued to improve its internal controls over financial reporting in the areas as described below:

We1) ~~have~~Improving ~~adopted~~knowledge ~~a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing~~ and ~~promote~~quality ~~honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting~~ of ~~code~~financial ~~violations;~~department ~~and~~staff ~~provide accountability for adherence to the code. A copy of the code of ethics is filed as an exhibit to this report.~~continuously;

~~Disclosure~~2) ~~Committee~~Improving the design and ~~Charter~~documentation related to multiple levels of review over financial statements included in our quarterly reports;

We3) ~~have~~Expanding ~~a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of~~ the ~~committee~~design ~~is to provide assistance to the Chief Executive Officer~~ and ~~the~~assessment ~~Chief~~test ~~Financial~~work ~~Officer~~over ~~in fulfilling their responsibilities regarding~~ the ~~identification~~monitoring ~~and~~function ~~disclosure~~ of ~~material~~entity ~~information~~level ~~about us and the accuracy, completeness and timeliness of our financial reports. A copy of the disclosure committee charter is filed as an exhibit to this report.~~controls;

454) Enhancing documentation retention policies over test work related to our continuous management assessments of internal control effectiveness; and

~~ITEM~~5) ~~11. EXECUTIVE~~Expanding ~~COMPENSATION~~documentation practices and policies related to various key controls to provide support and audit trails for both internal management assessment as well as external auditor testing.

~~The~~Since ~~following~~December ~~table~~31, ~~sets~~2011, ~~forth~~the ~~information~~Company ~~with~~has ~~respect~~completed the necessary documentation to ~~compensation~~our ~~paid~~internal bycontrols with the ~~registrant~~assistance toof ~~its~~independent ~~officers~~internal ~~during~~controls ~~the~~consulting ~~last~~firm. ~~two~~In ~~completed~~the ~~fiscal~~year ~~years~~ ended at December 31, ~~2010~~2012, with the assistance of independent internal controls consulting firm, we also completed documentation of sales & revenue process since there was certain revenue generated from newly launched game. Further, our internal control consultants conducted extensive internal controls testing in the following areas: equity grants and ~~December~~stock 31administration, ~~2011~~financial reporting (including period end reconciliation, ~~respectively~~and financial reporting), IT general and application controls (security and access, capturing and processing information, end user computing, data backup and restoration). The Company confirms that all deficiencies noted during the testing of effectiveness of internal controls have been fully remediated by December 31, 2012.

Executive Officer Compensation Table
Name and principal position (a)	Year (b)	Salary (US$) (c)	Bonus (US$) (d)	Stock Awards (US$) (e)	Option Awards (US$) (f)	Non-Equity Incentive Plan Compensation (US$) (g)	Nonqualified Deferred Compensation Earnings (US$) (h)	All Other Compensation (US$) (i)	Total (US$) (j)
Mr. Zhilian Chen, President	2010	0	0	0	0	0	0	0	0
Mr. Zhilian Chen, President	2011	0	0	0	0	0	0	0	0
Ms. Dong Yan, CFO	2010	$46,153	0	0	0	0	0	0	$46,153
Ms. Dong Yan, CFO	2011	$46,153	0	0	0	0	0	0	$46,153
Mr. Sixiao Yan, COO	2010	$73,846	0	0	0	0	0	0	$73,846
Mr. Sixiao Yan, COO	2011	$73,846	0	0	0	0	0	0	$73,846

~~The~~Other ~~following~~than ~~table~~these ~~sets~~noted ~~forth~~changes, ~~information~~there ~~with~~has ~~respect~~been tono ~~compensation~~change ~~paid~~in our byinternal ~~the~~control ~~registrant~~over tofinancial ~~its~~reporting ~~directors~~(as defined in Rule 13a-15(f) under the Exchange Act) during the ~~fiscal~~most ~~year~~recent fiscal quarter ended December 31, ~~2011~~2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Director Compensation
Name (a)	Fees Earned or Paid in Cash (US$) (b)	Stock Awards (US$) (c)	Option Awards (US$) (d)	Non-Equity Incentive Plan Compensation (US$) (e)	Change in Pension Value and Nonqualified Deferred Compensation Earnings (US$) (f)	All Other Compensation (US$) (g)	Total (US$) (h)
Mr. Zhilian Chen	0	0	0	0	0	0	0
Mr. Xiongbing Zhong	0	0	0	0	0	0	0
Mr. Mingyang Li	$69,230	0	0	0	0	0	$69,230
Mr. David Cohen	$10,000	0	0	0	0	0	$10,000
Mr. Yanjie Shao	0	0	0	0	0	0	0
Mr. Jie Chen	0	0	0	0	0	0	0

Limitations on the Effectiveness of Controls

46Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.

