UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


(Mark
one)


FORM
20-F/A


(Amendment
No. 3)





 ̈
            REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
              EXCHANGE
      ACT OF 1934





OR





þ
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year endedDecember
      31, 2009.





OR





 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the transition period
      from __________ to
      ___________





OR





 ̈
            SHELL
      COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934Date of event requiring this
      shell company report:
________________





Commission
file number:  001-34149





DJSP
Enterprises, Inc.


________________________________


(Exact
name of the Registrant as specified in its charter)





British
Virgin Islands


_____________________________


(Jurisdiction
of incorporation or organization)





900 South
Pine Island Road, Suite 400


Plantation,
Florida 33324


___________________________


(Address
of principal executive offices)





Kumar
Gursahaney; Tel: (954) 233-8000 ext. 2024; Fax: (954) 233-8570


900 South Pine Island Road,
Suite 400; Plantation, Florida 33324


(Name,
Telephone, E-mail and/or Facsimile Number and Address of Company Contact
Person)





Securities
registered or to be registered pursuant to Section 12(b) of the
Act:




Title of Each Class
                  
                  Name of each exchange on which
      registeredUNITS,
      EACH CONSISTING OFONE
      ORDINARY SHAREAND
      ONE WARRANT
                  
                  The
      NASDAQ Stock Market LLCORDINARY
      SHARES
                  
                  The
      NASDAQ Stock Market LLCWARRANTS
      TO PURCHASEONE
      ORDINARY SHARE
                  
                  The
      NASDAQ Stock Market
LLC





Securities
registered or to be registered pursuant to Section 12(g) of the
Act:





None





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:





None





Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual report
(December 31, 2009):  9,166,666 ordinary shares.





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




 ̈
      Yes
            x
      No




If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.




 ̈
      Yes
            x
  No




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.




xYes
             ̈ 
      No




Indicate
by check mark whether the 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
             ̈ 
      No





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.




 ̈  Large
      Accelerated filer
             ̈  Accelerated
      filer
            x 
      Non-accelerated filer





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





x  US
      GAAP
             ̈ 
      International Financial Reporting Standards as issued by the International
      Accounting Standards Board
             ̈ 
      Other


If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.




 ̈ Item
      17
             ̈ Item
      18




If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).




 ̈
      Yes
            x
      No







EXPLANATORY
NOTE





This
Amendment No. 3 on Form 20-F/A (the “Amendment”) amends the annual report of
DJSP Enterprises, Inc. on Form 20-F for the year ended December 31, 2009 as
filed with the Securities and Exchange Commission (“SEC”) on April 2, 2010 and
amended by Amendment No. 1 on Form 20-F/A filed with the SEC on April 26, 2010
and by Amendment No. 2 on Form 20-F/A filed with the SEC on June 25, 2010 (as
amended by Amendment No. 1 and Amendment No. 2, the “Annual
Report”).  The purpose of this Amendment is to respond to comments
made by the SEC during their review of the Annual Report and the Company’s
registration statement on Form F-1, as filed with the SEC on February 16, 2010,
and subsequently filed amendments thereto, as follows:




·
            Item
      3.  Key Information: The Company has revised its disclosure in
      section D. Risk Factors, including providing additional disclosure with
      respect to the relationship between the Company and its CEO, the
      relationship between the Company and its law firm client, growth of the
      Company’s caseload, new rules and procedures affecting the mortgage
      foreclosure industry in Florida, and automatic conversion of ownership
      interests of the Company’s
subsidiary.




·
            Item
      5. Operating and Financial Review and Prospects: The Company has revised
      its disclosure to, among other things, expand upon the comparison of 2009
      results of operations to 2008 results of operations, as well as revised
      Unaudited Pro Forma Condensed and Combined Financial
      Statements.




·
            Item
      7.  Major Shareholders and Related Party
      Transactions:  The Company has revised its disclosure to include
      shareholder beneficial ownership as of a more recent
    date.




·
            Item
      10. Additional Information: The Company has revised its disclosure,
      including to add a more comprehensive description of  the
      Services Agreement between Law Offices of David J. Stern, P.C. and DJS
      Processing, LLC, and to provide additional tax
    disclosure.




·
            Item
      18. Financial Statements: The Company has revised the Audited Combined
      Carve-Out Financial Statements of DJS Processing Division and its Combined
      Affiliates.





We are also updating the
certifications in Exhibits 12.1, 12.2, 13.1 and 13.2.





Other than as expressly set forth
herein, this Form 20-F/A does not, and does not purport to, amend, update or
restate the information in any other Item of the Annual Report, or reflect any
events that have occurred after the Annual Report was filed. The filing of this
Form 20-F/A shall not be deemed an admission that the Annual Report, when filed,
included any untrue statement of a material fact or omitted to state a material
fact necessary to make a statement not misleading.





Any forward-looking statements included
in this 20-F/A represent management’s view as of the filing date of the original
20-F. Such forward looking statements include statements about events and
projections after the date of the filing of the original 20-F and are identified
by words such as words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,”
“project,” “should,” “would” or other words that convey uncertainty of future
events or outcomes. Such forward-looking statements should not be assumed to be
accurate as of any future date, including the date hereof. Accordingly, this
20-F/A should be read in conjunction with the “Risk Factors” and the other
statements contained in the original 20-F and the Company’s other filings made
with the SEC subsequent to the filing date of the original
20-F.





TABLE
OF CONTENTS




PAGEPART IITEM
      3.
                    KEY
      INFORMATION
                    1ITEM
      5.
                    OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                    11ITEM
      7.
                    MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                    29PART
      IIITEM
      10.
                    ADDITIONAL
      INFORMATION
                    32ITEM
      18.
                    FINANCIAL
      STATEMENTS
                    F-1ITEM
      19
                    EXHIBITS
                    47SIGNATURES
                    54










PART
I





ITEM 3. KEY INFORMATION





A.  Selected
Financial Data




The
following tables present selected financial data regarding the business of the
DJS Processing Division and its combined affiliates.  The financial
data below represent a “carve out” of the DJS Processing Division from DJS
combined with the accounts of PTA and DSI as of and for the years ended December
31, 2009, 2008, 2007 and 2006 and have been derived from audited financial
statements.  The financial data as of and for the year ended December
31, 2005 are not presented in the tables below because there are no selected
financial statements of DJS Processing Division and its combined affiliates
prior to 2006 and, therefore, the financial data for 2005 cannot be provided
without unreasonable effort or expense.  The financial data below are
only a summary and should be read in conjunction with, and are qualified in
their entirety by, “Item 5. Operating and Financial Review and Prospects – DJS
Processing And Combined Affiliates – Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and the combined financial
statements and notes thereto, included elsewhere in this Report.  The
combined carve-out financial statements are prepared and presented in accordance
with U.S. GAAP.  The financial statements contained elsewhere fully
represent the financial condition and operations of DJS Processing Division and
its combined affiliates; however, they are not necessarily indicative of our
future performance.





Prior to
January 15, 2010, the Company was a shell company, and therefore had only
nominal assets and no revenue.  There are significant differences
between the Company’s business prior to the Transaction, and the business of the
DJS Processing Division and its combined affiliated operating companies prior to
the Transaction.  Financial data for the operation of the DJS
Processing Division and its combined affiliates are presented below because,
after the Transaction, they represent all of our operations.





DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES





Selected Financial
Data





As of December 31,Combined Carve-Out Balance Sheets
                  
                  2009
                  
                  
                  2008
                  
                  
                  2007
                  
                  
                  2006Cash
      and cash equivalents
                  
                  $
                  763,387
                  
                  
                  $
                  1,427,588
                  
                  
                  $
                  978,766
                  
                  
                  $
                  69,889Client
      reimbursed costs receivable
                  
                  
                  6,046,760
                  
                  
                  
                  26,147,837
                  
                  
                  
                  15,585,345
                  
                  
                  
                  4,189,833Total
      current assets
                  
                  
                  33,924,395
                  
                  
                  
                  50,640,222
                  
                  
                  
                  35,075,548
                  
                  
                  
                  7,307,063Total
      assets
                  
                  
                  38,615,915
                  
                  
                  
                  53,794,845
                  
                  
                  
                  37,800,142
                  
                  
                  
                  8,726,110Total
      current liabilities
                  
                  
                  24,236,337
                  
                  
                  
                  25,679,169
                  
                  
                  
                  12,399,408
                  
                  
                  
                  3,537,489Total
      liabilities
                  
                  
                  25,595,763
                  
                  
                  
                  26,329,196
                  
                  
                  
                  12,655,383
                  
                  
                  
                  3,694,199Total
      shareholder’s and member’s equity
                  
                  
                  13,020,152
                  
                  
                  
                  27,465,649
                  
                  
                  
                  25,144,759
                  
                  
                  
                  5,031,911




For the Years Ended December 31,Combined Carve-Out Statements of Income
                      
                      2009
                      
                      
                      2008
                      
                      
                      2007
                      
                      
                      2006Revenue
                      
                      $
                      260,268,847
                      
                      
                      $
                      199,202,701
                      
                      
                      $
                      115,500,349
                      
                      
                      $
                      40,392,317Operating
      expenses:Client
      reimbursed costs
                      
                      
                      139,059,336
                      
                      
                      
                      92,319,306
                      
                      
                      
                      47,613,198
                      
                      
                      
                      16,802,800Compensation
      related expenses
                      
                      
                      50,085,039
                      
                      
                      
                      44,356,093
                      
                      
                      
                      20,268,283
                      
                      
                      
                      11,006,660Direct
      operating expenses and general and administrative expenses
                      
                      
                      25,435,754
                      
                      
                      
                      19,078,472
                      
                      
                      
                      8,668,430
                      
                      
                      
                      3,811,153Depreciation
      expense
                      
                      
                      1,123,564
                      
                      
                      
                      594,156
                      
                      
                      
                      277,926
                      
                      
                      
                      193,133Total
      operating expenses
                      
                      
                      215,703,693
                      
                      
                      
                      156,348,027
                      
                      
                      
                      76,827,837
                      
                      
                      
                      31,813,746Operating
      Income
                      
                      
                      44,565,154
                      
                      
                      
                      42,854,674
                      
                      
                      
                      38,672,512
                      
                      
                      
                      8,578,571Other
      Income
                      
                      
                      312
                      
                      
                      
                      31,677
                      
                      
                      
                      16,328
                      
                      
                      
                      —Net
      income (1) (2)
                      
                      $
                      44,565,466
                      
                      
                      $
                      42,886,351
                      
                      
                      $
                      38,688,840
                      
                      
                      $
                      8,578,571





(1)
            The
      DJS Processing Division and its combined affiliates have no discontinued
      operations; therefore, Net Income has been provided in lieu of income from
      continuing operations.




1





(2)
            Ordinary
      shares outstanding (actual and diluted) and per share data (basic and
      diluted) of the DJS Processing Division and its combined affiliates have
      been omitted because of differences in capital structure of those entities
      and the Company.  Presenting such data in this report is not
      particularly helpful and could be misleading to
  readers.





B.  Capitalization
and Indebtedness





Not
required.





C.  Reasons
for the Offer and Use of Proceeds





Not
required.




D.  Risk
Factors




An
investment in our shares involves a high degree of risk. You should carefully
consider the risks described below, together with all of the other information
included in this Report, before making an investment decision. If any of the
following risks actually occurs, our business, financial condition or results of
operations could suffer. In that case, the trading price of our shares could
decline, and you may lose all or part of your investment.




Risks
Related to our Business




David
J. Stern, our President and Chief Executive Officer, is also the sole owner of
Law Offices of David J. Stern, P.A. (“DJS”), which is our primary law firm
customer, and he may, under certain circumstances, have interests that differ
from or conflict with the interests of our shareholders.





David
J. Stern, our President and Chief Executive Officer, is the sole
shareholder of DJS, which is our primary law firm client. Revenues from this
relationship account for approximately 94%, 97% and 98% of our total revenues
for the years ended December 31, 2009, 2008 and 2007,
respectively.  As a result of this relationship with both us and DJS,
Mr. Stern may encounter conflicts of interest in the execution of his duties on
behalf of us. These conflicts may not be resolved in a manner favorable to us.
For example, he may be precluded by his ethical obligations as an attorney or
may otherwise be reluctant to take actions on our behalf that are in
our best interests but are not in the best interests of DJS, or its
clients. Further, as a licensed attorney, he may be obligated to take actions on
behalf of DJS or its clients that are not in our best interests. Mr. Stern has
other direct and indirect relationships with us that could cause similar
conflicts including as our largest creditor. See Note 2 to the consolidated
financial statements of the operating subsidiaries for a description of these
relationships.  Certain of the agreements between Mr. Stern, DJS and
their affiliates and the Company and its affiliates specifically provide for the
manner in which these conflicts will be resolved. For instance, the DAL limited
liability company agreement provides that, in the event that a majority of the
members of DAL’s Board of Managers not nominated by Mr. Stern or his affiliates
have a conflict of interest with respect to any matter involving DAL, they may
designate another person to represent DAL with respect to that matter. Because
the Company’s operations are conducted through DAL and its subsidiaries, this
allows the members of the DAL Board of Managers not nominated by Mr. Stern and
his affiliates to designate a party independent of Mr. Stern to represent the
interests of DAL and its subsidiaries in all of DAL’s dealings with Mr. Stern
and his affiliates, including as a customer, equity holder and lender. This
agreement also provides that, so long as the Company owns more than fifty (50)
percent of the outstanding membership interests of DAL, the DAL Board of
Managers cannot take certain actions without the approval of a majority of the
Company’s Board of Directors other than those nominated by Mr. Stern or his
affiliates or Mr. Ruiz. Among the actions subject to this restriction are
entering into, amending or waiving any contract with a member of DAL or its
affiliates, such as Mr. Stern and his affiliates, declaring or making
distributions, including distributions that benefit Mr. Stern or his affiliates,
or amending or waiving the DAL limited liability company agreement, including
amendments or waivers that benefit Mr. Stern or his affiliates. Mr. Stern’s
employment agreement provides that if DJS defaults under the services agreement
between DJS and DJS LLC, the Board of Managers of DJS LLC may appoint a
committee of independent members of DJS LLC to direct DJS LLC’s activities in
response to the default and suspend Mr. Stern’s responsibilities relating to the
default. In other situations, not covered by the agreements discussed above,
pursuant to the Company’s code of conduct and ethics, Mr. Stern is required to
resolve conflicts of interests involving his affiliates and him that may arise
from time to time under guidelines or resolutions approved by the Company’s
Board of Directors, a majority of whom are independent directors under NASDAQ
rules. In addition, under the Company’s Audit Committee Charter, among the
duties of the Company’s Audit Committee, all of the members of which are
independent directors under NASDAQ rules, are to review and approve all
related-party transactions and to review and approve all payments made to the
Company’s officers, directors and affiliates.


2





David
J. Stern plays a critical role in our success and the success of DJS. Should Mr.
Stern become unwilling or unable to perform his duties for either entity, it is
likely that our business and results would be adversely affected to a
significant degree.





Although
we and DJS each have substantial management teams that are capable and
experienced, the majority of the client relationships of DJS and our customer
relationships were established and continue to be managed by Mr.
Stern.  If Mr. Stern becomes unable or unwilling to perform his duties
under his employment agreement or dies, it is possible that the client
relationships of DJS, and therefore the volume of referrals that we receive from
DJS, would suffer, materially reducing our revenues and
profitability.





Mr.
Stern received a significant amount of cash consideration in connection with the
Transaction, which may reduce his incentive to devote his full efforts to
continue to develop and expand our business and the business of
DJS.





Under the
terms of the Transaction, Mr. Stern and his affiliates received approximately
$58.5 million in initial cash in exchange for contributing their business
to DAL, plus another approximately $88 million in the Stern Deferral Note
(defined herein) and post-closing cash. Those amounts will be paid to the
contributors of the business acquired by DAL (DJS, PTA, DSI and David J. Stern
(“Stern,” together with DSI, PTA and DJS the “Stern
Contributors”)) regardless of how we perform. Although he also has a
substantial equity stake in DAL, which gives him an incentive to improve our
operations, there can be no assurance that he will do so, or that his efforts to
do so, however diligent, will succeed.





Mr.
Stern has recommended four members of our Board of Directors, and Mr.
Stern’s affiliates may accelerate the maturity date of indebtedness due to him
upon his removal as CEO of the Company or DAL, which may make it difficult or
impossible to remove him as CEO of the Company or DAL, even if that were
considered desirable.





We agreed
to have Mr. Stern propose four of seven directors for election by our
shareholders.  In the event that Mr. Stern does not diligently and
faithfully discharge his responsibilities as CEO of the Company or DAL, the fact
that he chose four of our directors may make taking disciplinary action against
him difficult, if not impossible, notwithstanding that all of the directors will
have fiduciary duties to our shareholders to do so. In such a case, the only
recourse available to our shareholders may be to bring an action against the
directors for breach of their fiduciary duty, but as with any litigation, it can
be costly, time-consuming and drawn out, and there is no assurance that it would
succeed.





In
addition, the involuntary termination of Mr. Stern by the Company or DAL is an
event of default under the terms of the Stern Deferral Note and $35 million of
post-closing cash due to affiliates of Mr. Stern, permitting Mr. Stern’s
affiliates to accelerate the due date of such obligations.  As a
result, the Company could not involuntarily terminate Mr. Stern’s employment as
CEO of the Company or DAL unless it is able to repay in full these
obligations.





If
the number of case files referred to us by DJS, which is our principal
foreclosure processing service law firm client, do not increase, our operating
results and ability to execute our growth strategy could be adversely
affected.





We
have one law firm customer in Florida, DJS. Each foreclosure, bankruptcy,
eviction, litigation, and other mortgage default related case file referred to
DJS will typically have a fixed fee associated with it that is based on a
schedule established by government sponsored entities, such as Freddie Mac and
Fannie Mae. We are paid a fixed fee by DJS for the services we render to DJS.
Therefore, the success of our mortgage default processing services business is
tied to the number of these case files that DJS receives from its mortgage
lending and mortgage loan servicing firm clients and our ability to control
costs.  During calendar years 2007, 2008 and 2009, DJS referred to us
case files totaling 61,480, 96,509 and 98,259, respectively. Revenues from our
mortgage foreclosure segment increased in 2009, even though case referral levels
only increased slightly primarily because of the timing of revenue recognition
for such files, which is discussed further in the section entitled “DJS
Processing Division and Combined Affiliates – Management’s Discussion and
Analysis of Financial Condition and Results of Operations – 2009 Compared to
2008.” While there has been a slowdown in foreclosure activity in early 2010
because of recent government programs, we expect the level of case files
referred to us in future quarters to increase because we believe the recent
government programs to aid homeowners will have only limited success. However,
such programs may have more success than we expect or new programs may be
implemented that are more successful, which could reduce case file referrals to
us.  You should also refer to “DJS Processing Division and Combined
Affiliates – Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Recent Developments – Regulatory Environment” for more
information about regulatory and similar changes that could affect the volume of
referrals we receive for our mortgage default processing services. There is
little or no opportunity for DJS LLC to increase revenues on a per file basis
unless the fee schedule that DJS has with its clients is adjusted upward. Such
upward adjustments may or may not keep pace with increases in DJS LLC’s costs.
Because DJS receives a fixed fee from its client, it has limited financial
ability to pay increased fees to DJS LLC. As a result, if the number of
referrals that we receive through DJS decreases, it would likely result in a
decrease in revenues and profits for DJS LLC.  There is little or no
opportunity for us to increase revenues on a per file basis unless the fee
schedule that DJS has with its clients is adjusted upward. Such upward
adjustments may or may not keep pace with increases in our costs. Because DJS
receives a fixed fee from its clients, it has limited financial ability to pay
increased fees to us. As a result, if the number of referrals that we receive
through DJS decreases, it would likely result in a decrease in our revenues and
profits.