~~All~~The ~~compensation~~design ~~received~~of byany ~~our~~system ~~officers~~of controls also is based in part upon certain assumptions about the likelihood of future events, and ~~directors~~there ~~has~~can ~~been~~be ~~disclosed~~no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~There~~CEO ~~are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers~~ and ~~directors.~~CFO Certifications

~~Long~~Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-~~Term~~Oxley Act ~~Incentive~~of ~~Plan~~2002 ~~Awards~~(the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

~~We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.~~32

~~Indemnification~~Management’s Report on Internal Control over Financial Reporting

~~Under~~Our ~~our~~management ~~Bylaws, we may indemnify an officer or director who~~ is ~~made~~responsible afor ~~party~~establishing toand ~~any~~maintaining adequate ~~proceeding,~~internal ~~including~~control aover ~~lawsuit,~~financial ~~because of his position~~reporting, ifas hesuch ~~acted~~term inis ~~good~~defined ~~faith and~~ in aExchange ~~manner~~Act heRule ~~reasonably believed to be in our best interest~~13a-15(f). WeThe ~~may~~Company’s internal ~~advance~~control ~~expenses~~over ~~incurred~~financial inreporting ~~defending a proceeding. To the extent that the officer or director~~ is ~~successful on the merits in~~ a ~~proceeding~~process asdesigned to ~~which~~provide hereasonable isassurance to beour ~~indemnified,~~management weand ~~must~~board ~~indemnify~~of directors ~~him~~regarding ~~against~~the ~~all~~reliability ~~expenses~~of ~~incurred,~~financial ~~including~~reporting ~~attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually~~ and ~~reasonably incurred in defending~~ the ~~proceeding,~~preparation ~~and~~of if the ~~officer~~financial orstatements ~~director~~for isexternal ~~judged~~purposes in ~~liable,~~accordance ~~only~~with byaccounting aprinciples ~~court~~generally ~~order.~~accepted ~~The~~in ~~indemnification is intended to be to~~ the ~~fullest~~United ~~extent~~States ~~permitted by the laws~~ of ~~the State of Nevada~~America.

~~Regarding~~Our ~~indemnification~~internal ~~for~~control ~~liabilities~~over ~~arising~~financial ~~under~~reporting ~~the~~includes ~~Securities~~those policies ~~Act~~and procedures that (i) pertain to the maintenance of ~~1933~~records that, ~~which~~in ~~may~~reasonable bedetail, ~~permitted~~accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to ~~directors~~permit orpreparation ~~officers~~of ~~under~~financial ~~Nevada~~statements ~~law~~in accordance with accounting principles generally accepted in the United States of America, weand that receipts and expenditures of the Company are ~~informed~~being ~~that,~~made only in ~~the~~accordance ~~opinion~~with authorizations of management and directors of the ~~Securities~~Company; and ~~Exchange~~(iii) ~~Commission,~~provide ~~indemnification~~reasonable isassurance ~~against~~regarding ~~public~~prevention ~~policy~~or timely detection of unauthorized acquisition, use, asor ~~expressed~~disposition inof the ~~Act~~Company’s ~~and~~assets ~~is,~~that ~~therefore,~~could ~~unenforceable~~have a material effect on the financial statements.

~~ITEM~~Because 12of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. ~~SECURITY~~ ~~OWNERSHIP~~All OFinternal ~~CERTAIN~~control ~~BENEFICIAL~~systems, ~~OWNERS~~no ~~AND~~matter ~~MANAGEMENT~~how ~~AND~~well ~~RELATED~~designed, ~~STOCKHOLDER~~have ~~MATTERS~~inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~The~~Our ~~registrant~~management ~~has~~assessed nothe ~~compensation~~effectiveness ~~plans~~of ~~(including~~our ~~individual~~internal ~~compensation~~control over ~~arrangements~~financial reporting as of December 31, 2012. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) ~~under~~in ~~which~~Internal ~~equity~~Control-Integrated ~~securities~~Framework. Based on our assessment, we believe that, as of December 31, 2012, the ~~registrant~~Company’s ~~are~~internal ~~authorized~~control ~~for~~over ~~issuance~~financial reporting was effective based on those criteria.

~~The~~This ~~following~~annual ~~table~~report ~~sets~~does ~~forth,~~not asinclude ofan ~~the~~attestation ~~date~~report of ~~this Annual Report on Form 10-K, the total number of shares owned beneficially by each of~~ our ~~directors,~~registered ~~officers~~public ~~and~~accounting ~~key~~firm ~~employees,~~regarding ~~individually~~internal ~~and~~control asover afinancial ~~group,~~reporting. ~~and~~Management’s ~~the~~report ~~present~~was ~~owners~~not ofsubject to 5%attestation orby ~~more of~~ our ~~total~~registered ~~outstanding~~public ~~shares.~~accounting ~~The~~firm ~~stockholders~~pursuant ~~listed~~to ~~below~~temporary ~~have~~rules ~~direct ownership~~ of ~~his/her~~the ~~shares~~Securities and ~~possess~~Exchange ~~voting~~Commission ~~and~~that permit ~~dispositive~~us ~~power~~to ~~with~~provide ~~respect~~only tomanagement’s ~~the~~report ~~shares~~in this annual report.

4733

(1) Title of Class	(2) Name and address of beneficial owner	(3) Amount and nature of beneficial ownership	(4) Percent of class
Common Stock	Morning Express Limited PO Box 957, Offshore Incorporations Centre, Road Town, Tortola	34,073,000	48.763%
Common Stock	Dong Yan 24-201 Yang Zhuang Xiao Qu, Shijingshan, Beijing	100	0.000%
Common Stock	Li Mingyang Room 2-3-2, Xiao He Xi Lu Road No. 84 Shen He District, Liaoning Province Shenyang Cit	500,000	0.716 %
Common Stock	Yan Sixiao Room 4F, Gate No.32, Hu Shan Street, No.28, Taoyuan County, Yangmei Town, Taiwan	350,000	0.5 %
Common Stock	Zhong Xiongbing Room 601, Building No.8, Zong Lv Yuan Lane No.1, Hui Jing Xin Cheng, Guang Yuan Dong Lu Street, Guangzhou City	3,200,000	4.580%
All Officers & Directors		4,050,100	5.796 %

The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 139B. ~~CERTAIN~~ ~~RELATIONSHIPS~~OTHER ~~AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE~~INFORMATION

~~The Company is in a development stage and has had no revenue from the period of inception (December 30, 2009) to December 31, 2011~~None. CixiYide Auto Company (the “CixiYide”), a company 97% owned by the Company’s director Mr. Zhilian Chen, provides continuous financial support for Beijing Sntaro and Ningbo Sntaro’s business and operation. By the end of 2010, CixiYide and Mr. Zhilian Chen have provided a loan of $4,846,184. During the year ended December 31 2011, CixiYide made an additional loan of $1,358,273 to the Company. At December 5, 2011, Mr. Zhilian Chen invests $4,626,818 (RMB 29,260,000) into Beijing Sntaro as capital injection which is used to pay back the borrowing from CixiYide. The total amount due to CixiYide and Mr. Zhilian Chen is $1,577,639 as of December 31, 2011.

48ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

~~Santaro~~Directors Investments, LTD, a Hong Kong company, signed a loan agreement with Mr. Zhilian Chen on August 2, 2010 for $310,000 for the payment of Ningbo Sntaro’s registered Paid-In-Capital in accordance with Chinese legal requirements. Santaro Investments, LTD received this loan in September 2010. During fiscal year 2011, this loan decreased by $159,993 and atExecutive ~~December 31, 2011, the carrying amount of this loan was $150,007 accordingly.~~Officers

InThe ~~the~~Company’s ~~year~~management ~~ended~~team ~~December~~is ~~31,~~highly ~~2011~~qualified, Mrwith most members having previously worked in leading foreign or domestic online games and/or IT companies. ~~Zhilian~~The ~~Chen~~majority ~~provided~~of ~~$4,713~~senior ~~loan~~staff members bring more than 10 years’ individual professional team management experience. Executive Officers who are responsible for day-to-day operations of the ~~Ningbo~~Company ~~Sntaro~~are listed in the table below.

As of December 31, 2011, the total balance of loans from CixiYide and Mr. Zhilian Chen was $1,732,359. The loans are unsecured and interest free, payable on demand, and were outstanding.