3




The
majority of file referrals to DJS come from fewer than a dozen lenders and loan
servicing firms. If DJS were to lose any of these sources of business, in whole
or in part, it would adversely affect our financial performance.





In 2009,
the top ten clients for DJS, on an aggregate basis, accounted for 89.5% of case
files referred to DJS for mortgage default and other processing services, and
its largest single customer accounted for 30% of DJS’ total foreclosure file
volumes for the same period. Our operating results and ability to execute our
growth strategy could be adversely affected if (i) our current law firm
customer, DJS, loses business from these clients; (ii) these clients are
affected by changes in the market and industry or other factors that render them
unable to pay for the services we have rendered; or (iii) our law firm customer
is unable to attract additional business from current or new clients for any
reason, including any of the following: a decline in the quality of legal
services provided, the loss of key attorneys (such as David J. Stern, who has
developed and maintains a substantial amount of DJS’ client relationships), the
desire of the law firm’s clients to allocate files to other firms or among a
larger number of firms, decreasing the share received by DJS, or a decrease in
the number of residential mortgage foreclosure actions that customers initiate
in Florida, our principal market, whether due to business considerations or
governmental action impeding foreclosures. The reduction in work received from
DJS or the inability or failure of DJS to pay us as a result of any one or more
of these factors could materially reduce our cash flow, revenues and profits.
Please refer to the risk factors below for more information about governmental
or other voluntary action on the part of the clients of DJS that could
negatively affect us.




We
could lose our law firm customer if we materially breach the Services
Agreement.





Under the
terms of the Services Agreement between us and DJS, DJS has the right to
terminate the Services Agreement in the event we breach the terms of that
agreement. DJS may have an ethical duty to take such action if we do not provide
services of a quality necessary for DJS to properly serve its clients. In
addition, under the Services Agreement, if one of DJS’ clients requires DJS not
to use us to provide services for their accounts, DJS may provide those services
itself or use another party to do so. In the event of the occurrence of any of
these events, our revenues and earnings could be materially adversely
affected.





Regulation
of the legal profession may constrain our operations, and numerous issues
arising out of that regulation, its interpretation or evolution could impair
our ability to provide professional services to customers and reduce
revenues and profitability.





Each
state has laws, regulations and codes of professional responsibility that govern
the conduct and obligations of attorneys to their clients and the courts.
Adherence to those codes of professional responsibility is a requirement to
retaining a license to practice law in the licensing jurisdiction. The
boundaries of the “practice of law,” however, can be indistinct, vary from one
state to another and are the product of complex interactions among state law,
bar association standards and constitutional law as formulated by the U.S.
Supreme Court. Many states define the practice of law to include the giving of
advice and opinions regarding another person’s legal rights, the preparation of
legal documents or the preparation of court documents for another person.
Although we are not aware of any ruling or interpretation of laws, regulations
or other applicable standards that would result in the operations that we
perform being considered the practice of law, we cannot say with certainty that
no existing law, regulation or standard will be interpreted to produce that
result, or that a new law, regulation or standard leading to that result will
not be adopted in the future. In addition, all states and the American Bar
Association prohibit attorneys from sharing fees for legal services with
non-attorneys, so that if any aspect of our business is deemed to constitute the
practice of law, it would not be possible for us to continue performing those
services.





Our
principal business activity involves providing foreclosure processing services,
usually in connection with legal proceedings, such as foreclosure actions.
Current laws, regulations and codes of professional responsibility governing the
practice of law pose the following principal risks to our
business:


4




·
            State
      or local bar associations, state or local prosecutors or other persons may
      claim that some portion of the services that we provide constitutes the
      unauthorized practice of law. Any such challenge could have a disruptive
      effect on our operations, including the diversion of significant time and
      attention of our senior management in order to respond. We may also incur
      significant expenses in connection with such a challenge, including
      substantial fees for attorneys and other professional advisors. If a
      challenge to the legitimacy of all or a portion of our operations were
      successful, such operations may need to be modified in a manner that could
      adversely affect our business, revenues and profitability, and we could be
      subject to a range of penalties and suffer damage to our
      reputation.




·
            The
      Services Agreement between us and DJS could be deemed to be unenforceable,
      in whole or in part, if a court were to determine that such agreements
      constitute an impermissible fee sharing arrangement between the law firm
      customer and us.





In
addition, applicable laws, regulations and codes of professional responsibility,
including their interpretation and enforcement, could change in a manner that
restricts our operations. Any such change in laws, policies or practices could
increase our cost of doing business or adversely affect our revenues and
profitability.





Failure
to customize the proprietary case management software system so that it can be
used to serve additional law firm customers both in Florida and in new
jurisdictions, could adversely affect the growth prospects of our mortgage
default processing service business.





We rely
heavily on a proprietary case management software system, which stores, manages
and reports on the large amount of data associated with each foreclosure,
bankruptcy, real estate owned liquidation or eviction case file we process,
to achieve a high level of efficiency, accuracy and customer service. The system
was initially developed for use in the state of Florida, and it is adapted
specifically to the procedural requirements of that jurisdiction. We intend to
expand our business beyond Florida, and in order to do so profitably, we will
need to modify our system to accommodate the specific procedural and legal
requirements associated with those additional jurisdictions. While the system we
use in foreclosures processed in Puerto Rico was modified, whether the system
can be modified to conform to other jurisdictions at an acceptable cost is
unknown. That will depend on how significant the needed changes are and whether
we can develop a volume of business in those jurisdictions that will justify the
cost of making them.





We may
decide to enter into a service agreement with customers in other jurisdictions
prior to modifying our software systems, based on a judgment that we can do so
in a timely, effective and efficient manner to fulfill our contractual
obligations. It is possible that our judgment will turn out to be incorrect,
notwithstanding that it was made in good faith, in which case we could find that
we are unable to provide the services that we agreed to provide or that we are
unable to do so profitably. If we are unable to provide the agreed upon services
in a timely and effective way, the harm to our business reputation may adversely
affect our business in Florida or in other markets that we seek to enter, both
reducing our revenues and profits from those other jurisdictions and making
future expansion more difficult.





In
addition, Florida is a “judicial” foreclosure state, which means that the
foreclosure process is overseen at each step by a judge in a court of law. The
processing services required, and the fees generated as a result, in a judicial
state are significantly greater than those in a non-judicial state, which has
minimal, if any, proceedings in a court of law in processing a foreclosure. If
we choose to market our services in a non-judicial state, the revenue per file
will be substantially less than we are currently generating in Florida, and that
decreased revenue per file may prove not to be sufficient to justify the expense
of modifying our software systems to expand our business into those
jurisdictions.




Claims,
even if not valid, that the case management software system or other proprietary
software products and information systems infringe on the intellectual property
rights of others could increase our expenses or inhibit our business from
offering certain services.





Other
persons could claim that they have patents and other intellectual property
rights that cover or affect our use of software products and other components of
information systems on which we rely to operate our business, including the
proprietary case management software system that we use to provide mortgage
default processing services. Litigation may be necessary to determine the
validity and scope of third-party rights or to defend against claims of
infringement. Any litigation, regardless of the outcome, could result in
substantial costs and diversion of resources and could have a material adverse
effect on our business. If a court determines that one or more of the software
products or other components of information systems used infringe on
intellectual property owned by others or we agree to settle such a dispute, we
may be liable for money damages. In addition, we may be required to cease using
those products and components unless we obtain licenses from the owners of the
intellectual property or redesign those products and components in such a way as
to avoid infringement. In any event, such situations may increase our expenses
or adversely affect our ability to provide services.


5





We
have experienced significant growth in caseload over the last few years and if
we are unable to maintain the quality of our work-product with increasing
volumes, our clients will not continue to refer us additional
cases.





From
2006 to 2009, our foreclosure case load increased from 15,332 to
70,382.  This rapid increase in caseload required us to hire
additional personnel to help ensure that case materials were prepared and
submitted properly.  In addition, we were required to hire additional
personnel to maintain our internal control over financial reporting given the
substantial increase in caseload.  If we did not hire sufficient
personnel in the past or if we do not or are unable to hire personnel in the
future to keep pace with future growth, the quality of our work product may
suffer, resulting in dissatisfaction on the part of DJS’ financial institution
clients that may then choose to reduce the amount of business they conduct with
DJS which would result in reduced business for us. In addition, failure to
adequately staff our operations in light of increased caseload could put stress
on our internal control over financial reporting which could compromise its
effectiveness.




We
are subject to risks relating to litigation due to the nature of our products
and service offerings.





We may,
from time to time, be subject to or be named as a party in legal proceedings in
the ordinary course of our mortgage default processing business. We could
incur significant legal expenses and management’s attention may be diverted from
operations in defending against and resolving lawsuits or claims. An adverse
resolution of any future lawsuits or claims against us could result in a
negative perception of our business and cause the market price of our ordinary
shares to decline or otherwise have an adverse effect on our operating
results and growth prospects.





The
Transaction may not be treated as a reverse recapitalization, resulting in
adverse consequences to our financial statements.





We have
accounted for the Transaction as a reverse recapitalization of the businesses
operated by DJS LLC, PTA LLC and DSI LLC. However, this accounting treatment is
dependent on a number of factors that we believe result in this transaction
being considered a reverse recapitalization, that may be subsequently determined
to have been improperly considered by management or outweighed by other factors.
If our auditors or the SEC determine that the Transaction was not a reverse
recapitalization, our financial results could be significantly impacted because
we would have increased future amortization and depreciation charges for certain
assets acquired in the Transaction with fair values in excess of their carrying
values, which could reduce our profits.





In
connection with the Transaction, we and our subsidiaries issued approximately
$103 million of debt (of which David J. Stern, our Chairman, President and Chief
Executive Officer, and his affiliates are the largest creditors ($87.5 million))
and subsequently entered into a $15 million revolving line of credit with Bank
of America, which, if we defaulted on the payments related to such debt, could
result in our lenders (including Mr. Stern and/or his affiliates) acting to
acquire our assets in satisfaction of the debt and our ceasing
operations.





In
connection with the Transaction, we and our subsidiaries issued approximately
$103 million of debt of which David J. Stern, our Chairman, President and Chief
Executive Officer, and his affiliates are the largest creditors ($87.5 million).
In addition, we subsequently entered into a $15 million revolving line of credit
with Bank of America which is secured by substantially all of our assets. The
issuance of this debt resulted in our having negative equity and retained
earnings post-Transaction. In addition, if we are unable to make payments on
such debt, our lenders may take action to seize our assets in satisfaction of
our debt. If this were to occur, we might not be able to continue running our
business and be forced to cease operations.





Risks
Relating to the Mortgage Foreclosure Industry





State
and federal regulation and limitation of lenders’ ability to pursue foreclosure
actions, along with voluntary foreclosure relief programs developed by lenders,
loan servicers and the Hope Now Alliance, a consortium that includes loan
servicers, may have an adverse effect on the volume of our mortgage default
processing services and public notice operations.


6





The
prevalence of sub-prime, Alternative A paper mortgage and other non-traditional
mortgage products, rising unemployment and the increasing number of defaults and
delinquencies in connection with those and other mortgages have led to the
adoption of governmental regulations that incentivize lenders and loan servicers
not to pursue, or restrict the ability of lenders and loan servicers to pursue,
foreclosure against defaulting mortgagors. While the effects of these
regulations to date have not been substantial, if new or more stringent
regulations are enacted, the clients of DJS would likely be subject to these
regulations, and it could adversely affect the number of mortgage default files
that DJS receives from its clients and can then refer to us for processing.
Similarly, these new or more stringent regulations could impose new requirements
on the processing of foreclosures, which could adversely affect when foreclosure
referrals are sent to us for processing. The federal government has enacted the
Housing and Economic Recovery Act of 2008, which contains reforms intended to
reduce the volume of mortgages in foreclosure, including the development of a
refinance program for homeowners with sub-prime loans. This refinance program
took effect on October 1, 2008. In September 2008, the federal government also
enacted the Economic Emergency Stabilization Act, which provides funding to
purchase troubled assets from financial institutions.





More
recently, the federal administration announced the Homeowner Affordability and
Stability Plan, an attempt to address the continuing rise in mortgage
delinquencies and mortgage defaults. Under this plan, the federal government set
forth detailed requirements for the “Making Home Affordable” program, which
offers qualified homeowners with a loan-to-value ratio above 80% the opportunity
to apply for mortgage refinancing at lower interest rates. The “Making Home
Affordable” program also provided loan modification guidelines that are expected
to become standard industry practice in pursuing affordable and sustainable
mortgage modifications. The loan modification program guidelines are expected to
work in tandem with an expanded Hope for Homeowners program. If this legislation
or any other bills being considered, including the proposed bankruptcy
legislation that would allow bankruptcy judges in Chapter 13 cases to revise the
terms of a mortgage on a primary residence, are successful, they will likely
reduce the number of mortgages going into default and, thus, the number of
mortgage default files that DJS or other customers refer to us for processing.
If either of these occurs, it could have a negative impact on our earnings and
growth.





Furthermore,
a number of lenders and loan servicers, including clients of DJS, are focusing
greater attention on loss mitigation, loan modifications and similar efforts
which may delay or prevent foreclosures. For example, programs have been
announced to manage certain delinquent loans that banks hold in a manner that
will attempt to avoid foreclosure. To the extent that lenders, loan servicers
and others over whom we have no control, voluntarily, or are required to,
continue these efforts, the number of files referred to DJS for mortgage default
processing, and the number of foreclosure files referred to us, could decline,
which would have a negative impact on our revenue and earnings. You should also
refer to “Item 5. Operating and Financial Review and Prospects – DJS Processing
Division and Combined Affiliates – Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Recent Developments – Regulatory
Environment” for more information about regulatory and similar changes that
could affect the volume of referrals we receive for our mortgage default
processing services.





Changes
in court practices or procedures may affect the filing and service requirements
for case filings or may reduce or eliminate the amount of case filings, either
of which could adversely affect our revenues, profitability and growth
opportunities or adversely restrict our operations.





Florida
and other jurisdictions are facing unprecedented levels of foreclosure activity
in recent years, which has led to a substantial burden on the court systems in
those states. It is possible that those jurisdictions, in order to relieve that
burden and eliminate what has become a growing backlog of cases, will adopt
modifications to their foreclosure proceedings to streamline them. Should they
do so, it could reduce the amount of fees that we receive per file, thus leading
to a reduction in our revenues and profits, even if foreclosure volumes remain
constant or even increase.





If
“judicial” foreclosure states adopted “non-judicial” procedures for filing
foreclosures, mortgage foreclosure processing firms operating in “judicial”
states would be materially and adversely affected. “Judicial” foreclosure states
require foreclosures to follow a set of rules, compliance with which is overseen
by a judge in a court of law. The level of processing fees associated with a
foreclosure in a judicial state is significantly greater than would be expected
in a non-judicial state. Should Florida (or another judicial state in which we
choose to operate) choose to adopt a non-judicial mortgage foreclosure process
in order to expedite the processing of foreclosures, it would result in a
substantial reduction in the revenues derived from that jurisdiction, with an
accompanying reduction in profits.





The
Supreme Court of Florida has recently taken steps to insure that proper
documentation is filed in foreclosure actions, and if DJS does not comply with
the new rules and procedures the foreclosure actions on which they are working
may be dismissed, which may result in DJS receiving fewer referrals, and, since
they are our primary client, reduced revenues for us.


7





The
Supreme Court of Florida has recently taken an active role in ensuring that
proper documentation is filed in a foreclosure action by amending several rules
of civil procedure and pertinent forms related to foreclosure actions filed in
Florida.  The amendments are aimed at addressing certain concerns
courts have recently had regarding foreclosure filings and create more stringent
standards to be followed by plaintiffs and plaintiffs’ counsel.  DJS,
our primary client, has taken certain steps to insure that the more stringent
standards are met.  However, DJS may not be successful in complying
with these new rules.  If DJS is not successful in doing so, they may
receive fewer cases to work on from their  financial institution
clients, and, since they provide us with the vast majority of the cases on which
we work, our case-load would significantly decline as well.  Any
significant reduction in our caseload will significantly reduce our revenues and
results of operations.





Risks
Related to Our Structure





Our
outstanding warrants could decrease our share price.





If our
outstanding warrants are called or exercised, the underlying ordinary shares
will be eligible for future resale in the public market. “Market overhang” from
the warrants may cause investors to assume that there will be additional
ordinary shares outstanding that were purchased at the warrant exercise price,
which  will likely be below our then current  share price. That
possibility could reduce the market price of our ordinary shares, even prior to
a call of the warrants.




We have
11,166,666 warrants outstanding which were issued prior to and in connection
with our initial public offering, exercisable at a price of $5.00 per share.
Those warrants are now exercisable and 6,875,000 of them (the “Public Warrants”)
will be callable at a price of $0.01 per warrant and upon thirty (30) days’
notice if the closing price of our shares equals or exceeds $10 for 20 out of 30
consecutive trading days. The shares underlying these 6,875,000 warrants have
been registered pursuant to our registration statement filed in connection with
our IPO. In the event that the Public Warrants are called, all or nearly all of
them are likely to be exercised. Another 2,291,666 warrants issued prior to our
IPO are not subject to a call. If any of our warrants are exercised or called, a
substantial number of additional ordinary shares will be eligible for resale in
the public market. Those additional shares will have been purchased at a price
of $5.00, and as a result, the exercise or the prospect of the exercise or call
of these warrants may reduce the market price at which our ordinary shares
trade.





Immediately
prior to the consummation of our initial public offering, we issued 2,000,000
warrants at a price of $0.50 to our management and their affiliates (the
“Private Placement Warrants”). The Private Placement Warrants were issued on
terms equivalent to those of the Public Warrants, except that (i) the Private
Placement Warrants are not callable; and (ii) the Private Placement Warrants
contain a “cashless” or “net” exercise provision, which allows the holders of
the Private Placement Warrants to exercise them by receiving a reduced amount of
our shares compared to a “cash” exercise of the warrants, in exchange for not
having to pay the $5.00 exercise price. The exact terms of the cashless exercise
will depend on the share price of our shares. The Company filed a registration
statement on Form F-1 with the SEC on February 12, 2010 to register both the
Private Placement Warrants and the shares underlying the Private Placement
Warrants.  This registration statement is not yet effective. The
prospect that those warrants may be exercised for $5.00 may reduce the market
price at which our ordinary shares trade.





In order
to generate additional cash for payment of the note issued in connection with
the Transaction, certain of the holders of the Private Placement Warrants have
agreed to exercise or sell those warrants to third parties who agree to exercise
them beginning on the later of six months following the closing of the
transaction or the date that the warrants and the shares underlying them are
covered by an effective resale registration statement and provided that our
ordinary shares are trading at or above $9.00. In exchange for their agreement
to do so, the holders of those warrants will receive, in the aggregate, 233,010
ordinary shares. As a result of this agreement, the time at which the Private
Placement Warrants will be exercised may be accelerated, thus causing the
increase in the number of our issued and outstanding shares to occur at an
earlier time than might otherwise have happened.