Position	Name	Age
Chief Executive Officer (CEO)	Mingyang Li	36
Chief Financial Officer (CFO)	Yan Dong	31

InMingyang ~~the~~Li ~~year~~- ~~ended~~Chief ~~December~~Executive ~~31,~~Officer ~~2011,~~(CEO). Mr. Li ~~Mingyang~~joined LiBeijing ~~who~~Sntaro isin ~~the~~September ~~company’s~~2007 as CEO,. ~~provided~~His arole $7involves many key tasks,~~856~~ ~~loan~~such toas ~~Beijing~~strategic ~~Santaro~~planning (operational and financial), ~~provided~~setting aup $5and modernizing the management system,~~554~~ ~~loan~~managing various departments and their annual budgets as well as performance and resources planning. Prior to ~~Ningbo~~joining Sntaro., AsMr Li worked from November 2006 to August 2007 for Western Union (France) and was involved in the R&D of ~~December~~several ~~31,~~key ~~2011,~~projects such as the ~~total~~discount ~~balance~~card program. Mr. Li began his professional working career as an intern in the Purchasing Department of ~~loans~~France’s ~~from~~automobile company Renault Group in May 2005. Mr. Li ~~Mingyang~~has Lia ~~was~~PhD ~~$13,410. The~~from ~~loans~~Institut ~~are~~European ~~unsecured~~des Affaires (IEDA) in France and ~~interest~~a ~~free,~~Master’s ~~payable~~Degree onfrom ~~demand~~INSEEC, ~~and~~one ~~remain~~of ~~outstanding~~the top business schools in France.

~~ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES~~34

Ms. Yan Dong - Chief Financial Officer (1CFO). ~~Audit~~Ms. Yan ~~Fees~~Dong graduated from Ji Nan University with the bachelor’s degree in 2003. Her first job was in Lament Brown Financial Consultant Co. as an assistant. From 2005 to 2009, she worked for Erisson Great China Corporation as an accounting assistant manager. Before she enjoined Santaro in July 2010, she worked for Bayer Science China Corporation as accounting manager.

~~The~~Board ~~aggregate fees billed for each~~ of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:Directors

~~2011 $112~~Our Board of Directors is comprised of five members. Mr. Zhilian Chen,~~500~~ Mr. Mingyang Li, and Mr. Xiongbing Zhong are executive directors of the Company, with Mr. Chen as Chairman. Mr. David Cohen and Mr. Ji Chen are independent directors. Mr. David Cohen serves as Chairman of the Audit Committee; Mr. David Cohen and Mr. Ji Chen comprise the Compensation Committee (Mr. Ji Chen as Chairman); and Mr. Ji Chen is the only member of the Nomination Committee.

~~2010 $107~~Zhilian Chen - Chairman. Mr. Chen founded Beijing Sntaro in 2006 and is a member of the Board of Directors. Born in 1965,~~575~~ Mr. Chen is an experienced and successful businessman and has maintained several positions as Legal Representative throughout his career. Mr Chen commenced his professional career in 1985 in the supply and marketing department in Cixi, Zhejiang Province. In 1991, he established a Sino-foreign joint venture Xinlian Clothing and Shoes Co., Ltd in Ningbo, Zhejiang Province, whose products were exported to over 20 countries. In 2001, he founded Shente Chemical Fiber Co., Ltd in Zhejiang Province. As one of the top hundred enterprises in Cixi City, the company today mainly focuses on chemical fiber production. During 2005 and 2006, he worked at the BMW Auto Sales shop, Toyota Auto Sales shop and Volkswagen Auto Sales shop. These auto sales ventures now sell over 9,000 vehicles annually.

~~2009 $46~~Mr. Ji Chen - Independent Director. Mr. Ji Chen was born in 1952. He graduated from Beijing Normal University with the bachelor degree in 1976 and graduated from Beijing Administrative College with master degree in 1998. From 1988 to 1995,~~482~~ Mr. Chen worked as chief editor of the Beijing Youth Daily. From 1995 until the present, Mr. Chen provided services for Beijing Star Group Corporation as the vice-president.

~~(2)~~Mr. ~~Audit~~David Cohen -~~Related~~ ~~Fees~~Independent Director. David Cohen is a licensed attorney who has been a member of the New York State Bar Association for the last 25 years. For the last 5 years he has been a sole practitioner with a general business law practice with a specialty in litigation and creditors’ issues. Previously, David managed the bankruptcy practice at Herzfeld & Rubin, P.C. and prior to that was a partner at Cohen & Lippman, LLP a law firm with primarily a business law practice. From 2001 to 2004, David Cohen has served as an independent Director of Laidlaw Global Corporation, a Financial Holding company with multiple subsidiaries while the Company was listed on the American Stock Exchange and for a time on the OTC Bulletin-Board. In that function, he served as an independent Director and Member of the Audit Committee and the Compensation Committee. Prior to becoming a lawyer, Mr. Cohen was a Senior Executive for an Aviation company headquartered in Vienna, Austria. Earlier Mr. Cohen served in the United States military in a communication unit based in Germany. Mr. Cohen was graduated from New York Law School and holds a J.D. degree.

There is no fee billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph.35

~~(3)~~Zhong ~~Tax~~Xiongbing ~~Fees~~- Excutive Director. Mr. Zhong worked for Zhong Shan technology school as a teacher in Guang Dong province from 1984 to 1989. After then, during 1989 and 1997 Mr. Zhong did some business in Guang Hua commercial firm in Guang Dong province. From 1997 to 2005, Mr. Zhong took the responsible of general manager for Guang Dong Free Land movie studio. Prior to joining Sntaro, Mr. Zhong was general manager in Beijing Hua You Free Land digital musical Tech. Co. Ltd. From 2009 till now, Mr. Zhong is Beijing Sntaro Free Land’s general director.

49Mr. Zhong has a physics diploma from Shao Guan University.

~~There~~KEY ~~is no fee billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.~~EMPLOYEES

Jiang Baochun - Marketing and Sales Manager. Mr. Jiang has a strong background in the online gaming industry, with six years of R&D and 5 years of management experience. He joined Santaro in November 2009 as COO and he is also responsible for the marketing and sales of its two key online games: Three Kingdoms Online and UU World. Prior to joining Sntaro, Mr. Jiang was responsible for the operations of two games – Kusomania and The Lord of Dragon at Beijing Huanyu Kongjian Tech Co. Ltd. In February 2007, Mr. Jiang was employed by Beijing Xinyu Brother Tech Co., Ltd where he negotiated business deals for overseas web games. Mr. Jiang’s professional career also includes stints at Shanghai Ruanjin Tech Co., Ltd; Dalian Zhuoao Tech Co., Ltd; Beijing Kingsoft Co., Ltd; and Guoji (4Zhongshan) ~~All~~Electronic ~~Other~~Co., ~~Fees~~Ltd. Mr. Jiang holds a bachelor’s degree in manufacturing and automation from Jilin University.

~~There~~Fu isQiang no- ~~fee~~Deputy ~~billed~~Program Director. Fu Qiang graduated from Peking University and earned a Bachelor's degree in ~~each~~Biotechnology. ofSince ~~the~~2000, ~~last~~Fu ~~two~~Qiang ~~fiscal~~has had 10 years ~~for~~of software ~~the~~development ~~products~~experience, and ~~services~~is ~~provided~~familiar bywith ~~the~~industrial ~~principal~~process ~~accountant~~and system architecture. In 2004, ~~other~~Fu ~~than~~Qiang ~~the~~joined ~~services~~Beijing Dawawa ~~reported~~Tech Co. Ltd, and participated in ~~paragraphs~~the development of “Magic Forest” (1MMORPG). Subsequent to “Magic Forest”, Fu ~~(2)~~Qiang has had an additional 6 years of R&D experience with MMORPG, and ~~(3)~~has become familiar with several Game Engine such as OGRE, Unreal, Torque, etc. and has design a proprietary MMORPG Game Engine. Fu Qiang worked in the Game College as director of online game department, responsible for development of game training course system and teacher training work. Fu Qiang joined Santaro as Vice Program Director in 2010, and is responsible for the R&D of its online game: 108 Warriors.

(5) Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.36

~~(6)~~Dong ~~There~~Rui is- noDeputy ~~hour~~General ~~expended~~Manager onand Game Producer. Dong Rui has worked in the ~~principal~~Gaming ~~accountant’s~~Industry ~~engagement~~since to2000, ~~audit~~has ~~our~~11 ~~financial~~years ~~statements~~of ~~for~~R&D ~~the~~experience ~~most~~and ~~recent~~10 ~~fiscal~~years ~~year~~of ~~that~~management ~~were~~experience. ~~attributed~~Dong Rui toworked ~~work~~in ~~performed~~Kingsoft byLtd, ~~persons~~Game ~~other~~College, ~~than~~and ~~the~~Coslight ~~principal~~Ltd, ~~accountant’s~~and ~~full~~was ~~time~~responsible for JianWang (MMORPG), YeSe (MMORPG), JuLong (MMORPG), etc. Dong Rui joined Santaro as program manager in 2010, and ~~permanent~~is ~~employees~~responsible ~~was~~for the MMORPG named “108 Warriors”.