The
2,291,666 of our units purchased prior to our initial public offering (the
“Insider Units”), each consisting of one ordinary share and one warrant to
purchase one of our ordinary shares for $5.00, along with the Private Placement
Warrants, are currently held in escrow. The Insider Units will be released from
escrow on January 15, 2011 (i.e., one year after the closing of the
Transaction). If the Public Warrants have not been called or exercised prior to
that time, the release of these shares from escrow will increase our public
“float” by approximately 33%, which may cause a decrease in our share
price.


8





Exchange
rights held by the holders of DAL’s membership interests could reduce the market
price of our ordinary shares.





The
members of DAL, other than the Company, do not hold a direct ownership
interest in the Company. However, the 2,700,000 DAL Common Units and
1,666,667 DAL Series A Preferred Units that they hold are exchangeable into
our shares commencing one year after the Transaction was consummated (i.e.,
January 15, 2011).  In addition, they hold DAL Series B Preferred
Units, which automatically convert into 3,900,000 additional DAL Common Units,
which in turn are exchangeable for 3,900,000 ordinary shares of the Company, if
the market value of the company’s ordinary shares exceeds set prices between
$10.00 and $20.00 per share prior to January 15, 2015.  The exchange
of the DAL Units for our shares will increase our public “float,” which may
cause a decrease in our share price.





Purchasers
of Chardan 2008 shares may also be entitled to rescission on the grounds that
the Business Combination did not involve a company whose principal operations
are in China.





In the
prospectus that Chardan 2008 used to consummate its initial public offering,
Chardan 2008 stated that it intended to enter into a business combination with a
company whose principal operations are in China. Although the management of
Chardan 2008 considered a business combination with a number of companies that
met that description, it determined that the Business Combination was an
alternative that was more beneficial to Chardan 2008’s shareholders than any of
the China-based opportunities. However, as a result of this change in strategy,
the public shareholders who acquired their shares before we announced the
intention to engage in the Business Combination could assert claims to rescind
their purchase, including a right to receive the difference between the value of
the shares that they hold and the value that the shares would have had if
Chardan 2008 had entered into a business combination with a company based in
China. We cannot predict whether any shareholders will bring such claims, how
many might bring them, the extent to which might be successful or the amount of
any possible recovery by them. Although it is not possible to estimate potential
damages to us, if we assumed that the shares had a value of $0, then the
potential maximum amount of rescission claims would be $8.00 per share plus
interest, or an aggregate of approximately $55 million plus
interest.




Risks
to Our Shareholders




If
our outstanding warrants are exercised, the underlying ordinary shares will be
eligible for future resale in the public market.  ”Market overhang”
from the warrants as a result of that potential dilution could reduce the market
price of the ordinary shares.





Outstanding
warrants and unit purchase options to purchase an aggregate of 11,441,000
ordinary shares issued in connection with our initial public offering and the
private placement that took place immediately prior to the initial public
offering became exercisable after the Transaction on January 15,
2010.  If they are exercised, a substantial additional number of our
ordinary shares will be eligible for resale in the public market, which may
reduce the market price.





If
certain price targets are met, up to 3,900,000 Series B Preferred Units of DAL
Group LLC, our subsidiary, will be automatically exchanged for common units of
DAL Group, LLC, which will then be convertible into our ordinary shares,
which  will be eligible for future resale in the public market.
“Market overhang” from the Series B Preferred Units as a result of that
potential dilution could reduce the market price of the ordinary
shares.





DAL
Group LLC issued 3,900,000 Series B Preferred Units in connection with our
acquisition of it.  The Series B Preferred Units are automatically
exchangeable for common units of DAL Group LLC if our share price reaches
certain thresholds.  Once converted into common units of DAL Group
LLC, beginning January 15, 2011, once certain conditions are met, the common
units will be convertible into our ordinary shares.  If they are
converted, a substantial additional number of our ordinary shares will be
eligible for resale in the public market, which may reduce the market price. On
March 23, 2010 the 750,000 Series B-1 Preferred Units converted into DAL Group
LLC common units. On May 3, 2010, the 750,000 Series B-2 Preferred Units also
converted into common units of DAL Group LLC.





Because
we do not intend to pay dividends on our ordinary shares, shareholders will
benefit from an investment in our ordinary shares only if they appreciate in
value.




We have
never declared or paid any cash dividends on our ordinary shares. We currently
intend to retain all future earnings, if any, for use in the operations and
expansion of the business. As a result, we do not anticipate paying cash
dividends in the foreseeable future. Any future determination as to the
declaration and payment of cash dividends will be at the discretion of our Board
of Directors and will depend on factors the Board of Directors deems relevant,
including among others, our results of operations, financial condition and cash
requirements, business prospects, and the terms of our credit facilities and
other financing arrangements. Accordingly, realization of a gain on
shareholders’ investments will depend on the appreciation of the price of our
ordinary shares. There is no guarantee that our ordinary shares will appreciate
in value.


9





We
may choose to redeem our outstanding warrants at a time that is disadvantageous
to our warrant holders.




Subject
to there being a current prospectus under the Securities Act of 1933, as
amended, with respect to the ordinary shares issuable upon exercise of our
warrants, we may redeem our warrants issued as a part of our units at any time
after such warrants become exercisable, in whole and not in part, at a price of
$.01 per warrant, upon a minimum of 30 days’ prior written notice of redemption,
if and only if, the last sales price of our ordinary shares equals or exceeds
$10.00 per ordinary share for any 20 trading days within a 30 trading day period
ending three business days before we send the notice of redemption. In addition,
we may not redeem the warrants unless the warrants and the ordinary shares
underlying those warrants are covered by an effective registration statement
from the beginning of the measurement period through the date fixed for the
redemption. In order to accelerate the payment of the receiving cash
owed to the Stern Contributors, we have agreed to call our warrants as soon as
the conditions for doing so are met.




Redemption
of the warrants could force the warrant holders: (i) to exercise the warrants
and pay the exercise price at a time when it may be disadvantageous for the
holders to do so, (ii) to sell the warrants at the then-current market price
when they might otherwise wish to hold the warrants, or (iii) to accept the
nominal redemption price which, at the time the warrants are called for
redemption, is likely to be substantially less than the market value of the
warrants. We expect most purchasers of our warrants will hold their securities
through one or more intermediaries and consequently holders of warrants are
unlikely to receive notice directly from us that the warrants are being
redeemed. Holders who fail to receive notice of redemption from a third party,
and whose warrants are redeemed for nominal value, will not have recourse to
us.





Risks
Related to Our Corporate Structure




Prior
to the Transaction, Chardan 2008 had not had operations, and DAL had not
operated as a public company.  Fulfilling DAL’s obligations incident
to being a public company will be expensive and time consuming.




Prior to
Chardan 2008’s acquisition of DAL on January 15, 2010, Chardan 2008 had not
had operations, and DAL had not operated as a public company. Each of Chardan
2008 and DAL have maintained relatively small finance and accounting
staffs. Neither Chardan 2008 nor DAL currently has an internal audit group.
Although Chardan 2008 has maintained disclosure controls and procedures and
internal control over financial reporting as required under the federal
securities laws with respect to its very limited activities, it has not been
required to maintain and establish these disclosure controls and procedures and
internal control as will be required with respect to businesses such as DAL with
substantial operations. Under the Sarbanes-Oxley Act of 2002 and the related
rules and regulations of the U.S. Securities and Exchange Commission (“SEC”),
the Company will need to implement additional corporate governance practices and
adhere to a variety of reporting requirements and complex accounting rules.
Compliance with these obligations will require significant management time,
place significant additional demands on our finance and accounting staffs and on
our financial, accounting and information systems, and increase our insurance,
legal and financial compliance costs. We may also need to hire additional
accounting and financial staff with appropriate public company experience and
technical accounting knowledge.




We
may qualify as a passive foreign investment company, or “PFIC,” which could
result in adverse U.S. federal income tax consequences to U.S.
investors.




In
general, we will be treated as a PFIC for any taxable year in which either (1)
at least 75% of our gross income (looking through certain 25% or more-owned
corporate subsidiaries) is passive income or (2) at least 50% of the average
value of our assets (looking through certain 25% or more-owned corporate
subsidiaries) is attributable to assets that produce, or are held for the
production of, passive income. Passive income generally includes, without
limitation, dividends, interest, rents, royalties, and gains from the
disposition of passive assets. If we are determined to be a PFIC for any taxable
year (or portion thereof) that is included in the holding period of a U.S.
Holder (as defined in the section of this Report in Item 10(E) captioned
“Taxation – United States Federal Income Taxation – General”) of our ordinary
shares or warrants, the U.S. Holder may be subject to increased U.S. federal
income tax liability and may be subject to additional reporting requirements.
Based on the expected composition of our assets and income for the 2010 taxable
year, we do not expect to be treated as a PFIC for our 2010 taxable year.
However, our actual PFIC status for our 2010 taxable year or any subsequent
taxable year will not be determinable until after the end of such taxable year.
Accordingly, there can be no assurance as to our status as a PFIC for our 2010
taxable year or any future taxable year. U.S. Holders of our ordinary shares or
warrants are urged to consult their own tax advisors regarding the possible
application of the PFIC rules. See the discussion in Item 10(E) entitled
“Taxation – United States Federal Income Taxation – Passive Foreign Investment
Company Rules.”


10





ITEM 5.   OPERATING AND
FINANCIAL REVIEW AND PROSPECTS





DJS Processing Division and
Combined Affiliates - Management’s Discussion and Analysis of Financial
Condition and Results of Operations





Overview





DJSP
Enterprises, Inc. (f/k/a Chardan 2008 China Acquisition Corp.) is a British
Virgin Islands company limited by shares, that was incorporated on February 19,
2008, organized as a blank check company for the purpose of acquiring, engaging
in a merger or share exchange with, purchasing all or substantially all of the
assets of, or engaging in a contractual control arrangement or any other similar
transaction with an unidentified operating business.





On August
11, 2008, we consummated our initial public offering, generating gross proceeds
of $55,000,000 and net proceeds of $52,200,000.  The net proceeds were
deposited into a trust account.





On
January 15, 2010, we acquired a controlling interest in DAL Group, LLC
(“DAL”).  Concurrently with the Transaction, we consummated a private
placement of 1,500,000 ordinary shares of the Company for aggregate gross
proceeds of $10,500,000, which proceeds, together with the cash in the trust
account, were used to pay a portion of the Transaction consideration and related
expenses.





DAL’s
business is comprised of DJS Processing, LLC, a limited liability company
organized under the laws of the State of Delaware (“DJS LLC”), Professional
Title & Abstract Company of Florida, LLC, a limited liability company
organized under the laws of the State of Delaware (“PTA LLC”) and Default
Servicing, LLC, a limited liability company organized under the laws of the
State of Delaware (“DSI LLC”), each of which is engaged in providing non-legal
services supporting residential real estate foreclosure, other related legal
actions and lender real estate owned (“REO”) services.  Each of DJS
LLC, PTA LLC and DSI LLC were formed in Delaware on September 15, 2009 for the
specific purpose of receiving the contribution of the assets used in providing
non-legal services from businesses founded by David J. Stern (i.e., Stern
Holding Company – PT, Inc. (f/k/a Professional Title and Abstract Company of
Florida, Inc.) (“PTA”), Stern Holding Company – DS, Inc. (f/k/a Default
Servicing, Inc.) (“DSI”) and Law Offices of David J. Stern, P.A.
(“DJS”)).





In
connection with the Transaction, DJS, PTA and DSI contributed DJS LLC, PTA LLC
and DSI LLC, respectively, to DAL in exchange for cash, a promissory note, an
obligation for a post-closing cash payment and a minority interest in
DAL.  The members of DAL prior to the Transaction also retained a
minority interest in DAL.





In
connection with the Transaction, DJS LLC entered into a long-term exclusive
Services Agreement with DJS under which it will have the right to perform all
non-legal services required to process foreclosure files and perform ancillary
services.  Pursuant to a facilities sharing agreement, DJS LLC will
furnish corporate and back-office services to DJS, such as finance, accounting,
IT and other administrative functions.  DJS LLC will be the exclusive
processing firm for all business undertaken by DJS, and DJS will be precluded
from pursuing any material business not requiring the use of DJS LLC’s
processing capabilities, subject to limited exceptions.  However, DJS
LLC will not be restricted from pursuing business with other law firms, whether
in Florida or other jurisdictions.  All of our revenues from
foreclosure services are derived from this Services Agreement.  PTA
LLC provides title searches and examinations related to services provided by DJS
and defendant location services to third party processors engaged by
DJS.  DSI LLC provides REO liquidation related services directly to
customers.  Currently, DSI LLC provides such services nationwide for a
single customer.





We
generate revenue by charging for the services performed by our three operating
subsidiaries as described above, each of which is a separate reportable segment.
See Note 10 to Notes to the Combined Carve-out Financial Statements of DJS
Processing Division and Combined Affiliates. The revenues generated from our
foreclosure services, conducted through DJS LLC, are directly related to
the volume of mortgage foreclosures being referred to DJS which, in turn, is
directly related to the number of foreclosures occurring in our principal market
of Florida.  This volume varies based on a number of factors including
general economic conditions as well as government sponsored programs to reduce
mortgage foreclosures which are discussed below.  Virtually all of our
title related services, conducted through PTA LLC, are performed in
connection with the foreclosure files we process; therefore, the revenues we
receive for title related services are also directly related to the volume of
mortgage foreclosures in our principal market.  The revenues generated
by our REO liquidation services, conducted through DSI LLC, are
related to the volume of REO business referred to us by our sole
customer.  As with the other services we provide, this volume is
directly related to the volume of real estate foreclosures in our primary market
as well as real estate foreclosures nationwide as our REO liquidation business
also handles transactions related to real estate foreclosures outside of our
primary market.


11





Initially,
we believe our opportunities for future growth will come from increases in
foreclosure volumes in Florida and an increase in files referred to our primary
client, DJS, by its clients.  Because the average cycle time on a
foreclosure file, except cases that are fully litigated, ranges from 220 to 240
days, with approximately half of the revenue earned within the first month after
the referral, and the remainder near the end of the process, the number of
current referrals is an indicator of revenue levels for the following year, with
high levels of file referrals indicative of strong revenues.  We are
currently forecasting foreclosure volumes and file referrals to increase for at
least the next few years.  As a result of DJS’ position as a leading
residential foreclosure law firm, it now participates in two “direct source”
programs and seeks to increase that number in the future.  These
programs permit DJS to capture more file referrals and ancillary services from
its clients.  We also believe there are opportunities for the growth
of our business in Puerto Rico as a result of increased referrals to DJS from
its existing clients and increase our file volumes and the capacity of DJS’
referral law firm in Puerto Rico to handle significant additional
volume.  In addition, we intend to offer our REO liquidation services
to additional customers, who are already using DJS for their
foreclosures.  We do not believe that pursuing these opportunities
will require significant additional investments by us.





We look
to adapt our infrastructure platform to support foreclosure servicing in other
states and expand our business into those states.  The cost to do so
will vary from state to state and we have not yet developed specific estimates
of such costs.  We may enter new states through acquisitions of
existing processing businesses operating in those states.  These
activities may require significant investments by us,
although  initially we believe we can fund those from our operating
cash and, in the case of acquisitions, through issuances of our
equity.





On a
longer-term basis, we also see opportunities for growth by expanding the
services we offer to include others related to the foreclosure industry such as
publication, document retrieval, lien searches, automotive default services and
foreclosure services for commercial real estate mortgages.  A possible
long-term challenge we face is to expand into counter-cyclical markets before
there is a cyclical decline in foreclosure volumes.  Our long-term
plans; therefore, could include plans to enter the counter-cyclical markets such
as providing mortgage origination services. We are currently reviewing the
development of a national title insurance platform, which could allow us to
expand our service offerings in that area beyond those supporting our
foreclosure processing services and into new counter-cyclical markets, such as
mortgage origination.  Each of these activities would likely represent
new service offerings for us, requiring us to develop new processes and
procedures to provide these services or to acquire businesses already providing
them.  Such activities could require significant investments by
us.





Because
of the preliminary nature of our consideration of these growth initiatives, the
amount of such investments is not known, nor do we know whether we can fund
these investments from our operating cash flows or would have to seek debt
financing from third parties.  Any such debt financing, if available
to us on reasonable terms, would have to be approved by our existing
lenders.





The
following discussion and financial information reflects the combined
carve-out performance of the DJS Processing Division, PTA and DSI for the
periods presented, each of which ended prior to the Transaction.  For
2009, total revenues increased $61.1 million, or 30.7%, from $199.2 million for
2008.  The total revenues of $260.3 million for 2009 primarily
resulted from an increase in the number of mortgage foreclosures taking place in
the principal market of the business, Florida, and as a result of the expansion
of REO activities of DSI.





Recent
Developments





Regulatory
Environment




Federal,
state and local governments have recently proposed, and in some cases enacted,
legislation or have taken other action that may have an adverse impact on the
number of mortgage defaults that go into foreclosure, and therefore on the
number of case files referred to DJS for processing. The federal government
enacted the Hope for Homeowners Act of 2008 and the Emergency Economic
Stabilization Act to bring relief to distressed homeowners and provide funds to
troubled financial institutions, respectively. The Federal Housing Finance
Agency, Fannie Mae and Freddie Mac announced the Streamlined Modification
Program, which is designed to make mortgage payments more affordable, and Fannie
Mae announced the temporary suspension of foreclosure sales. Further, various
lender and mortgage servicers have voluntarily focused their attention on loss
mitigation, loan modification and similar efforts, including moratoria on
certain foreclosure sales, in an attempt to reduce the number of mortgage
defaults and resulting foreclosures.


12





These
programs have met with limited success to date, based on, among other things,
the fact that they only reduce the interest to be paid by borrowers, not
principal owed. While addressing affordability in the near-term, they do not
address the willingness to continue to pay a mortgage on a property that has
negative equity, nor does it deal with the inability to pay as a result of
unemployment or other factors.




The Obama
administration also proposed a $75 billion Mortgage Modification Plan in March
2009 for borrowers facing foreclosure. The Home Affordable Refinance Program
(“HARP”) is meant to help homeowners who have an existing mortgage owned by
Fannie Mae or Freddie Mac to refinance to a lower rate or to a fixed rate
mortgage to improve the affordability of the loan. The program is mainly aimed
at borrowers who are under water. Borrowers owing up to 125% of their home’s
value are eligible for refinancing /assistance, and the borrowers must not be
more than 30 days delinquent on payments. The Home Affordable Modification
Program (“HAMP”), which is scheduled to end on December 31, 2012, is meant to
help homeowners who are at risk of foreclosure to modify their loan to reduce
their monthly mortgage payments.




In
October 2008, we created a team dedicated to the offering of loss mitigation
services to our clients. These services provide our clients with
alternatives to foreclosure such as loan modification or forbearance, which
allow the borrower to continue to own the property; and short sales and
deed-in-lieu of foreclosure which transfer the ownership of the property to the
lender outside of the foreclosure process. Management believes that in addition
to capturing revenues from this service offering that it is well positioned to
receive the foreclosure referral stemming from the re-default of the modified
loans and capture additional revenues, as we will have familiarity with the
file.




In
February 2010, President Obama announced an additional $1.5 billion for five
state housing finance agencies to come up with new programs to address the
foreclosure problem locally. The funds will be directed to states such as
Florida and California, which RealtyTrac Inc. data show had the highest number
of foreclosures in 2009.





2009
Compared to 2008





Revenues
increased by $61.1 million, or 30.7%, for 2009, as compared to 2008 primarily
due to revenues from client-reimbursed costs increasing by $46.8 million to
$139.1 million in 2009, as compared to $92.3 million in 2008 and, to a lesser
extent and as discussed further below, as a result of the increase in mortgage
foreclosures related activities in our principal market, Florida, and as a
result of the expansion of our REO business. For 2009, we received 70,382
foreclosure files, compared to 70,328 foreclosure files received in 2008. The
number of foreclosure files received in 2009 was impacted by the slowdown in
foreclosure files while banks work through the programs discussed in the “Recent
Developments Regulatory Environment” section above. We anticipate that the
programs mentioned above will result in additional fee revenues for us in areas
of loan modifications and loss mitigations. Additionally, unless the real estate
market and unemployment improve, many of the loans that are in the modification
process will likely result in re-default, thus increasing our foreclosure
volume.  According to the Mortgage Bankers Association (“MBA”)
National Delinquency Survey, the percentage of loans in the foreclosure process
at the end of the fourth quarter was 4.58%, an increase of 11 basis points from
the third quarter of 2009 and 128 basis points from one year prior. The combined
percentage of loans in foreclosure or with at least one payment past due
nationally was 15.02 % on a non-seasonally adjusted basis, the highest ever
recorded in the MBA delinquency survey.  According to RealtyTrac, over
3.5 million homes are expected to enter some phase of foreclosure nationally
this year.  Florida continues to be the worst state in terms of
delinquencies.  Approximately 20.4% of Florida mortgages are 90 days
or more past due or already in the process of foreclosure according to MBA’s
chief economist.





Revenues
from client-reimbursed costs increased due primarily to an increase in
foreclosure filing fees which, due to changes in Florida law, over the course of
2009 increased by up to approximately 400%.


13





During
2009, revenues from mortgage foreclosure related services, net of revenue from
client reimbursements, increased by $7.2 million, or 7.0% to $110.0 million,
compared to $102.8 million for 2008.  This consists of (i) an increase
in revenues from DJS LLC’s mortgage foreclosure segment, net of revenue from
client reimbursements, of $10.3 million, or 13.3%, to $87.8 million for 2009,
compared to $77.5 million for 2008 which is primarily due to the increase in
foreclosure files received in 2008 over 2007.  The estimated average
processing time for all foreclosure files, except those cases that are fully
litigated, ranges from 220 to 240 days.  The fee income for
foreclosure processing is recognized utilizing the proportional performance
method during the file processing period based on the achievement of various
processing milestones.  This results in the total revenue for any
given case file being recognized over a period that averages approximately eight
months.  Therefore, revenue for any given year is determined, in part,
by the volume of files in the latter months of the previous
year.  Because foreclosure case volumes were up in the latter part of
2008 over the same period in 2007, revenues from mortgage foreclosure related
services in 2009 increased over 2008 revenues, even though the number of
foreclosure file referrals remained constant from 2008 to 2009.  The
increase in revenue is also attributable to an increase in the number of REO
closings processed during 2009 accounting for a net increase of $2.7 million as
well as a net increase in other services provided by the mortgage foreclosure
segment such as those related to bankruptcy which increased by $0.8
million.  Fees for these services are recognized on a much more
current basis than are those related to mortgage foreclosure
services.  These increases were partially offset by a decrease in the
revenues from PTA LLC’s title related services of $3.1 million, or 12.4%, to
22.2 million for 2009, compared to $25.3 million for 2008 due to a decrease in
the fee per mortgage foreclosure file, permitted to be charged to clients and
certain clients requiring the use of other title service
providers.




During
2009, DSI LLC’s REO liquidation business became an increasingly significant
source of revenue, generating approximately 9.4% of our total revenue excluding
client costs during that period, and it was a leading cause of the increase in
revenues during that period. In 2009, we produced revenues of $11.2 million
compared to revenue of $4.1 million for 2008, representing a 175% growth from
the previous period. We intend to offer DSI LLC services to additional customers
as a means of increasing its contribution to revenues and profits. As an added
benefit resulting from the increase in the share of the revenues produced by DSI
LLC, because these REO services follow the completion of the foreclosure
process, they will have the effect of helping to sustain our revenues even if
foreclosure volumes stabilize or begin what is expected to be a slow decline
following 2012.





The
principal operating expenses of the operating subsidiaries consist of the
following:




·
            Court
      filing fees and other client-reimbursed
costs;




·
            Compensation
      related expense, which consists primarily of the salaries, related
      benefits and payroll taxes paid to or on behalf of our employees that are
      engaged in operations;




·
            Depreciation
      expense, which represents the cost of fixed assets and software allocated
      over the estimated useful lives of these assets, ranging from one to
      thirty years;




·
            Direct
      operating expense, which consists primarily of direct cost such as freight
      and postage;




·
            Other
      general and administrative expenses which consist primarily of rent and
      other facilities-related expenses, as well as office supplies and other
      administrative expenses; and




·
            Interest
      expense.





Client
reimbursed costs, as a percentage of revenues, increased to 53.4% in 2009, as
compared to 46.3% during 2008. In dollar terms, the client reimbursed costs
increased by $46.7 million to $139.1 million from $92.3 million in 2008. We
experienced an increase in client reimbursed costs directly as a result of
increases in the underlying cost on a per file basis. Because these costs are
reimbursed by DJS clients, they do not impact our profitability.





Compensation
related expense decreased to 19.2% of revenues in 2009, as compared to 22.3% in
2008. In dollar terms, the compensation related expense increased by $5.7
million, from $44.4 million in 2008 to $50.1 million in 2009. These increases
primarily occurred due to an increase in headcount needed to process the growth
in foreclosure volume. We had 950 employees on December 31, 2009, compared to
860 on December 31, 2008. We are in the process of examining our processes and
implementing strategies to improve our efficiency, including upgrades to our
technology infrastructure.





Direct
operating and general and administrative expenses, as a percentage of revenues,
increased to 9.8% in the twelve months ended December 31, 2009, as compared to
9.6% in the same period in 2008. In dollar terms, the direct operating expense
increased by $6.4 million.  We experienced an increase in direct
operating expense and other general and administrative expenses primarily as a
result of increase costs for liability insurance and loss claims, outside
professional fees, and freight and postage charges.  The increased
costs were attributable in part to the increased volume of files
handled.  In addition, as the time to complete an average case file
has extended, there is a higher frequency of certain direct operating charges
such as freight and postage.


14





Total
operating expenses as a percentage of revenues increased to 82.9% in the twelve
months ended December 31, 2009, as compared to 78.5% in the same period in 2008,
primarily due to increases in client reimbursed costs. Total operating expenses
(excluding client reimbursed costs) as a percentage of fee revenues increased to
63.2% in the twelve months ended December 31, 2009, as compared to 59.9% in the
same period in 2008.




Total
operating expenses of DJS LLC’s mortgage foreclosure segment increased by $65.1
million to $199.3 million in 2009, from $134.2 million in 2008 primarily due to
an increase in wages and client costs due to an increase in the number of
foreclosure files, in addition to an increase in attorney fees relating to the
Transaction.  Total operating expenses of this segment (excluding
client reimbursed costs) as a percentage of fee income from this segment was
68.5% for 2009, as compared to 54.0% for 2008.  This increase was
primarily due to higher wage expense resulting from hiring additional employees
to accommodate the increase in the number of foreclosure files and an increase
in attorney fees relating to the Transaction, partially offset by an increase in
fee revenue.




Total
operating expenses of PTA LLC’s title related services segment decreased by $5.7
million to $15.0 million in 2009, from $20.7 million in 2008 primarily due to a
decrease in wages and outside title agents in states that require a physical
presence outside Florida.  Total operating expenses of this segment as
a percentage of revenue from this segment was 67.8% for 2009, as compared to
81.8% for 2008, primarily due to a decrease in wages and outside title agent
expenses in states that require a physical presence outside Florida, partially
offset by a decrease in fee revenue.





The
services PTA LLC provides take on average 10 to 14 days to complete while a bill
is remitted immediately upon receiving a file.  As a result, an
estimated amount of deferred revenue is recorded relating to this category of
services.  Historically, the factors used to determine the deferred
revenue estimate, such as the volume of files related to these services, has
remained fairly constant and since the deferred revenue amount is also
immaterial, the amount recorded as an estimate of deferred revenue has remained
unchanged.  This was true for calendar years 2007 and 2008, during
which time the amount remained unchanged at $263,900.  In late 2009,
volumes decreased sufficiently to warrant a change in the amount of deferred
revenue from $263,900 to $225,063.




Total
operating expenses of DSI LLC’s REO liquidation services segment remained
consistent at approximately $1.4 million in 2009 and 2008.  Total
operating expenses of this segment as a percentage of revenue from this segment
was 12.5% for 2009, as compared to 36.5% for 2008.  This decrease was
primarily due to an increase in fee income.




Adjusted
EBITDA, which is a non-GAAP financial measure discussed in more detail below,
increased by $10.1 million, or 16.9%, to $69.9 million in 2009, as compared to
$59.8 million in 2008.





Net
income increased by $1.7 million, or 3.9%, to $44.5 million in 2009, as compared
to $42.9 million in 2008.  Adjusted net income, which is a non-GAAP
financial measure discussed in more detail below, increased by $6.1 million or
15.9% to $44.6 million in 2009, as compared to $38.5 million in
2008.





Adjusted
EBITDA and adjusted net income adjust EBITDA and net income, respectively to
eliminate income and/or expense items that are not expected to be incurred in
periods following the Transaction, primarily relating to payments made in
periods prior to the Transaction to an affiliate of the former shareholders of
the acquired companies.





2008
Compared to 2007




For the
year ended December 31, 2008, revenues increased by $83.7 million, or 72%, as
compared to the same period in 2007, primarily as a result of the increase in
mortgage foreclosures taking place in our major market of Florida. For the year
ended December 31, 2008, we received 70,328 foreclosure files, an increase of
57% from 44,733 foreclosure files received in 2007.




Revenues
from DJS LLC’s mortgage foreclosure segment increased by $70.8 million to $169.8
million in 2008, as compared to $99.0 million in 2007, principally due to an
increase in revenues from client-reimbursed costs and, to a lesser extent, an
increase in fees, in both cases due to the increase in the number of foreclosure
of files.  Revenues from client-reimbursed costs increased by $44.7
million to $92.3 million in 2008, as compared to $47.6 in 2007, while revenue
excluding client-reimbursed costs increased by $26.2 million to $77.5
million in 2008, as compared to $51.3 in 2007.


15





Revenues
from PTA LLC’s title related services segment increased by $10.5 million to
$25.3 million in 2008, as compared to $14.8 million in 2007, principally due to
an increase in the number of foreclosure files.




Revenues
from DSI LLC’s REO liquidation segment increased by $2.4 million to $4.1 million
in 2008, as compared to $1.7 million in 2007, principally due to an increase in
REO liquidation files referred to DSI LLC.




Client
reimbursed costs, as a percentage of revenues, increased to 46.3% in fiscal 2008
as compared to 41.2% in fiscal 2007. In dollar terms, the client reimbursed
costs increased by $44.7 million. We experienced an increase in client
reimbursed costs principally as a result of continuing growth in foreclosure
case volume as well as variances in the underlying expenses
themselves.




Compensation-related
expense, as a percentage of revenues, increased to 22.3% in fiscal 2008 as
compared to 17.6% in fiscal 2007. In dollar terms, the compensation related
expense increased by $24.1 million. The increase in compensation related expense
is as a result of an increase in headcount to handle the increased volume of
foreclosures and the related recruiting and training costs incurred to support
the growth of the our operations. Between fiscal 2007 and 2008, we built
capacity both to meet its growing demand and in anticipation of continued growth
in foreclosure volume. It had approximately 600 employees on December 31, 2008
compared to approximately 350 on December 31, 2007. As stated above, we are now
implementing strategies to improve efficiency and reduce costs as a percentage
of revenues.




Direct
operating expense, as a percentage of revenues, increased to 3.5% in fiscal 2008
as compared to 3.1% in fiscal 2007. In dollar terms, the direct operating
expense increased by $3.4 million.  We experienced an increase in
direct operating expense primarily as a result of increase in freight and
postage charges. The increased costs were primarily attributable to increases in
the underlying expenses. In addition, as the time to complete an average case
file has extended, there is a higher frequency of incurring certain direct
operating charges such as freight and postage.




Other
general and administrative expense, as a percentage of revenues, increased to
6.1% in fiscal 2008 as compared to 4.4% in fiscal 2007. This increase was
primarily attributable to the higher rent and relocation costs associated with
our new facilities in Plantation, Florida, as well as increased marketing
expenses. In dollar terms, the other general and administrative expense
increased by $7.0 million.





Total
operating expenses as a percentage of revenues increased to 78.5% in fiscal 2008
as compared to 66.5% in fiscal 2007. Total operating expense (excluding client
reimbursed costs) as a percentage of fee revenues increased to 59.0% in fiscal
2008 as compared to 44% in fiscal 2007. The increase in total operating expense
primarily was due to a ramp up in staff in order to continue to deliver a level
of customer service to its clients in light of continued strong demand for
foreclosure related services. In addition, we incurred larger fixed costs
associated with rent and facilities as it moved its headquarters into a larger
facility.




Adjusted
EBITDA, which is a non-GAAP financial measure discussed in more detail below,
increased by $16.1 million, or 36.8%, to $59.8 million in 2008, as compared to
$43.7 million in 2007, primarily as a result of the increase in revenues
discussed above.




Net
income increased by $6.2 million or 10.8%, to $42.9 million in 2008, as compared
to $36.7 million in 2007.





Adjusted
net income, which is a non-GAAP financial measure discussed in more detail
below, increased by $10.2 million or 36.3% to $38.5 million in 2008, as compared
to $28.2 million in 2007.





Adjusted
EBITDA and adjusted net income adjust EBITDA and net income, respectively, to
eliminate income and/or expense items that are not expected to be incurred in
periods following the Transaction, primarily relating to payments made, in
periods prior to the Transaction, to the former shareholders of the acquired
companies and their affiliates.




Total
operating expenses of DJS LLC’s mortgage foreclosure segment increased by $66.9
million to $134.2 million in 2008, from $67.3 million in 2007 primarily due to
an increase client costs.  Total operating expenses of this segment
(excluding client reimbursed costs) as a percentage of fee income from this
segment was 54.0% for 2008, as compared to 38.4% for 2007.  This
increase was primarily due to an increase in wages and rent
expense.


16





Total
operating expenses of PTA LLC’s title related services segment increased by
$11.7 million to $20.7 million in 2008, from $9.0 million in 2007 primarily due
to an increase in wages and outside title agent expenses in states that require
a physical presence outside Florida.  Total operating expenses of this
segment as a percentage of revenue from this segment was 81.8% for 2008, as
compared to 60.4% for 2007, primarily due to an increase in wages and outside
title agent expenses in states that require a physical presence outside Florida,
partially offset by an increase in fee revenue.




Total
operating expenses of DSI LLC’s REO liquidation services segment increased by
$970,000 to $1.5 million in 2008, from $530,000 in 2007 and total operating
expenses of this segment as a percentage of revenue from this segment was 36.5%
for 2008, as compared to 31.4% for 2007.  These increases were due to
higher wage expense due to the hiring of additional employees to accommodate the
increased number of REO liquidation files referred to DSI LLC and a unreimbursed
loss recognized in connection with a client, partially offset by increase
revenue attributable to the increased number of files.




Financial
Condition





The
following table sets forth the major balance sheet accounts at December 31, 2009
and 2008 (in thousands):





December 31,2009
                  
                  
                  2008Assets:Cash
      and cash equivalents
                  
                  $
                  763
                  
                  
                  $
                  1,428Accounts
      receivable
                  
                  
                  33,074
                  
                  
                  
                  49,166Property,
      equipment and improvement, net
                  
                  
                  4,692
                  
                  
                  
                  3,155Liabilities:Accounts
      payable – client reimbursed costs
                  
                  $
                  6,047
                  
                  
                  $
                  20,425Line
      of credit
                  
                  
                  10,656
                  
                  
                  
                  —




Cash
and cash equivalents decreased to $0.8 million at December 31, 2009 compared to
$1.4 million at December 31, 2008.





Accounts
receivable decreased by $16.1 million, or 32.7%, to $33.1 million as of December
31, 2009, compared with $49.2 million as of December 31, 2008. The decrease in
accounts receivables is as a result of strong efforts to collect from
clients.





Property,
equipment and improvement, net increased at December 31, 2009 to $4.7 million
from $3.2 million at December 31, 2008, or 48.7%, as a result of new office
space leased and office furniture being purchased for the new
offices.





Accounts
payable – client reimbursed costs decreased by $14.4 million to $6.0 million at
December 31, 2009 from $20.4 million at December 31, 2008, as a result of the
implementation of new billing practices which allow for the reimbursement of
client related costs more rapidly, thereby allowing for faster payment of such
costs to our vendors, and the use of line of credit borrowings to fund the
payments of these accounts payable.





Line of
credit borrowings were obtained from a bank and were secured by customer
receivables.  The line of credit was drawn primarily due to the
increase in filing fees per case file.  DJS LLC pays the initial
filing fee and bills the customer for the amount.  Eventually, DJS LLC
is reimbursed for the filing fee, but in periods of high growth, an increase of
available cash is necessary to cover the initial filing fees.  At the
time of the closing of the Transaction, the line of credit was repaid in full
using the proceeds of Senior Financing Notes that were issued simultaneously
with the closing.  On March 23, 2010, we obtained a new $15 million
line of credit from a bank that is secured by customer
receivables.  Approximately $12.6 million of the line was immediately
drawn.  Simultaneously, the principal and interest outstanding on all
but three of the Senior Financing Notes were repaid, leaving an aggregate
outstanding principal balance for the Senior Financing Notes of $3
million.  The new line of credit will be used for the same purposes as
the one paid in full at the closing of the Transaction, as well as for other
working capital needs.





Our
working capital needs will fluctuate primarily based upon a number of factors,
including (i) revenues, (ii) account and notes receivables changes and (iii)
case files started. Historically, income from continuing operations has funded
the account receivables growth, but with the recent increase in filing fees, the
Company may need to borrow funds from third parties from time to time to fund
its cash requirements, such as from the new line of credit described
above.


17





Liquidity
and Capital Resources





The
following table sets forth certain historical information with respect to our
statements of cash flows (in thousands):





Year Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Net
      cash provided by operating activities
                    
                    $
                    48,345
                    
                    
                    $
                    43,363
                    
                    
                    $
                    20,897Net
      cash used in investing activities
                    
                    
                    (2,652
                    )
                    
                    
                    (2,274
                    )
                    
                    
                    (1,302
                    )Net
      cash used for financing activities
                    
                    
                    (46,357
                    )
                    
                    
                    (40,640
                    )
                    
                    
                    (18,686
                    )Net
      increase (decrease) in cash and cash equivalents
                    
                    $
                    (664
                    )
                    
                    $
                    449
                    
                    
                    $
                    909





During
2009, we generated positive operating cash flows of $48.3 million. These cash
flows related primarily to net income of $45 million, adjusted for non-cash
charges for depreciation of $1.1 million. These operating cash inflows are
partially offset by an aggregate decrease in cash flow from our operating assets
and liabilities of $2.7 million. Our investing activities used $2.7 million of
cash, consisting primarily of the expenditure of $2.7 million for the purchase
of property and equipment required to support our expanded file volumes and
related personnel.  Our financing activities used cash of $46.4
million, which was primarily used to pay profit and tax distributions to our
pre-Transaction sole shareholder partially offset by advances on our line of
credit of $9.5 million.