50Li Xuepeng - Chief Design Officer. Li Xuepeng joined the gaming industry in 2005, has 6 years of R&D experience, and worked for Giant, Mop, as well as for Perfect World as Master of Planning. Li Xuepeng has extensive experience in game design and team management. Li Xuepeng participated in development of “zhizun”, “tumo”, “King of kings 3” (MMORPG). Li Xuepeng joined in Santaro as Planning Director, and is responsible for the R&D of “108 Warriors”.

~~ITEM~~Song 15Hang - Chief Art Officer. ~~EXHIBITS~~ Song Hang joined the gaming industry in 2003, has ~~FINANCIAL~~8 ~~STATEMENT~~years ~~SCHEDULES~~of R&D experience, and worked for Ladder Tech Co., Ltd.; Possodility Space Co., Ltd.; and Cross Light Tech Co., Ltd. as Art Director. Song Hang participated in the development of “Warrior Epic” and “Galaxy”. Song Hang has extensive project experience, and excellent design and management capabilities. Song Hang joined Santaro as Art Director, and is responsible for the R&D of “108 Warriors”.

Exhibit	Document Description	Form	Date	Number	herewith
3.1	Articles of Incorporation	S-1	03-29-10	3.1
3.2	Bylaws	S-1	03-29-10	3.2
4.1	Specimen Stock Certificate	S-1	03-29-10	4.1
14.1	Code of Ethics				X
31.1	Certification of Chief Executive Officer pursuant to 15d-15(e), promulgated under
	the Securities and Exchange Act of 1934, as amended.				X
31.2	Certification of Chief Financial Officer pursuant to 15d-15(e), promulgated under
	the Securities and Exchange Act of 1934, as amended.				X
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
	906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)				X
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
	906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)				X
99.1	Audit Committee Charter				X
99.2	Disclosure Committee Charter

Family Relationships

51There are no family relationships between or among any of our current directors, executive officers or persons nominated or charged by the Company to become directors or executive officers. There are no family relationships among our officers and directors and the officers and directors of our direct and indirect subsidiaries.

~~SIGNATURES~~Involvement in Certain Legal Proceedings

~~Pursuant~~To to the ~~requirements~~best of ~~Section~~our 13knowledge, ornone ~~15(d)~~ of ~~the~~our ~~Securities~~directors ~~Exchange~~or ~~Act of 1934~~executive officers, during the ~~registrant~~past ten years, has ~~duly~~been ~~caused~~involved ~~this~~in ~~report~~any tolegal beproceeding ~~signed~~of onthe ~~its~~type ~~behalf~~required byto ~~the~~be ~~undersigned,~~disclosed ~~thereto~~under ~~duly~~applicable SEC ~~authorized.~~rules, including:

~~SANTARO~~1. ~~INTERACTIVE~~Any ~~ENTERTAINMENT~~petition ~~COMPANY~~under the Federal bankruptcy laws or any state insolvency law being filed by or against, or a receiver, fiscal agent or similar officer being appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

~~By:~~2. ~~/s/~~Conviction ~~Zhilian~~in ~~Chen~~a criminal proceeding, ~~President~~or being a named subject of a pending criminal proceeding (excluding traffic violations and ~~Director~~other minor offenses);

~~By:~~3. ~~/s/~~Being ~~Dong~~the ~~Yan~~subject of any order, ~~Chief~~judgment, ~~Financial~~or ~~Officer~~decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

~~Date:~~i. ~~March~~Acting 29as a futures commission merchant, ~~2012~~introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.37

~~BY:~~ii. ~~/s/~~Engaging ~~Zhilian~~in ~~Chen~~any type of business practice; or

~~Zhilian~~iii. ~~Chen,~~Engaging ~~President~~in ~~and~~any ~~Director~~activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

~~Date:~~4. ~~March~~Being 29the subject of any order, ~~2012~~judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (3)(i) of this section, or to be associated with persons engaged in any such activity;

~~BY:~~5. ~~/s/~~Being ~~Dong~~found ~~Yan~~by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

~~Dong~~6. ~~Yan~~Being found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, ~~Chief~~and ~~Financial~~the ~~Officer~~judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

~~Date:~~7. ~~March~~Being 29the subject of, ~~2012~~or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

52 i. Any Federal or State securities or commodities law or regulation; or

ii.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

iii.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Compliance with Section 16(a) of the Exchange Act

Based solely on review of the copies of such forms furnished to the Company, or written representations that no reports were required, the Company believes that for the year ended December 31, 2012, our directors and executive officers complied with Section 16(a) filing requirements applicable to them.

Audit Committee and Charter

Mr. David Cohen, independent directors of the Company, is the Chairman of our Audit Committee. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.

Audit Committee Financial Expert

None of our directors or officers has the qualifications or experience to be considered a financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.

Code of Ethics

We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.

Disclosure Committee and Charter

We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information with respect to compensation paid by the registrant to its officers during the last two completed fiscal years ended December 31, 2012, and December 31, 2011, respectively.

Executive Officer Compensation Table
Name and principal position (a)	Year (b)		Salary (US$) (c)			Bonus (US$) (d)		Stock Awards (US$) (e)		Option Awards (US$) (f)		Non-Equity Incentive Plan Compensation (US$) (g)		Nonqualified Deferred Compensation Earnings (US$) (h)		All Other Compensation (US$) (i)		Total (US$) (j)
Ms. Dong Yan, CFO		2012	$	28,481			0		0		0		0		0		0	$	28,481
		2011	$	46,153			0		0		0		0		0		0	$	46,153

Mr. Mingyang Li, CEO		2012	$	69,230														$	69,230
		2011	$	69,230														$	69,230

Mr. Sixiao Yan, COO		2012	$	8,173	*		0		0		0		0		0		0	$	8,173
		2011	$	73,846			0		0		0		0		0		0	$	73,846

*Mr. Sixiao Yan, our former COO, has left the Company in February 2012.

Compensation Discussion and Analysis

We intend to provide our named executive officers (as defined in Item 402 of Regulation S-K) with a competitive base salary that is in line with their roles and responsibilities.

It is not uncommon for PRC private companies to have base salaries as the sole form of compensation. The base salary level is established and reviewed based on the level of responsibilities, the experience and tenure of the individual, and the current and potential contributions of the individual.

The following table sets forth information with respect to compensation paid by the registrant to its directors during the fiscal year ended December 31, 2012.

Director Compensation
Name (a)	Fees Earned or Paid in Cash (US$) (b)		Stock Awards (US$) (c)		Option Awards (US$) (d)		Non-Equity Incentive Plan Compensation (US$) (e)		Change in Pension Value and Nonqualified Deferred Compensation Earnings (US$) (f)		All Other Compensation (US$) (g)		Total (US$) (h)
Mr. Zhilian Chen		0		0		0		0		0		0		0
Mr. Xiongbing Zhong		0		0		0		0		0		0		0
Mr. Mingyang Li	$	69,230		0		0		0		0		0	$	69,230
Mr. David Cohen	$	10,000		0		0		0		0		0	$	10,000
Mr. Ji Chen		0		0		0		0		0		0		0

All compensation received by our officers and directors has been disclosed.

There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors.

Long-Term Incentive Plan Awards

We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance.

Indemnification

Under our Bylaws, we may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.

Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

As of March 15, 2013, an aggregate of 69,875,000 shares of our common stock were outstanding. The registrant has no compensation plans (including individual compensation arrangements) under which equity securities of the registrant are authorized for issuance.

The following table sets forth, as of March 15, 2013, the total number of shares beneficially owned by each of our directors and officers, individually and as a group, and each person who is known by us to beneficially own more than 5% of our total outstanding shares.

Title of Class	Name of Beneficial Owner	Number of Shares			Percent of class

Common Stock	Zhilian Chen, Chairman		34,073,000	(1)		48.763	%

Common Stock	Yan Dong, Chief Financial Officer		100	(2)			*

Common Stock	Mingyang Li, Chief Executive Officer and Director		500,000	(3)			*

Common Stock	David Cohen, Director		20,000	(4)			*

Common Stock	Xiongbing Zhong, Director		3,200,000	(5)		4.580	%

All Officers & Directors			37,793,100			53.34	%

* Less than one percent.

(1)The shares are held through Morning Express Limited with the address of PO Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands, of which Mr. Zhilian Chen is the 100% shareholder and sole director. Mr. Chen’s address is 901C, 9th Floor, Building 4, Courtyard 1 Shangdi East Road, Haidian District, Beijing, PRC.

(2)Yan Dong’s address is 24-201 Yang Zhuang Xiao Qu, Shijingshan, Beijing, PRC.