During
2008, we generated positive operating cash flows of $43.4 million. These cash
flows related primarily to net income of $42.9 million, adjusted for, among
other things, non-cash charges for depreciation and disposal of leasehold
improvements of $2.3 million. These operating cash inflows are partially offset
by an aggregate decrease in cash flow from our operating assets and liabilities
of $1.8 million. Our investing activities used $2.3 million of cash, consisting
primarily of the expenditure of $2.3 million for the purchase of property and
equipment required to support our expanded file volumes and related personnel.
Our financing activities used cash of $40.7 million, which was primarily used to
pay profit and tax distributions to our pre-Transaction sole
shareholder.





During
2007, we generated positive operating cash flows of $20.9 million. These cash
flows related primarily to net income of $38.7 million, adjusted for
depreciation of $278 thousand. These operating cash inflows are partially offset
by an aggregate decrease in cash flow from our operating assets and liabilities
of $18.1 million. Our investing activities used $1.3 million of cash, consisting
primarily of the expenditure of $1.3 million for the purchase of property and
equipment required to support our expanded file volumes and related personnel.
Our financing activities used cash of $18.7 million, which was primarily used to
pay profit and tax distributions to our pre-Transaction sole
shareholder.





In
connection with the Transaction, we issued the following notes on January 15,
2010:




·
            A
      note in the amount of $52,469,000 issued to DJS (the “Stern Deferral
      Note”) which has an interest rate of 3.0% per annum and a maturity date of
      36 months after January 15, 2010;




·
            Notes
      in the aggregate amount of $1,100,000 relating to deferred compensation
      issued to the underwriters of the Company’s initial public offering, which
      have an interest rate of 5% per annum and are payable upon the earlier of
      (i) the one year anniversary of the repayment of the Stern Deferral Note,
      or (ii) January 15, 2012;




·
            A
      note in the aggregate amount of $500,000 relating to certain deferred
      compensation owing by the Company to Rodman & Renshaw, LLC which has
      an interest rate of 5% per annum and is payable upon the earlier of (i)
      the one year anniversary of the repayment of the Stern Deferral Note, or
      (ii) January 15, 2012;




·
            A
      note in the amount of $250,000 relating to deferred compensation owing by
      the Company to Chardan Capital Markets, LLC which has an interest rate of
      5% per annum and is payable upon the earlier of (i) the one year
      anniversary of the repayment of the Stern Deferral Note, or (ii) January
      15, 2012; and


18




·
            Notes
      in the aggregate amount of $15,188,736 relating to a senior financing
      facility (the “Senior Financing Notes”) entered into in connection with
      the Transaction and which have interest rates of 15% per annum and are
      payable by January 15, 2011.





In March
2010, we obtained a new $15 million line of credit from Bank of
America.  Approximately $12.6 million of the line was immediately
drawn.  Simultaneously, the principal and interest outstanding on all
but three of the Senior Financing Notes were repaid, leaving an aggregate
outstanding principal balance for the Senior Financing Notes of $3
million.  The new line of credit will be used for the same purposes as
the one paid in full at the closing of the Transaction, as well as for other
working capital needs.  See the section of this Report titled, “Item
10(C). Additional Information – Material Contracts – Contracts Related to
Company Operations – Line of Credit Loan Agreement” for more information about
the terms of the new line of credit.




We
anticipate that we will have adequate sources of working capital in the
foreseeable future, although, as indicated above, we may need to borrow funds
from time to time to fund those needs, in addition to the new line of credit
described above.  We may elect in the future to obtain additional
funding to expand and grow our operations, which may include borrowings from
financial institutions and/or the sale of equity.





Adjusted
EBITDA/Adjusted Net Income





The
adjusted EBITDA measure presented consists of income (loss) from continuing
operations before (a) interest expense; (b) income tax expense; (c) depreciation
and amortization; and (d) income and/or expense items that are expected to be at
reduced levels in future periods. The adjusted EBITDA margin is the ratio of
adjusted EBITDA to total revenues. We are providing adjusted EBITDA, a non-GAAP
financial measure, along with GAAP measures, as a measure of profitability
because adjusted EBITDA helps us to evaluate and compare our performance on a
consistent basis with the lower operating cost structure that will be in place
after consummation of the Transaction, reflecting the effects of that lower cost
structure on profitability. In the calculation of adjusted EBITDA, we exclude
from expenses the compensation paid to Stern that exceeds the base compensation
that he is entitled to receive after completion of the Transaction, since after
such time the Company does not have any arrangement with Stern that would
require any payments to him at a comparable level. Stern does not have an
incentive plan arrangement providing for pay above base compensation. In
addition, we excluded the payroll taxes associated with such compensation, as
well as travel expenses incurred on behalf of Stern in prior periods that are
not being provided after the Transaction.





In the
calculation of adjusted net income measure presented, we deduct the depreciation
and amortization amounts from adjusted EBITDA calculation and then subtracts
assumed income tax expense, calculated at the expected going forward tax rate of
35%.  For periods prior to the Transaction, we were not subject to
income tax and so did not record income tax expense.  We are providing
adjusted net income, a non-GAAP financial measure, along with GAAP measures, as
a measure of profitability because adjusted net income helps us to evaluate and
compare our past performance on a consistent basis with the taxable structure in
place after consummation of the Transaction, reflecting the effects of that
taxable structure on profitability.





The
following table provides reconciliations of net income (US GAAP) to Adjusted
EBITDA (Non-GAAP) and adjusted net income (Non-GAAP).





Reconciliations
Of Net Income (US GAAP) To Adjusted EBITDA (Non-GAAP)


and
Adjusted Net Income (Non-GAAP)




Years Ended December 31,2009
                    
                    
                    2008
                    
                    
                    2007Net
      Income
                    
                    $
                    44,565
                    
                    
                    $
                    42,886
                    
                    
                    $
                    38,689AdjustmentsCompensation
      related
                    
                    
                    12,262
                    
                    
                    
                    15,887
                    
                    
                    
                    4,710Non-recurring
      travel
                    
                    
                    6,372
                    
                    
                    
                    385
                    
                    
                    
                    —Adj.
      to fee to processing
                    
                    
                    3,631
                    
                    
                    
                    —
                    
                    
                    
                    —Transaction
      related
                    
                    
                    260
                    
                    
                    
                    —
                    
                    
                    
                    —Interest,
      depreciation & amortization
                    
                    
                    1,297
                    
                    
                    
                    594
                    
                    
                    
                    278Other
                    
                    
                    1,486
                    
                    
                    
                    —
                    
                    
                    
                    —Total
      adjustments
                    
                    
                    25,308
                    
                    
                    
                    16,866
                    
                    
                    
                    4,988Adjusted
      EBITDA
                    
                    $
                    69,873
                    
                    
                    $
                    59,752
                    
                    
                    $
                    43,677Interest,
      depreciation & amortization
                    
                    
                    1,297
                    
                    
                    
                    594
                    
                    
                    
                    278Income
      taxes estimate at 35%
                    
                    
                    24,002
                    
                    
                    
                    20,705
                    
                    
                    
                    15,189Adjusted
      Net Income
                    
                    $
                    44,574
                    
                    
                    $
                    38,453
                    
                    
                    $
                    28,210


19





Adjusted
EBITDA and adjusted net income are non-GAAP financial measures that have
limitations because they do not include all items of income and expense that
affect our operations. These non-GAAP financial measures are not prepared in
accordance with, and should not be considered an alternative to, measurements
required by GAAP, such as operating income, net income (loss), net income (loss)
per share, cash flow from continuing operating activities or any other measure
of performance or liquidity derived in accordance with GAAP. The presentation of
this additional information is not meant to be considered in isolation or as a
substitute for the most directly comparable GAAP measures. In addition, it
should be noted that companies calculate adjusted EBITDA and adjusted net income
differently and, therefore, adjusted EBITDA and adjusted net income as presented
for us may not be comparable to the calculations of adjusted EBITDA and adjusted
net income reported by other companies.





Contractual
Payment Obligations





The
following is a summary of our known contractual obligations as of December 31,
2009.





Payments due by periodContractual Obligations
                    
                    Total
                    
                    
                    Less than
                      1 year
                    
                    
                    1-3 years
                    
                    
                    4-5 years
                    
                    
                    More than
                      5 yearsOperating
      lease obligations (1)
                    
                    $
                    17,251
                    
                    
                    $
                    2,711
                    
                    
                    $
                    5,895
                    
                    
                    $
                    6,137
                    
                    
                    $
                    2,508Capital  lease
      obligations
                    
                    
                    566
                    
                    
                    
                    191
                    
                    
                    
                    303
                    
                    
                    
                    70
                    
                    
                    
                    -Total
                    
                    $
                    17,817
                    
                    
                    $
                    2,902
                    
                    
                    $
                    6,198
                    
                    
                    $
                    6,207
                    
                    
                    $
                    2,508





(1)
            We
      are obligated for leases of office space under non-cancellable operating
      lease agreements which expire at times ranging from September 2012 through
      October 2018. Rent expense is recognized on a straight line basis over the
      terms of the leases based on the aggregate amount of payments due over the
      lease terms.




Critical
Accounting Policies and Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect both the reported amounts of assets,
liabilities, revenue and expenses during the reporting period, and disclosure of
contingent assets and liabilities at the date of the financial statements.
Actual results could differ from those estimates.





Revenue
Recognition





Substantially
all of DJS LLC’s and PTA LLC’s revenues are generated from services rendered
ultimately to the clients of DJS. A substantial portion of the accounts
receivable are generated from DJS, DJS LLC’s only customer for foreclosure and
related services, at the time DJS bills its clients. DSI LLC has independent
relationships with its clients for REO liquidation services and does not receive
file referrals directly from DJS.





The
estimated average file processing time for all foreclosure files, except cases
that are fully litigated, ranges from 220 to 240 days. The fee income for
foreclosure processing is recognized utilizing the proportional performance
method during the file processing period based on the achievement of various
processing milestones. DJS LLC bills DJS for services performed and recognizes
revenue for services performed but not yet billed, reporting them as unbilled
receivables at the end of each reporting period.





Revenue
related to all types of services other than foreclosure is recognized using the
completed performance method. Revenue is recognized once the services are
performed and the Company has no further fulfillment responsibilities related to
these services. Accounts receivable for title services is presented net of an
allowance for estimated uncollectible accounts based on management’s experience
and expectations.


20





The
per-file fee negotiated between DJS LLC and DJS is based on negotiations between
related parties. There can be no assurances that the per file fees or the level
of profitability achieved would be the same if the fees had been negotiated
between unrelated entities.





Expense
Allocation





Management
has allocated certain expenses of DJS to the operating subsidiaries based on its
estimate of expenses the operating subsidiaries would have incurred on a
stand-alone basis during the periods reported; however, there can be no
assurance that these expenses represent the expenses of the operating
subsidiaries on a stand-alone basis, or that the allocations are fully inclusive
of the functions necessary to operate the operating subsidiaries on a
stand-alone basis. The following is a summary of the methodology used to
allocate expenses in some major categories.




·
            Certain
      executive officers of DJS are substantially involved with the operating
      subsidiaries’ operations. Their salaries, bonuses, payroll taxes and
      related auto, travel, meals, entertainment and professional expenses are
      allocated to the operating subsidiaries based on the estimated percentage
      of time the executive officers spent on the activities of the operating
      subsidiaries.




·
            Employee
      benefits, including health insurance, pension/profit sharing, workers’
      compensation, incentives and training, are allocated based on the number
      of employees specifically assigned to the operating subsidiaries in
      relation to the total number of employees of DJS (“the employee ratio
      method”).




·
            Equipment
      lease expense is allocated based on the employee ratio
    method.




·
            Certain
      facilities lease expenses are allocated based on the employee ratio
      method.




·
            Depreciation
      is computed based on the equipment and leasehold improvements utilized by
      the operating subsidiaries as determined by the above allocation
      methods.




·
            Postage
      and delivery is allocated based on the employee ratio
    method.




·
            Advertising,
      marketing and professional fees are allocated based on the estimated
      percentages that apply to our business
  activities.




·
            All
      other general and administrative expenses were allocated based on the
      employee ratio method.





In the
opinion of management, the proceeding expense allocations are a reasonable basis
for determining the costs associated with the carve-out processing
division.





Income
Taxes





Because
DJS LLC, PTA LLC and DSI LLC are limited liability companies, they will not be
subject to income taxes. Because they are pass-through entities, the taxable
income of these three entities will be passed through to each company’s sole
member, DAL. DAL will pass through this taxable income to its members, including
the Company.  Prior to the Transaction, DJS, PTA and DSI were not
subject to income taxes under federal or state tax laws. Instead, the taxable
income of these entities was passed through to the owner of the companies and
was taxable to the owner on an individual level. Therefore, the financial
statements presented through December 31, 2009 do not reflect an allocation of
federal and state income taxes.





Recently
Issued Accounting Pronouncements





See the
section entitled “Nature of Business and Significant Accounting Policies” in
Note 1 to the combined financial statements of the operating subsidiaries, which
is incorporated herein by reference.





21




Market
Risk





As of
December 31, 2009, the Company did not have instruments subject to market risk.
After the Transaction, our functional currency is the U.S. dollar and so are
virtually all of our revenues and operating costs; therefore, we do not expect
to be exposed to any significant extent to the impact of changes in foreign
currency exchange rates. Furthermore, most of our debt carries a fixed rate of
interest, so we do not expect to be exposed to any significant extent to the
impact of changes in market interest rates.





Seasonality





Seasonality
has not historically impacted our operating results.





Impact
of Inflation





Inflation
has not historically been a significant factor impacting our operating
results.




Chardan 2008 Financial
Condition and Results of Operations




The
following discussion and financial information reflects the performance of
Chardan 2008 for periods prior to the Transaction.





Critical
Accounting Policies and Estimates





The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that both the reported amounts of
assets, liabilities, revenue and expenses during the reporting period, and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could materially differ from those estimates. We have
identified the following as our critical accounting policies:





Cash and cash
equivalents.  We consider all highly liquid investments,
including short-term money market instruments with original maturities of three
months or less when purchased, to be cash equivalents.





Results
of Operations





2009.  For the
period from January 1, 2009 to December 31, 2009, we had net income/(loss)
of  $(446,904), which consisted of interest income of $47,286 earned
on the Trust Account investment of approximately $54,300,000, offset by filing
and listing fees of $54,043,  management fees of $90,000 and $259,721
for travel-related expenses, and other miscellaneous administrative
fees.





2008.  For the
period from February 19, 2008 (inception) to December 31, 2008, we had net
income/(loss) of ($59,789), which consisted of interest income of $484,894
earned on the trust account investment of $54,564,894, offset by filing fees of
$87,471, $65,000 for D&O insurance, $172,616 for travel-related expenses and
other miscellaneous administrative fees.





Liquidity
and Capital Resources





The funds
held in the trust account were available for use only to: (i) engage in an
acquisition transaction; (ii) redeem up to one ordinary share less than 35% of
the shares voted against an extension of the period of time to consummate an
acquisition if an extended period was approved by the shareholders; (iii) redeem
up to one ordinary share less than 35% of the shares owned by the public
shareholders that voted against an acquisition transaction if the transaction
was approved and completed; or (iv) distribute to the public shareholders in the
event Chardan 2008 had failed to complete an acquisition transaction within the
time available to it and liquidated and dissolved, subject to certain
exceptions.





At
December 31, 2009, Chardan 2008 had approximately $54,302,000 held in the trust
account, and cash outside of the trust account of approximately
$24,000.  Chardan 2008 has since used these funds to cover expenses
incurred in identifying, evaluating and performing due diligence with respect to
the Transaction, as well as for legal, accounting and other expenses associated
with structuring, negotiating and documenting the Transaction. Prior to the
Transaction, Chardan 2008 also incurred regular expenses to meet its obligations
under applicable securities laws, to maintain directors’ and officers’ insurance
coverage and to pay a monthly $7,500 administrative expense to Chardan Capital,
LLC, an affiliate of Li Zhang, former chairman of Chardan 2008’s board of
directors.


22





Off-Balance
Sheet Arrangements





Prior to
its acquisition of a controlling interest in DAL on January 15, 2010, Chardan
2008 never entered into any off-balance sheet financing arrangements, never
established any special purpose entities, and had not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.




Contractual
Obligations





Prior to
its acquisition of a controlling interest in DAL on January 15, 2010, Chardan
2008 did not have any long-term debt, capital lease obligations, operating lease
obligations, purchase obligations or other long-term liabilities. However, as
discussed above, Chardan 2008 paid Chardan Capital, LLC a monthly rental of
approximately $7,500, for office space and administrative services up until the
acquisition of DAL.





Inflation





Inflation
has not impacted the results of Chardan 2008.




Unaudited Pro Forma
Condensed Combined Financial Statements




The
following unaudited pro forma condensed combined financial information has been
prepared assuming that the Transaction, including the acquisition by us of a
controlling interest in DAL, DAL’s acquisition of the membership interests of
DJS LLC, PTA LLC and DSI LLC and the Stern Contributors transfer of non-legal
business, assets and liabilities to DJS LLC, PTA LLC and DSI LLC, all of which
occurred concurrently with the closing of the Transaction on January 15, 2010,
occurred (i) at the beginning of each of the applicable periods for the pro
forma statements of operations and (ii) at December 31, 2009 for the pro forma
balance sheet.





The
unaudited pro forma condensed combined financial information is provided for
illustrative purposes only. The historical financial information has been
adjusted to give effect to pro forma events that are directly attributable to
the Transaction, are factually supportable, and are expected to have a
continuing impact on the combined results.





You
should not rely on the unaudited pro forma condensed combined balance sheet as
being indicative of the historical financial position that would have been
achieved had the transactions contemplated by the Transaction been consummated
as of December 31, 2009, or the unaudited pro forma condensed combined
statements of operations as being indicative of the historical financial results
of operations that would have been achieved had the Transaction been consummated
on the first day of each of the respective operating periods. See “Item 3(D).
Risk Factors” for further details.





We are
providing the following information to aid in the analysis of the operations of
the Company after the Transaction. The historical financial information of the
operating subsidiaries was derived from the audited combined financial
statements of DJS Processing Division and Affiliates for the year ended December
31, 2009 and the notes thereto included elsewhere in this Report. The historical
financial information of Chardan 2008 was derived from the audited financial
statements of Chardan 2008 for the year ending December 31, 2009 and the notes
thereto included elsewhere herein. This information should be read together with
such financial statements and related notes, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” for DJS Processing
Division and Affiliates and Chardan 2008, and other financial information
included elsewhere in this Report.





Actual
results could differ from the pro forma information presented and depend on
several variables, including the actual timeline of the conversion of the DAL
Series B Preferred Units.





The
Transaction was accounted for as a reverse capitalization, due to, among other
things, the fact that the owner of DJS, PTA and DSI will have significant
representation on the Board of Directors (initially four out of seven members),
and the management of the acquired business became the management of DAL and the
Company. This treatment also disregards DAL for accounting purposes for the
reason that it serves principally to issue equity interests in connection with
the Transaction, and it did not have significant operations prior to its role in
the Transaction, along with the fact that the equity interests in DAL held by
the Stern Contributors and the then existing members of DAL and their assignees
are exchangeable for comparable securities in the Company.


23


DJSP
ENTERPRISES, INC. (FORMERLY KNOWN AS CHARDAN 2008 ACQUISITION
CORP.)


AND
DJS PROCESSING DIVISION AND COMBINED AFFILIATES


Unaudited
Pro Forma Condensed Combined Balance Sheet


Year
Ended December 31, 2009


(In
thousands of U.S. Dollars, except share and per share amounts)




DJSP Enterprises, Inc.
                                        
                                        
                                        DJS(formerly known as
                                        
                                        
                                        ProcessingChardan 2008
                                        
                                        
                                        DivisionChina
                                        
                                        
                                        and
                                        
                                        
                                        Pro Forma
                                        
                                        
                                        Pro FormaAcquisition
                                        
                                        
                                        Combined
                                        
                                        
                                        Adjusting and Eliminating Entries
                                        
                                        
                                        CombinedCorp.)
                                        
                                        
                                        Affiliates
                                        
                                        
                                        Debit
                                        
                                        
                                        Credit
                                        
                                        
                                        CompaniesAssetsCurrent
      assets:Cash
                                        
                                        $
                                        23
                                        
                                        
                                        $
                                        763
                                        
                                        
                                        
                                        10,500
                                        (4)
                                        
                                        
                                        3,568
                                        (7)
                                        
                                        $
                                        3,36015,589
                                        (11)
                                        
                                        
                                        4,198
                                        (9)15,750
                                        (11)Funds
      held in trust
                                        
                                        
                                        54,302
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        54,302
                                        (1)(9)
                                        
                                        
                                        -Accounts
      receivable
                                        
                                        
                                        -
                                        
                                        
                                        
                                        33,074
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        33,074Prepaid
      expenses and other current assets
                                        
                                        
                                        1,364
                                        
                                        
                                        
                                        87
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,451Total
      current assets
                                        
                                        
                                        55,689
                                        
                                        
                                        
                                        33,924
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        37,884Equipment
      and Leasehold Improvements, net
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,692
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,692Total
      assets
                                        
                                        $
                                        55,689
                                        
                                        
                                        $
                                        38,616
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        $
                                        42,576LiabilitiesCurrent
      liabilities:Accounts
      payable - reimbursed client costs
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        6,047
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        $
                                        6,047Accounts
      payable
                                        
                                        
                                        1,401
                                        
                                        
                                        
                                        1,506
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2,907Current
      portion of capital lease
                                        
                                        
                                        -
                                        
                                        
                                        
                                        192
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        192Deferred
      revenue
                                        
                                        
                                        -
                                        
                                        
                                        
                                        225
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        225Due
      to related party
                                        
                                        
                                        125
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        125Accrued
      expenses
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,201
                                        
                                        
                                        
                                        3,568
                                        (7)
                                        
                                        
                                        8,838
                                        (8)
                                        
                                        
                                        6,470Accrued
      compensation
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,863
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,863Current
      portion of deferred rent
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,020
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,020Deferred
      underwriting fees
                                        
                                        
                                        1,430
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,430
                                        (3)
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Notes
      Payable & Client Trust Account - Current
                                        
                                        
                                        -
                                        
                                        
                                        
                                        13,203
                                        
                                        
                                        
                                        15,750
                                        (11)
                                        
                                        
                                        2,547
                                        (2)
                                        
                                        
                                        -Total
      current liabilities
                                        
                                        
                                        2,957
                                        
                                        
                                        
                                        25,256
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        18,849Deferred
      rent, less current portion
                                        
                                        
                                        
                                        
                                        
                                        
                                        78
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        78Capital
      lease obligation, less current portion
                                        
                                        
                                        
                                        
                                        
                                        
                                        262
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        262Senior
      Secured Notes
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        15,589
                                        (11)
                                        
                                        
                                        15,589Due
      to Related Party - Stern Notes
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        87,469
                                        (9)
                                        
                                        
                                        87,469Total
      liabilities
                                        
                                        
                                        2,957
                                        
                                        
                                        
                                        25,596
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        122,247Ordinary
      shares, subject to possible redemption
                                        
                                        
                                        18,985
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        18,985
                                        (5)
                                        
                                        
                                        
                                        
                                        
                                        
                                        --Stockholders’
      equity
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Preferred
      shares Series A, $0.0001 par value
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Preferred
      shares Series B, $0.0001 par value
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Ordinary
      shares, $0.0001 par value
                                        
                                        
                                        1
                                        
                                        
                                        
                                        1
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        2Additional
      paid-in capital
                                        
                                        
                                        34,253
                                        
                                        
                                        
                                        8,671
                                        
                                        
                                        
                                        8,838
                                        (8)
                                        
                                        
                                        18,985
                                        (5)
                                        
                                        
                                        61,948507
                                        (10)
                                        
                                        
                                        1,430
                                        (3)2,547
                                        (2)
                                        
                                        
                                        10,500
                                        (4)Retained
      earnings
                                        
                                        
                                        (507
                                        )
                                        
                                        
                                        4,348
                                        
                                        
                                        
                                        145,969
                                        (9)
                                        
                                        
                                        507
                                        (10)
                                        
                                        
                                        (118,455
                                        )23,166
                                        (6)Total
      DJSP Enterprises, Inc.’s equity
                                        
                                        
                                        33,747
                                        
                                        
                                        
                                        13,020
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (56,505
                                        )Noncontrolling
      interest
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        23,166
                                        (6)
                                        
                                        
                                        
                                        
                                        
                                        
                                        (23,166
                                        )Total
      Equity
                                        
                                        
                                        33,747
                                        
                                        
                                        
                                        13,020
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (79,671
                                        )Total
      liabilities and stockholders’ equity
                                        
                                        $
                                        55,689
                                        
                                        
                                        $
                                        38,616
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        $
                                        42,576




24





Pro
Forma Adjustments and Eliminations (In thousands of U.S. Dollars, except for
share and per share data, unless otherwise noted):





(1)
            To
      liquidate investments held in
trust.





(2)
            To
      adjust actual closing payments on line of credit to amount outstanding at
      balance sheet date and to eliminate client trust accounts which were not
      transferred in the Transaction.





(3)
            To
      record payment of deferred underwriting fees of $1,430 as part of Footnote
      (8).





(4)
            To
      record $10,500 gross proceeds of a simultaneous to close Private Placement
      equity investment in DJSP Enterprises, Inc. of 1,500 shares at $7.00 per
      share.





(5)
            To reclassify
      ordinary shares no longer subject to redemption, and related deferred
      interest, because substantially all shareholders approve of the proposed
      acquisition.





(6)
            This
      amount represents the net assets attributable to the combined
      noncontrolling ownership interests of DAL. The noncontrolling interests of
      DAL exist following the Transaction due to the ownership by the Stern
      Contributors and Existing Members of DAL.  Each owns a
      combination of either DAL common units, DAL Series A preferred units,
      and/or DAL Series B preferred units.  This ownership represents
      a combined 29.05% of DAL.  Refer also to footnote 12 of the pro
      forma balance sheet for additional details of this ownership and the units
      related to the noncontrolling ownership interests.  The
      ownership percentages and equity allocations for the members of DAL, on a
      pro forma basis, as of the closing date of the Transaction, are summarized
      below.





Member
                
                Ownership
      Interest
                
                
                Equity
                  AllocationDJSP
      Enterprises
                
                
                70.95
                %
                
                $
                56,579Stern
      Contributors
                
                
                19.07
                %
                
                $
                15,207Existing
      Members
                
                
                9.98
                %
                
                $
                7,958Total
                
                
                100.00
                %
                
                $
                79,744




(7)
            To
      record payment of costs related to the
  Transaction.





(8)
            To
      accrue balance of estimated costs of raising capital based upon engagement
      letters, actual invoices and/or currently updated fee estimates as
      follows:





Investment
      banking fees
                  
                  $
                  4,800Financial
      due diligence
                  
                  
                  115Legal
      fees
                  
                  
                  3,220Accounting
      fees
                  
                  
                  296Out
      of pocket fees
                  
                  
                  134Other
      fees
                  
                  
                  271Total
      estimated costs
                  
                  
                  8,838Less
      costs incurred to-date
                  
                  
                  -Balance
      to accrue
                  
                  $
                  8,838




Total
estimated costs includes contingent underwriters fees of approximately $2,200
that are payable upon consummation of the Transaction. These costs were
originally incurred in connection with DJSP Enterprises, Inc.’s initial public
offering and were recorded in Additional Paid-In Capital but will be
subsequently recorded as an expense.





(9)
            To
      record the cash consideration purchase price, which represents an
      acquisition by DAL of the Stern Contributors’ interest in the operating
      subsidiaries DJS LLC, PTA LLC, and DSI
LLC:




Cash
      Consideration Purchase Price
                  
                  $
                  145,969Less:
      Stern Note
                  
                  
                  52,469Less:
      Post-Closing Cash
                  
                  
                  35,000Initial
      Cash
                  
                  $
                  58,500Deferred
      consideration - Stern Notes
                  
                  
                  87,469




25





The
cash consideration paid in excess of the carrying value of the equity interest
sold of $132,949 represents a special distribution to the Stern
Contributors.





(10)
            To
      eliminate historical retained earnings of accounting
    acquiree.




(11)
            To
      reflect a senior secured round of private financing at 15% to replace the
      existing line of credit until a new line of credit could be established at
      DJS Processing, LLC.





(12)
            Upon
      this Transaction, David J. Stern, the Law Offices of David J. Stern
      (“DJS”), Professional Title and abstract Company of Florida, Inc. (“PTA”)
      and Default Servicing, Inc. (“DSI”) transferred all of their non-legal
      business and assets to DJS LLC, PTA LLC and DSI LLC, respectively. Mr.
      Stern, DJS, PTA and DSI (the “Stern Contributors”) then transferred all of
      their ownership interests in DJS LLC, PTA LLC and DSI LLC to DAL. In
      consideration for their contribution of their ownership interests in DJS
      LLC, PTA LLC and DSI LLC to DAL, the Stern Contributors received from DAL
      the following: (i) $58,500,080 in cash; (ii) $52,469,000 in a promissory
      note issued by DAL to DJS (the “Stern Deferral Note”); (iii) 1,200,000 DAL
      Common Units; (iv) 1,666,667 DAL Series A Preferred Units; (v) 3,133,333
      DAL Series B Preferred Units; and (vi) the right to receive $35 million in
      post-closing cash. As a result of the Transaction, DAL acquired membership
      interests in the three limited liability companies (DJS LLC, PTA LLC and
      DSI LLC) that together constitute a provider of non-legal residential
      mortgage foreclosure processing and other services, principally in the
      state of Florida. DAL did not acquire any portion of such companies that
      involves the provision of legal services. Following the Transaction, the
      existing members of DAL, FlatWorld DAL LLC (“FlatWorld”) and Fortuna
      Capital Partners LP (“Fortuna”), held (i) an aggregate of 1,500,000 Common
      Units of DAL and (ii) an aggregate of 766,667 Series B Preferred Units in
      DAL. Immediately following the closing of the Transaction, Fortuna
      transferred its membership interest in DAL to FlatWorld; FlatWorld then
      immediately transferred its resulting membership interest, 60% to Nagina
      Partners LLC (“Nagina”) and 40% to Jeffrey A. Valenty
      (“Valenty”).





The
issuance of Series B units by DAL to the Stern Contributors and Existing Members
will expire unless the below share price targets for the Company’s ordinary
shares are met for at least 10 out of 30 trading days:





Subclass
                  
                  Conversion
                  
                  
                  Price
                  
                  
                  Number
      of
                    UnitsSeries
      B Preferred
                  
                  
                  1
                  
                  
                  $
                  10.00
                  
                  
                  
                  750,000Series
      B Preferred
                  
                  
                  2
                  
                  
                  $
                  12.50
                  
                  
                  
                  750,000Series
      B Preferred
                  
                  
                  3
                  
                  
                  $
                  15.00
                  
                  
                  
                  800,000Series
      B Preferred
                  
                  
                  4
                  
                  
                  $
                  17.50
                  
                  
                  
                  800,000Series
      B Preferred
                  
                  
                  5
                  
                  
                  $
                  20.00
                  
                  
                  
                  800,000





Upon
meeting the share price target, the Series B units are automatically exchanged
for common units of DAL and will subsequently be convertible into DJSP
Enterprises ordinary shares on a 1:1 basis. If after 60 months following the
closing of the Transaction any portion of the Series B units have not been
exchanged for DAL common units, DAL will have the right to redeem the
unconverted Series B units by paying the holders $0.001 per unit.  The
Series B-1 preferred units converted into common units on March 23, 2010. The
Series B-2 Preferred Units converted into Common Units on May 3,
2010.





The
Transaction was accounted for as a reverse recapitalization, due to, among other
things, the fact that the owner of DJS, PTA and DSI will have significant
representation on the Board of Directors (initially four out of seven members),
and the management of the acquired business became the management of DAL and the
Company. This treatment also disregards DAL for accounting purposes for the
reason that it serves principally to issue equity interests in connection with
the Transaction, and it did not have significant operations prior to its role in
the Transaction, along with the fact that the equity interests in DAL held by
the Stern Contributors and the then existing members of DAL and their assignees
are exchangeable for comparable securities in the Company. Because the owner of
DJS, PTA and DSI is considered to be in control of the Company and DAL, the
assets were contributed to DAL in exchange for the units described above at the
net assets’ cost due to the entities involved in the Transaction being under
common control.  Refer to footnote 6 of the pro forma balance sheet
for the equity interest components of DAL. The calculation of the noncontrolling
interest assumes Series A and B units of DAL are outstanding.  Since
the Series A and B units are convertible on a 1:1 basis to common units, the
noncontrolling interest was computed by providing equal weighting to the Series
A and B units as compared to the common units resulting in a noncontrolling
interest of 29.05% of DAL.


26


DJSP
ENTERPRISES, INC. (FORMERLY KNOWN AS CHARDAN 2008 ACQUISITION
CORP.)
 AND
DJS PROCESSING DIVISION AND COMBINED AFFILIATES
 Unaudited
Pro Forma Condensed Combined Statement of Operations
 Year
Ended December 31, 2009
 (In
thousands of U.S. Dollars, except share and per share amounts)
 
 DJSP
                                                      Enterprises,
                                                      Inc.
                                                      (formerly
                                                      known as
                                                      Chardan
                                                      2008 China
                                                      Acquisition
                                                    
                                                    
                                                    DJSP
                                                      Processing
                                                      Division
                                                      and
                                                      Related
                                                    
                                                    
                                                    Pro Forma
                                                      Adjustments and
                                                      Eliminations
                                                    
                                                    
                                                    Pro FormaCorp.)
                                                    
                                                    
                                                    Entities
                                                    
                                                    
                                                    Debit
                                                    
                                                    
                                                    Credit
                                                    
                                                    
                                                    CombinedNet
      sales
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    260,269
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    260,269Cost
      of sales
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -Gross
      profit
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    260,269
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    260,269Operating
      expensesGeneral
      and administrative
                                                    
                                                    
                                                    489
                                                    
                                                    
                                                    
                                                    215,704
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    23,751
                                                    (2)
                                                    
                                                    
                                                    192,442Total
      operating expenses
                                                    
                                                    
                                                    489
                                                    
                                                    
                                                    
                                                    215,704
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    192,442Income
      (loss) from operations
                                                    
                                                    
                                                    (489
                                                    )
                                                    
                                                    
                                                    44,565
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    67,827-Other
      income (expense)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -Interest
      income (expense)
                                                    
                                                    
                                                    47
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    4,485
                                                    (1)(5)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (4,437
                                                    )Other
      Income (expense)
                                                    
                                                    
                                                    (5
                                                    )
                                                    
                                                    
                                                    0
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (5
                                                    )Income
      before income taxes
                                                    
                                                    
                                                    (447
                                                    )
                                                    
                                                    
                                                    44,565
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    63,384Income
      taxes
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    22,185
                                                    (4)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    22,185Income
      from continuing operations
                                                    
                                                    
                                                    (447
                                                    )
                                                    
                                                    
                                                    44,565
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    41,200Net
      income
                                                    
                                                    
                                                    (447
                                                    )
                                                    
                                                    
                                                    44,565
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    41,200Less
      net income attributable to non
      controlling  interests
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    12,062
                                                    (3)
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    12,062Net
      income attributable to  DJSP Enterprises
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    29,138Preferred
      share dividends declared
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    -Net
      income available to the ordinary shareholder
                                                    
                                                    $
                                                    (447
                                                    )
                                                    
                                                    $
                                                    44,565
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    29,138Net
      income per ordinary share -Basic
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    2.73Diluted
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    1.67Weighted
      average number of ordinary shares outstanding (Note B) -Basic
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    10,666,666Diluted
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    24,717,108
  27
  Pro
Forma Adjustments and Eliminations (In thousands of U.S. Dollars, except for
share and per share data, unless otherwise noted):
 
 (1)
                To eliminate interest income
      earned on funds held in trust and related income tax expense, as DJSP
      Enterprises, Inc. used all funds from the trust account for the
      transaction.
 
 (2)
                To record lower officer’s
      salaries per the Stern Employment Agreement and other costs not expected
      to be incurred post-Transaction resulting in a reduction in operating
      expenses by $23,751 in fiscal year
2009.
 
 (3)
                To provide for the noncontrolling
      interest associated with the post- Transaction capital structure of
      29.05%
 
 (4)
                To account for the incremental
      expense of DJSP Enterprises, Inc. being taxed at the corporate level at an
      estimated tax rate of 35%.
 
 (5)
                To account for the increased
      interest expense associated with the Transaction financing composed of a
      seller’s note of $87,469 using an assumed interest rate of 3% for the
      first 18 months on the $52,469 note and 0% for the first six months and 3%
      for the months six through 18 on the $35,000 note as well as 15% on a
      senior secured note of
$15,589.
 
 Pro
Forma Notes (In thousands of U.S. Dollars, except for share and per share data,
unless otherwise noted):
 
 (A)
                Pro forma entries are recorded to
      the extent they are a direct result of the Transaction, are factually
      supportable, and are expected to have a continuing impact on the combined
      results.
 
 (B)
                As the transaction is being
      accounted for as a reverse acquisition, the calculation of weighted
      average shares outstanding for basic and diluted earnings per share
      assumes that the shares issued in conjunction with the Transaction have
      been outstanding for the entire period.  Basic and diluted
      weighted average number of ordinary shares outstanding is calculated as
      follows:
 
 Pro forma
                                  Balance Sheet
                                  Entry No.
                                