(3) Mingyang Li’s address is Room 2-3-2, Xiao He Xi Lu Road No. 84 Shen He District, Shenyang City, Liaoning Province, PRC.

(4) David Cohen’s address is 102 Montauk Blvd PO Box 86 East Hampton, NY 11937 USA.

(5) Zhong Xiongbing’s address is Room 601, Building No.8, Zong Lv Yuan Lane No.1, Hui Jing Xin Cheng, Guang Yuan Dong Lu Street, Guangzhou City, PRC.

The Company is in a development stage and only has an insignificant amount of revenue to date during the period from its inception (August 9, 2006) to December 31, 2012. CixiYide is a company 100% beneficially owned by Mr. Zhilian Chen, the Company’s Chairman and major stockholder. CixiYide provides continuous financial support for Beijing Sntaro’s business and operation. By the end of 2011, CixiYide had provided loans to Beijing Sntaro in the aggregate amount of $1,577,639. During the year ended December 31, 2012, CixiYide made an additional loan of $957,343 to Beijing Sntaro. The total amount due to CixiYide from Beijing Sntaro is $2,534,982 as of December 31, 2012.

Santaro HK entered into a loan agreement with Mr. Zhilian Chen on August 2, 2010 for $310,000 for the payment of Ningbo Sntaro’s registered paid-in-capital in accordance with Chinese legal requirements. Santaro HK received the loan in September 2010. At December 31, 2012, the carrying amount of the loan was $150,007.

By the end of 2011, Mr. Zhilian Chen had provided loans in the amount of $4,713 to Ningbo Sntaro. During the year ended December 31, 2012, Mr. Zhilian Chen made an additional loan of $15,869 to Ningbo Sntaro. The total amount due to Mr. Zhilian Chen from Ningbo Sntaro was $20,582 as of December 31, 2012. During the year ended December 31, 2012, CixiYide made an additional loan in the amount of $1,687,750 to Ningbo Sntaro. The total amount due to CixiYide from Ningbo Sntaro was $1,687,750 as of December 31, 2012.

As of December 31, 2012, the total balance of loans due to CixiYide and Mr. Zhilian Chen from the company was $4,393,321. The loans are unsecured and interest free, payable on demand, and are outstanding.

During the year ended December 31, 2011, Mr. Mingyang Li, the Company’s CEO, provided a loan in the amount of $7,856 to Beijing Sntaro and a loan in the amount of $5,554 to Ningbo Sntaro. These loans increased by $8,689 and $10,980 during the year ended December 31, 2012, respectively. As of December 31, 2012, the total balance of loans from Mr. Mingyang Li was $33,079. The loans are unsecured and interest free, payable on demand, and are outstanding.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

(1) Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-Qs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:

2012	$	137,500

2011	$	112,500

(2) Audit-Related Fees

(3) Tax Fees

There is no fee billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

(4) All Other Fees

There is no fee billed in each of the last two fiscal years for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3).

(5) Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.

(6) There is no hour expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time and permanent employees was.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit	Document Description	Form	Date	Number	herewith

3.1	Articles of Incorporation	S-1	03-29-2010	3.1
3.2	Bylaws	S-1	03-29-2010	3.2
4.1	Specimen Stock Certificate	S-1	03-29-2010	4.1
14.1	Code of Ethics	10-K	03-29-2012	14.1
31.1	Certification of Chief Executive Officer pursuant to 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended.				X
31.2	Certification of Chief Financial Officer pursuant to 13a-15(e) and 15d-15(e), promulgated under the Securities and Exchange Act of 1934, as amended.				X
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
	906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)				X
99.1	Audit Committee Charter	10-K	03-29-2012	99.1
99.2	Disclosure Committee Charter	10-K	03-29-2012	99.2

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

SANTARO INTERACTIVE ENTERTAINMENT COMPANY

Date: March 29, 2013	By:	/s/ Mingyang Li
		Mingyang Li
		Chief Executive Officer,
		(principal executive officer)

Date: March 29, 2013	By:	/s/ Yan Dong
		Yan Dong
		Chief Financial Officer
		(principal financial officer and principal accounting officer)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the indicated capacities and on the dates indicated.

/s/ Zhilian Chen			Date: March 29, 2013
Zhilian Chen, Chairman

/s/ Xiongbing Zhong			Date: March 29, 2013
Xiongbing Zhong, Director

/s/ Mingyang Li			Date: March 29, 2013
Mingyang Li, Director

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