                                
                                SharesActual
      number of ordinary shares outstanding
                                
                                
                                
                                
                                
                                9,166,666Pro
      forma shares to be issued:Shares
      issued in connection with Private Placement financing
                                
                                
                                (4
                                )
                                
                                
                                1,500,000Pro
      forma weighted average number of ordinary shares outstanding -
      Basic
                                
                                
                                
                                
                                
                                
                                10,666,666Common
      stock equivalents:Shares
      retained by noncontrolling interest and convertible to DJSP Enterprises,
      Inc. shares
                                
                                
                                
                                
                                
                                
                                8,266,667Shares
      issued to warrantholders upon exercise of private placement
      warrants
                                
                                
                                
                                
                                
                                
                                233,010Shares
      issuable from actual “in the money” warrants outstandingFrom
      Public Offering warrants
                                
                                
                                
                                
                                
                                
                                6,875,000From
      Founder’s units
                                
                                
                                
                                
                                
                                
                                2,291,666From
      Private Placement warrants
                                
                                
                                
                                
                                
                                
                                2,000,000From
      UPO
                                
                                
                                
                                
                                
                                
                                275,000Less
      number of shares available “on the market” pursuant to the treasury stock
      method
                                
                                
                                
                                
                                
                                
                                (5,890,901
                                )Number
      of “new” shares to be issued pursuant to the treasury shares
      method
                                
                                
                                
                                
                                
                                
                                14,050,442Pro
      forma weighted average number of ordinary shares outstanding -
      Diluted
                                
                                
                                
                                
                                
                                
                                24,717,108
  (C)
                The current market prices of DJSP
      Enterprises, Inc. ordinary shares and ordinary share purchase warrants
      utilized in above calculations were as follows as of March 10,
      2010:
  Market
      price per share of ordinary shares (DJSP)
                                
                                $
                                9.80Market
      price per ordinary share warrant (DJSPW)
                                
                                $
                                4.80
  28
  (D)
                As disclosed in the proxy
      statement for the Transaction filed as exhibit 99.1 to a Form 6-K filed on
      December 29, 2009, because DJSP Enterprises, Inc. acquired a company
      outside of China, even though it indicated an intent to only acquire a
      company operating in China in its initial public offering, it is possible
      that shareholders who owned shares at the closing of the Transaction
      issued in DJSP Enterprises, Inc.’s initial public offering could assert
      claims against DJSP Enterprises, Inc. for rescission (under which a
      successful claimant would have the right to receive the total amount paid
      for his or her ordinary shares pursuant to an allegedly deficient
      prospectus, plus interest and less any income earned on the shares, in
      exchange for surrender of the shares or, to the extent they disposed of
      the shares, damages to the extent of the difference between the total
      amount paid for his or her shares and total amount received upon the sale
      of their shares). DJSP Enterprises, Inc. cannot predict whether any
      shareholders will bring such claims, how many might bring them, the extent
      to which they might be successful or the amount of any possible recovery
      by them. As such, DJSP Enterprises, Inc. has not recorded a liability for
      such possible claims for
rescission.
 
 Net
income per ordinary share-basic is calculated by dividing Net income
attributable to DJSP Enterprises by the Weighted average number of ordinary
shares outstanding-basic.
 
 Net
income per ordinary share-diluted is calculated by dividing Net income by the
Weighted average number of ordinary shares outstanding-diluted.
 
 ITEM
7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
  A.
Major
Shareholders
 
 The
following table sets forth, as of June 15, 2010, except as otherwise provided in
the footnotes to the table, certain information regarding beneficial ownership
of the Company’s ordinary shares by each person who is known by the Company to
beneficially own more than 5% of the Company’s ordinary shares. The table also
identifies the share ownership of each of the Company’s directors, each of the
Company’s executive officers, and all directors and officers as a group. Except
as otherwise indicated, the shareholders listed in the table have sole voting
and investment powers with respect to the shares indicated. The Company’s major
shareholders do not have different voting rights than any other holder of the
Company’s ordinary shares.
 
 Ordinary
shares which an individual or group has a right to acquire within 60 days
pursuant to the exercise or conversion of options, warrants or other similar
convertible or derivative securities are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual or group, but
are not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
 
 Name and Address of Beneficial Owner (1)
                      
                      Amount and
                        Nature of
                        Beneficial
                        Ownership
                      
                      
                      Approximate
                        Percentage of
                        Outstanding
                        Ordinary
                        shares (2)David
      J. Stern
                      
                      
                      4,435,966
                      (3)
                      
                      
                      35.36
                      %Kumar
      Gursahaney
                      
                      
                      0
                      
                      
                      
                      0Nicholas
      H. Adler
                      
                      
                      8,000
                      (4)
                      
                      
                      *Stephen
      J. Bernstein
                      
                      
                      0
                      
                      
                      
                      0Mark
      P. Harmon
                      
                      
                      0
                      
                      
                      
                      0Jerry
      Hutter
                      
                      
                      0
                      
                      
                      
                      0Matthew
      S. Kayton
                      
                      
                      16,959
                      
                      
                      
                      *Juan
      V. Ruiz
                      
                      
                      0
                      
                      
                      
                      0All
      Directors and Officers as a Group (8 persons)
                      
                      
                      4,460,925
                      (3),(4)
                      
                      
                      35.55
                      %Kerry
      Propper (5)
                      
                      
                      4,435,966
                      (3)
                      
                      
                      35.36
                      %Royale
      Holdings (6)
                      
                      
                      4,435,966
                      (3)
                      
                      
                      35.36
                      %Costa
      Brava Partnership III L.P. (7)
                      
                      
                      1,460,000
                      
                      
                      
                      12.90
                      %Craig
      Samuels (8)
                      
                      
                      1,068,600
                      
                      
                      
                      9.6
                      %South
      Ferry #2, LP (9)
                      
                      
                      657,143
                      
                      
                      
                      6.16
                      %
 
 * Less
than one percent
  29
 
 (1)
                Unless
      indicated otherwise, the business address of each of the individuals is
      900 South Pine Island Road , Suite 400, Plantation, Florida
      33324.
 
 (2)
                Based
      on 10,663,866 ordinary shares of the Company issued and outstanding as of
      May 10, 2010.
 
 (3)
                Includes
      of ordinary shares and ordinary shares underlying warrants (exercisable at
      $5.00 per share which expire at 5:00 p.m., New York City time, on August
      11, 2012) owned by parties to a Voting Agreement (the “Voting Agreement”)
      as follows:
 
 ·
                Kerry
      Propper: 321,107 ordinary shares and 397,068
  warrants;
 ·
                Steve
      Urbach: 136,713 ordinary shares and 170,540
  warrants;
 ·
                Jonas
      Grossman: 81,296 ordinary shares and 101,442
  warrants;
 ·
                George
      Kaufman: 27,708 ordinary
shares;
 ·
                Todd
      Gold: 5,542 ordinary shares;
 ·
                Jiangnan
      Huang: 261,427 ordinary shares and 220,000
  warrants;
 ·
                Royale
      Holdings: 661,693 ordinary
shares;
 ·
                Dr.
      Richard D. Propper: 186,528 ordinary shares and 400,000
      warrants;
 ·
                Paula
      Beharry: 130,713 ordinary shares and 30,000
  warrants;
 ·
                Daniel
      Beharry: 130,713 ordinary shares and 70,000
  warrants;
 ·
                Li
      Zhang: 130,713 ordinary shares and 400,000
  warrants;
 ·
                Li
      Ping He: 130,713 ordinary
shares;
 ·
                Li
      Gong: 25,000 ordinary shares and 30,000
  warrants;
 ·
                Dr.
      Jianjun Shi: 25,000 ordinary shares and 30,000
    warrants;
 ·
                Xiaosong
      Zhong: 25,000 ordinary shares and 30,000
  warrants;
 ·
                Carman
      Ramirez: 20,000 ordinary
shares;
 ·
                Edward
      Carter: 5,000 ordinary shares;
 ·
                Ida
      Carter: 5,000 ordinary shares;
and
 ·
                David
      J. Stern, jointly with his wife, Jeanine A Stern: 254, 000 ordinary
      shares.
 
 Other
parties to the Voting Agreement include the Stern Contributors, FlatWorld,
Valenty and Nagina, none of whom own ordinary shares or securities that are
exercisable or convertible into ordinary shares within 60 days. They own DAL
Common Units and DAL Series A Preferred Units that are exchangeable for ordinary
shares beginning January 15, 2011. The parties to the Voting Agreement share
voting power over these shares, but not investment power over these
shares.
 
 (4)
                Consists
      of 1,500 ordinary shares and 6,500
warrants.
  (5)
                Kerry
      Propper’s business address is c/o Chardan Capital Markets, LLC; 17 State
      Street; Suite 1600; New York, NY
10004.
  (6)
                Michael
      Walas has voting and investment control over the ordinary shares owned by
      Royale Holdings. Royale Holdings’ address is c/o Chardan Capital, LLC, 402
      W. Broadway, Suite 2600, San Diego,
CA.
  (7)
                Based
      on Schedule 13G jointly filed on June 14, 2010 by Costa Brava Partnership
      III L.P., a Delaware limited partnership; Roark, Reardon & Hamot, LLC,
      a Delaware limited liability company; and Seth W. Hamot (collectively,
      “The Costa Frava Filers”). The business address of the Costa Brava Filers
      is 420 Boylston Street, Boston, MA 02116. Seth W. Hamot is the president
      and managing member of Roark, Reardon & Hamot, LLC, which is the
      general partner of Costa Brava Partnership III
  L.P.
  (8)
                The
      information relating to Craig Samuels is derived from a Schedule 13G/A
      dated February 1, 2010, filed by Mr. Samuels with the SEC. Mr. Samuels
      business address is 13990 Rancho Dorado Bend, San Diego, California
      92130.
  (9)
                Based
      on the Schedule 13G jointly filed on January 25, 2010 by South Ferry #2,
      L.P., a Delaware limited partnership, Aaron Wolfson, Abraham Wolfson and
      Morris Wolfson (collectively, the “South Ferry Filers”). The business
      address of the South Ferry Filers is One State Street Plaza, 29th
      Floor, New York, New York 10004. Aaron Wolfson and Abraham Wolfson are the
      general partners of South Ferry #2, L.P., and Morris Wolfson is the
      portfolio manager of South Ferry #2,
L.P.
   30
  B. 
Related Party
Transactions
 
 Since
January 1, 2009, we have entered into a number of transactions with parties
related to us in connection with the Transaction, as well as employment
agreements with certain of our executive officers and other
contracts.
 
 For a
description of the transactions related to the Transaction, see the section of
this Report titled “Item 4. Information on the Company – History and Business
Plans – Transaction,” which is incorporated herein by reference.  For
summaries of the material contracts entered into with related parties in
connection with the Transaction, see the section of this Report titled “Item
10(C). Material Contracts – Contracts Related to the Transaction” which is
incorporated herein by reference.
 
 For
summaries of the employment agreements entered into with certain of our
executive officers, see the section of this Report titled “Item 6. Directors,
Senior Management and Employees – Employment Agreements,” which is incorporated
herein by reference.
 
 Summaries
of the other contracts we entered into with related parties since January 1,
2009 are described below and in the section of this Report titled, “Item 10(C).
Material Contracts – Contracts Related to Company Operations,” which is
incorporated herein by reference.
 
 DJS LLC
contracts with JMT Management Corp. for foreclosure sales services, and with
Target Surveying, Inc. for surveys required in connection with closing services.
Robert Samons, the husband of Cheryl Samons, Operations Manager of DJS LLC, is a
one-third owner of JMT Management Corp. and enjoys a profit sharing arrangement
with Target Surveying, Inc. whereby one-third of Target Surveying, Inc.’s
profits flow to him. During the calendar year ended December 31, 2009, the Stern
Contributors paid an aggregate of $938,490 to JMT and $512,356 to Target for
such services.
 
 C.  Interests of Experts and
Counsel
 
 Not
Applicable.
  31
  PART
II
 
 ITEM
10.  ADDITIONAL INFORMATION
  A.  Share
Capital
 
 Not
Applicable.
 
 B.  Memorandum and Articles of
Association
 
 Our
Second Amended and Restated Memorandum and Articles of Association are described
in our Registration Statement on Form F-1, filed with the SEC on February 12,
2010 (File No. 333-164907) in the sections entitled “Description of Securities –
Memorandum and Articles of Association,” “Description of Securities – Preferred
Shares,” and “Directors, Senior Management and Employees – Employees,” which
descriptions are incorporated herein by reference.
 
 C.
Material
Contracts
 
 Contracts
Related to the Capitalization of Chardan 2008
 
 Pre-IPO
 
 In July
2008, prior to the IPO, Chardan 2008 issued 2,291,666 ordinary units (the
“Insider Units”) to the individuals set forth below, each consisting of one
ordinary share and one warrant, for $25,000 in cash, at a purchase price of
approximately $0.011 per unit, as follows:
  Name
                
                No. of
                  SharesKerry
      Propper
                
                
                302,907Steve
      Urbach
                
                
                136,713Jonas
      Grossman
                
                
                81,296George
      Kaufman
                
                
                27,708Todd
      Gold
                
                
                5,542Jiangnan
      Huang
                
                
                261,427Royale
      Holdings
                
                
                661,693Dr.
      Richard D. Propper
                
                
                186,528Paula
      Beharry
                
                
                130,713Daniel
      Beharry
                
                
                130,713Li
      Zhang
                
                
                130,713LiLi
      Ping He, as custodian
                
                
                130,713Li
      Gong
                
                
                25,000Dr.
      Jianjun Shi
                
                
                25,000Xiaosong
      Zhong
                
                
                25,000Carman
      Ramirez
                
                
                20,000Edward
      Carter
                
                
                5,000Ida
      Carter
                
                
                5,000
 
 Such
units were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act as they were sold to sophisticated, wealthy
individuals. No underwriting discounts or commissions were paid with respect to
such sales.
 
 Immediately
prior to the consummation of the IPO, Chardan 2008 issued 2,000,000 warrants at
a price of $0.50 to certain of the officers, directors and existing shareholders
of Chardan 2008 (the “Private Placement Warrants”).  The Private
Placement Warrants were issued on terms equivalent to those of the warrants sold
to the public shareholders, except that (i) the Private Placement Warrants are
not callable; and (ii) the Private Placement Warrants contain a “cashless” or
“net” exercise provision, which allows the holders of the Private Placement
Warrants to exercise them by receiving a reduced amount of our shares compared
to a “cash” exercise of the warrants, in exchange for not having to pay the
$5.00 exercise price.  See the section of this Report titled, “Item
10(C). Material Contracts – Contracts Related to the Transaction – Warrant Sale
Agreement” for a description of certain amendments to the terms of the Private
Placement Warrants, in particular in connection with the cashless exercise
terms.
  32
  The
Private Placement Warrants were issued to the individuals set forth below, as
follows:
 
 Name
                
                No. of
                  WarrantsRichard
      Propper
                
                
                400,000Li
      Zhang
                
                
                400,000Kerry
      Propper
                
                
                377,968Jiangnan
      Huang
                
                
                220,000Steve
      Urbach
                
                
                170,590Jonas
      Grossman
                
                
                101,442Daniel
      Beharry
                
                
                70,000Michael
      Walas
                
                
                69,000Mark
      Brewer
                
                
                69,000Paula
      Beharry
                
                
                30,000Li
      Gong
                
                
                30,000Dr.
      JianJun Shi
                
                
                30,000Xiaosong
      Zhong
                
                
                30,000Ryan
      Hallman
                
                
                2,000
 
 Registration
Rights Agreement
 
 The
holders of a majority of all of: (i) the holders of the 2,291,666 ordinary
shares and insider warrants included in the Insider Units; and (ii) the
holders of the 2,000,000 ordinary shares issuable upon exercise of the 2,000,000
Private Placement Warrants will be entitled to make up to two demands that we
register these securities, pursuant to a registration rights agreement, dated
August 11, 2008 (the “Registration Rights Agreement”).  Such holders
may elect to exercise these registration rights at any time commencing on or
after the date on which these securities are released from escrow, which will
occur on January 15, 2011.  In addition, these holders have certain
“piggy-back” registration rights with respect to registration statements filed
subsequent to the date on which these securities are released from
escrow.  We will bear the expenses incurred in connection with the
filing of any such registration statements.  Pursuant to an amendment,
dated January 15, 2010, to the Registration Rights Agreement, the registration
rights granted under the Registration Rights Agreement were extended to include
the Additional Shares issued pursuant to the Warrant Sale
Agreement.
 
 Contracts
Related to the Transaction
 
 The
Stern Deferral Note and Post-Closing Cash
 
 DAL
issued a promissory note to DJS at the closing of the Transaction (the “Stern
Deferral Note”).  The Stern Deferral Note was issued in the amount of
$52,469,000, with a maturity date of January 15, 2013.  The Stern
Deferral Note has an interest rate of 3.0% per annum, payable monthly, with a
default rate equal to the lesser of (a) the current interest rate plus 10% or
(b) the highest lawful rate.  All assets of DAL and its subsidiaries
have been pledged to secure repayment of the Stern Deferral Note, the security
interest to be junior to obligations owed by DAL to its commercial
lender.
 
 DAL will
make monthly payments under the Stern Deferral Note in the amount of 90% of its
free positive cash flow (equal to EBITDA, plus accrued taxes, less debt service,
cash taxes, capital expenditures and net changes in working capital)
(“Designated Free Cash Flow”).  In addition, all proceeds from the
exercise by DJSP of the warrants for 11,441,666 DAL common units received by
DJSP from DAL in connection with the Transaction (the “DAL Warrants”) will be
used to repay the Stern Deferral Note, with any proceeds not required for that
purpose to be used to pay $35,000,000 in post-closing cash (defined below) plus
a late fee, if applicable.  The Stern Deferral Note contains customary
events of default including, without limitation, breaches of covenants or
representations, material adverse change or any merger or other change in
control transaction; and customary affirmative and negative covenants including,
without limitation, liens, restricted payments, sales of assets and business
combination transactions.
  33
  As part
of the Transaction, the Stern Contributors are entitled to be paid another
$35,000,000 in cash after the closing (the “Post-Closing Cash”).  The
Post-Closing Cash must be paid in full no later than the fifth anniversary of
the closing of the Transaction.  The principal source of the funds to
pay the Post-Closing Cash will be approximately 90% of the proceeds from the
required exercise of the DAL Warrants not used to satisfy the Stern Deferral
Note with the balance of such proceeds being used to meet obligations owed to
FlatWorld and Chardan Capital, LLC.  To the extent that there are not
sufficient proceeds from that source to pay in full the Post-Closing Cash within
180 days of the closing of the Transaction, a late fee of 0.25% per month will
be added to the outstanding balance of Post-Closing Cash due until paid in
full.  In that event, we will also utilize approximately 90% of our
Designated Free Cash Flow, together with any remaining proceeds from the
exercise of the warrants issued in the IPO (the “Chardan Warrants”), to pay the
Post-Closing Cash, until it is paid in full.  Payments from our
Designated Free Cash Flow will be made quarterly (or sooner at our option) until
such payments, together with the proceeds from exercise of the DAL Warrants that
are used to pay the Post-Closing Cash, result in the Post-Closing Cash, plus any
late fees, being paid in full.  To the extent that the Post-Closing
Cash has not been paid in full by the eighteen month “anniversary” of the
closing of the Transaction, 0.67% per month will be added to the outstanding
balance of the Post-Closing Cash due until paid in full.
 
 The
payment of the Stern Deferral Note and the Post-Closing Cash is guaranteed by
each of DJS LLC, PTA LLC and DSI LLC and secured by all of the assets of DAL,
DJS LLC, PTA LLC and DSI LLC.
 
 Senior
Financing Notes
 
 Concurrent
with the closing of the Transaction, DJSP issued notes to lenders (both
individuals and entities) with the aggregate principal amount of $15,188,735.97
relating to a senior financing facility entered into in connection with the
Transaction (the “Senior Financing Notes”).  The terms of the Senior
Financing Notes are set forth in a Senior Loan, Security and Pledge
Agreement.  The Senior Financing Notes have interest rates of 15% per
annum and are payable by January 15, 2011.  In March 2010, we paid in
full all but three of the Senior Financing Notes leaving an aggregate
outstanding principal balance of $3 million.  All of the currently
outstanding Senior Financing Notes were issued to lenders who are affiliates of
our former CEO, Kerry S. Propper.
 
 Line
of Credit
 
 Effective
March 18, 2010, we obtained a new $15 million revolving line of credit from Bank
of America that is secured by substantially all of our
assets.  Approximately, $12.6 million of the line was immediately
drawn upon.  The new line of credit will be used for the same purposes
as the one paid in full at the closing of the Transaction as well as for other
working capital needs.
 
 The terms
of the line of credit are set forth in a Loan Agreement. The amount available to
us under the line of credit is the lesser of $15 million or the amount
determined using a borrowing base formula based on a percentage of eligible
accounts receivable and eligible unbilled revenue. The line of credit has an
initial term of one year with interest only payments due monthly until the
expiration of the initial term, at which time all outstanding principal and
interest balances are due. The new line of credit has an interest rate of 175
basis points over the British Bankers Association LIBOR Daily Floating Rate.
DAL, as the borrower under the new line of credit, granted Bank of America a
lien on all of its assets, and its three operating subsidiaries have executed
security agreements and guarantees to secure DAL’s obligations under the loan.
As additional security for the loan, DJS LLC has collaterally assigned to Bank
of America a security agreement that it entered into with DJS, pursuant to which
DJS granted to DJS LLC a security interest in its accounts receivable and work
in process to secure DJS’s obligations under the Services
Agreement.
 
 Chardan
Capital Markets Note
 
 Chardan
Capital Markets, LLC, an affiliate of our former CEO, Kerry S. Propper, acted as
placement agent for the private placement of 10,663,886 of our ordinary shares
that was consummated in conjunction with the Transaction.  Chardan
Capital Markets, LLC received a placement fee of $500,000 in connection with the
financing, of which $250,000 was deferred and will be paid pursuant to a
promissory note made by DAL in favor of Chardan Capital Markets, LLC (the
“Chardan Capital Markets Note”).  The Chardan Capital Markets Note
provides for a 5% interest rate and is due in full on the earlier of the one
year anniversary of the payment in full of the Stern Deferral Note, or
twenty-four (24) months after the closing of the Transaction.  Chardan
Capital Markets, LLC will be entitled to receive amortizing payments equal to
the remaining unpaid principal balance divided by 12, beginning on the first day
of each month following the date that the Stern Deferral Note is paid in
full.
  34
  Chardan Capital
Fees
 
 Chardan
Capital, LLC, an affiliate of our former chairman, Zhang Li, received a
$2,000,000 fee when the Transaction closed.  Beginning in January
2011, Chardan Capital, LLC will also receive $40,000 per month under a
management consulting agreement with us.  Mr. Zhang will derive a
direct benefit from the payment of those fees.
 
 FlatWorld
Warrant Proceeds and FlatWorld Additional Warrant Proceeds
 
 In
connection with the Transaction, we agreed to pay to FlatWorld $2,000,000 (the
“FlatWorld Warrant Proceeds”), and another $1,000,000 upon the earlier of the
first anniversary after the Stern Deferral Note has been paid in full or 24
months after the closing of the Transaction (the “FlatWorld Additional Warrant
Proceeds”).
 
 The
principal source of the funds to pay the FlatWorld Warrant Proceeds will be
approximately 5% of the proceeds from the required exercise of the DAL Warrants
not used to satisfy the Stern Deferral Note.  If the FlatWorld Warrant
Proceeds are not paid in full by the six month anniversary of the closing of the
Transaction, FlatWorld is also entitled to receive approximately 5% of our
Designated Free Cash Flow until the FlatWorld Warrant Proceeds are paid in
full.   If the Post-Closing Cash is paid in full prior to the
time that the FlatWorld Warrant Proceeds are paid in full, then FlatWorld will
be entitled to receive 50% of the remaining proceeds from the exercise of the
DAL Warrants not used to satisfy the Stern Deferral Note and 50% of the
Designated Free Cash Flow until the FlatWorld Warrant Proceeds are paid in
full.
 
 Commencing
as of closing of the Transaction, a finance charge of 5% per annum on the unpaid
principal balance of the FlatWorld Additional Warrant Proceeds will be added to
the additional outstanding unpaid balance until such amount is paid in
full.  If any amount to be paid to FlatWorld for the FlatWorld
Additional Warrant Proceeds is paid more than three days late, the finance
charge will increase to 8% per annum.  The finance charge is payable
quarterly, in arrears, commencing on April 1, 2010.  If the FlatWorld
Additional Warrant Proceeds are not paid in full by the time that the Stern
Deferral Note is paid in full, then FlatWorld will be entitled to receive the
remaining amount of FlatWorld Additional Warrant Proceeds from (i) the remaining
proceeds from the exercise of the DAL Warrants not used to satisfy the Stern
Deferral Note and (ii) our cash flow in monthly installments equal to the
remaining unpaid amount of the FlatWorld Additional Warrant Proceeds, at the
time the Stern Deferral Note is paid in full, divided by twelve.
 
 Voting
Agreement
 
 In
connection with the closing of the Transaction, we and the Stern Contributors,
FlatWorld, Valenty, Nagina and the Principals (defined below) entered into the
Voting Agreement dated as of January 15, 2010.  Pursuant to its terms,
the parties to the Voting Agreement other than us agree to vote all of the
ordinary shares held by them in favor of four nominees to our Board of Directors
designated by Stern (each a “Stern Designee”), two nominees designated by the
Principals (each a “Principal Designee”) and Juan V. Ruiz (the “DAL
Nominee”).  The Voting Agreement also allows the holders of the DAL
Common Units and the DAL Series A Preferred Units (other than us), to designate,
after January 15, 2011, by majority vote, a number of nominees to our Board of
Directors based on their ownership percentage of our ordinary shares, assuming
their DAL Common Units and DAL Series A Preferred Units were exchanged for
ordinary shares.  The Principals are able to nominate one independent
Board nominee as long as they still hold ordinary shares representing 5% of our
outstanding shares.  The term of the Voting Agreement is five years
from the closing of the Transaction, or shorter in certain other events,
including: a liquidation (as defined by our Second Amended and Restated
Memorandum and Articles of Association); the occurrence of a merger or similar
transaction in which we are not the surviving entity; after the Post-Closing
Cash has been paid in full, termination of Stern’s employment by us and all of
its affiliates; or the termination of the Services Agreement between DJS and DJS
LLC or any agreement succeeding it.
 
 The
following persons comprise the “Principals”:  Kerry Propper, Steve
Urbach, Jonas Grossman, George Kaufman, Todd Gold, Jiangnan Huang, Royale
Holdings, Dr. Richard D. Propper, Paula Beharry, Daniel Beharry, Li Zhang, Li
Ping He, Li Gong, Dr. Jianjun Shi, Xiaosong Zhong, Carman Ramirez, Edward
Carter, and Ida Carter.  The other parties to the Voting Agreement,
FlatWorld, Valenty and Nagina, do not own ordinary shares or securities that are
exercisable or convertible into ordinary shares within 60 days.  They
own DAL Common Units that are exchangeable for ordinary shares beginning January
15, 2011.
 35
  Warrant
Sale Agreement
  In order
to make available to us a greater amount of cash to satisfy DAL’s obligations
pursuant to the Stern Deferral Note and to pay the Post-Closing Cash, holders of
1,910,000 of the 2,000,000 outstanding Private Placement Warrants agreed to
modify the terms of those warrants pursuant to a Warrant Sale Agreement (the
“Warrant Sale Agreement”).  The Private Placement Warrants had a
“cashless exercise” provision, which allowed the holders to exercise the
warrants without paying cash by exchanging them for a reduced number of our
ordinary shares.  Pursuant to the Warrant Sale Agreement, those
holders of the Private Placement Warrants agreed either to exercise their
warrants for cash or to sell the warrants to a third party on the condition that
the third party will exercise them for cash.
 
 The
obligation to sell or exercise the Private Placement Warrants under the Warrant
Sale Agreement arises on the later of six months following the closing of the
Transaction or upon the effectiveness of the resale registration statement
covering the Private Placement Warrants and the shares underlying
them.  In addition, the obligation to sell or exercise the warrants
exists only if the closing price of our ordinary shares is $9.00 or higher on a
trading day.  There is also a daily volume commitment that is equal to
the greater of 50,000 warrants or 10% of the average daily trading volume of our
ordinary shares on any trading day on which the $9.00 threshold is
satisfied.
 
 In
consideration of the agreement of such holders of the Private Placement Warrants
to forgo their cashless exercise rights, we will issue to them up to, in the
aggregate, 233,010 additional ordinary shares (the “Additional
Shares”).
 
 Registration
Rights Agreement
 
 Under the
terms of the various agreements governing the Transaction, the Stern
Contributors, Nagina and Valenty have the right to convert their DAL Common
Units (including those issued upon the conversion of the DAL Series B Preferred
Units) and any DAL Series A Preferred Units into corresponding securities of the
Company at any time after the first anniversary of the closing of the
Transaction.  Under the Registration Rights Agreement dated January
15, 2010 (the “Transaction Registration Rights Agreement”), we have agreed to
register the ordinary shares of the Company that are issuable upon the
conversion of the DAL Common Units and DAL Series A Preferred Units on the
earlier of the first anniversary date of the Transaction Registration Rights
Agreement or the date the DAL Common Units and DAL Series A Preferred Units are
first exchangeable for our ordinary shares.  In addition, the holders
of those securities may demand that we file up to two registration statements
registering their ordinary shares for resale.  The Transaction
Registration Rights Agreement also contains other customary provisions for such
types of agreements, including piggy-back registration rights, underwriter’s
cutback provisions and short-form registration of ordinary shares for
resale.
 
 Tax
Indemnification Agreements
 
 The
structure of the Transaction is designed to provide FlatWorld and the Stern
Contributors with certain tax benefits.  As a result of the adopted
structure, we may, under certain circumstances, incur adverse tax
consequences.  In consideration for our willingness to utilize the
structure used in the Transaction, the Stern Contributors, FlatWorld, Gupta and
Valenty have agreed to indemnify and protect us against certain adverse tax
consequences, should they occur, under three separate tax indemnification
agreements (collectively, the “Tax Indemnification Agreements”).  The
Tax Indemnification Agreements pertain only to specified circumstances and are
subject to a limit of $8,500,000 in the case of the Stern Contributors and
$1,750,000 in the case of FlatWorld, Gupta and Valenty.
 
 Limited
Liability Company Agreement
 
 Concurrently
with the closing of the Transaction, each of the Company, DAL, DJS, FlatWorld
and Fortuna (collectively, the “Members”) executed the Amended and Restated
Limited Liability Company Agreement of DAL Group, LLC (the “LLC
Agreement”).
 
 The
business and affairs of DAL are governed by a board of managers that consists of
five managers.  Stern, Raj Gupta, Mark Harmon, Matthew Kayton and
Jerry Hutter comprise the initial board of managers.  Managers may
only be removed for certain reasons enumerated in the LLC Agreement and will
hold office until removal or until their resignation or
death.  Vacancies will be filled by such manager’s alternative manager
as set forth in the LLC Agreement. For so long as the Stern Contributors
beneficially own DAL membership interests comprising of at least five percent of
the outstanding DAL membership interests, the Stern Contributors shall have the
right to appoint one manager to the board of managers.  For so long as
FlatWorld beneficially owns DAL membership interests comprising of at least five
percent of the outstanding DAL membership interests, FlatWorld shall have the
right to appoint one manager to the board of managers.
 
 During
any period when the Stern Contributors, FlatWorld and their transferees
beneficially own DAL membership interests comprising at least ten percent of the
DAL outstanding membership interest, there are certain actions enumerated in the
LLC Agreement that the board of managers cannot take without the prior written
consent of the Stern Contributors and FlatWorld, including, but not limited to,
taking any actions in contravention of the LLC Agreement or entering into,
amending or waiving any contract with a member of DAL or its affiliate with any
party that its not at arm’s length.
  36
  During
any period when we beneficially own any DAL membership interests comprising more
than fifty percent of the outstanding DAL membership interests, there are
certain actions enumerated in the LLC Agreement that the board of managers
cannot take without DJSP’s prior written consent, including, but not limited to,
taking any actions in contravention of the LLC Agreement or entering into,
amending or waiving any contract with a member of DAL or its affiliate with any
party that its not at arm’s length.
 
 At any
time when a Stern Contributor beneficially owns any membership interest in DAL,
the board of managers on behalf of DAL shall not, directly or indirectly, sell,
transfer or dispose of any of the membership interests of DJS LLC, PTA LLC or
DSI LLC, without the consent of the Stern Contributors.
 
 Commencing
on the date of the LLC Agreement, DJSP is prohibited from taking certain actions
specified in the LLC Agreement, which include, but are not limited to, issuing
any shares or other convertible securities, unless such securities are DJSP
securities convertible into or exchangeable for DJSP ordinary shares, without
the prior consent of members of the board of managers not nominated by the Stern
Contributors or the Members, other than DJSP, holding more than 50% of the DAL
membership interests.  Additionally, there are certain actions set
forth in the LLC Agreement that DJSP must take, such as calling the DJSP public
warrants at the earliest permitted time.  Finally, DJSP has agreed to,
among other things, devote all of its time and business efforts to promoting the
business and the interests of DAL.
 
 Employment
Related Contracts
 
 For
summaries of the employment agreements with certain of our executive officers
see the section of this Report titled, “Item 6. Directors, Senior Management and
Employees – Employment Agreements,” which is incorporated herein by
reference.
 
 Contracts
Related to Company Operations
 
 401(k)
Plan
 
 For
administrative convenience, each of DJS LLC, PTA LLC and DSI LLC will
participate in the 401(k) plan currently sponsored by DJS. Under the Law Offices
of David J. Stern, P.A., 401(k) Plan Cost Sharing Agreement, the administrative
costs for such 401(k) plan will be shared by DJS, DJS LLC, PTA LLC and DSI LLC
in proportion to the number of employees for the applicable employer. The fees
for administration of the 401(k) plan will be billed to DJS and DJS will seek
reimbursement from each of the three LLC’s.
 
 Consulting
Agreements
 
 Miriam
Mendieta and certain other employees of DJS have begun to perform direct
services for us. These DJS employees will enter into consulting agreements with
DJS LLC or PTA LLC pursuant to which DJS LLC and PTA LLC will agree to reimburse
DJS for an agreed upon percentage of their annual compensation, based upon the
percentage of their working time spent in performing direct services for
us.
 
 Services
Agreement
 
 DJS has
entered into a 25-year services agreement (the “Services Agreement”) with DJS
LLC, pursuant to which, among other things, DJS generally will be obligated to
utilize DJS LLC as the provider for substantially all non-legal services
required by DJS, to the extent that DJS LLC provides those services or comes to
provide the services in exchange for fees agreed upon by the parties to the
Services Agreement.
 
 The
services to be provided initially by DJS LLC under the Services Agreement are
processing services for foreclosures, bankruptcy, evictions, closings,
monitoring of junior lien positions, loss mitigation and litigation, each of
which has a specific fee amount agreed upon by DJS LLC and DJS. The initial fee
amounts for each of the services provided by DJS LLC in the Services Agreement
were negotiated and agreed upon by Chardan 2008 and DJS on an arms-length basis
in connection with the closing of the Transaction. The amount of the initial
fees charged was based upon the cost expected to be incurred by DJS LLC, plus a
profit component to compensate DJS LLC for its services and investments to
provide the services. In May 2010, DJS LLC and DJS agreed to increase the fee
amounts payable to DJS LLC to reflect increased costs incurred by DJS LLC in
performing the services and additional services required to be provided by DJS
LLC as a result of changes in the foreclosure process due to various government
programs discussed under “DJS Processing Division and Combined Affiliates –
Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Recent Developments” and changes in court requirements. The revised
fee schedule was approved by DJSP’s Audit Committee, which consists of only
independent directors, and Mr. Stern did not participate on behalf of DJS LLC or
DJSP in setting the revised fee schedule. At this time, DJS LLC does not provide
these services to parties other than DJS and so the fees were not set based upon
fee levels negotiated with parties other than Chardan 2008.
  37
  Either
party to the Services Agreement may propose a change to the fees as a result of
changes in law, demands of DJS’ clients, performance requirements, best
practices of costs to provide the services.  In the event such a
change is proposed, the Services Agreement provides that negotiations of the
fees on behalf of DJS LLC shall be handled by a person, designated by a majority
vote of the members of DJS LLC’s Board of Managers, who is not an owner,
officer, employee or agent of DJS, specifically excluding Mr. Stern from
conducting the negotiations on behalf of DJS LLC.  If DJS LLC and DJS
cannot agree on an amended fee schedule, then the matter will be referred to a
nationally recognized independent firm of public accountants selected by DJS LLC
and DJS to determine the appropriate amendment to the fee schedule, which
determination is binding on the parties.  The determination will be
made based upon the amount the accounting firm reasonably determines is required
to fairly compensate DJS LLC for the services to be provided, taking into
consideration the relevant reasonable economic expectations of each of the
parties when they entered into the Services Agreement and the economic needs of
DJS in order for it to provide legal services to its clients in accordance with
applicable law.  Adjustments to the fees will be retroactive to the
date a party first requested an adjustment.  The fee schedule is
subject to adjustment not more than twice each calendar year.
 
 DJS is
obligated to pay DJS LLC for services within five (5) business days after DJS
receives payment from its clients for the related services provided by DJS, but
in any event within ninety (90) days after the date of DJS LLC’s invoice to
DJS.  DJS LLC may invoice DJS for a foreclosure services on a file as
follows:  75% when DJS is permitted to provide its first invoice to
its client or, if sooner, sixty (60) days after the file is referred to DJS LLC,
and 25% when DJS is permitted to invoice its client for the rest of its fee or,
if sooner, three hundred thirty (330) days after the file is referred to DJS
LLC.  All other service fees are invoiced by DJS LLC when DJS is
permitted to invoice its client or, if sooner, ninety (90) days after the file
is referred to DJS LLC.
 
 DJS
LLC incurs and pays for all third party expenses and disbursements required in
connection with the provision of services under the Services Agreement, such as
court filing fees and costs, and third party costs such as notice publication
and posting, service of process, and title searches and
insurance.  DJS is required to reimburse DJS LLC for such third party
expenses and disbursements within five (5) business days after DJS receives
payment of such expenses and disbursements from its clients.
 
 The
Services Agreement also provides DJS LLC with a right of first refusal to
provide additional services required by DJS if DJS LLC and DJS can reach mutual
agreement on the terms and conditions for the provision of those services, DJS
LLC demonstrates its ability to provide the services to the reasonable
satisfaction of DJS and DJS LLC is permitted by applicable law to provide the
services.
 
 DJS is
not obligated to use DJS LLC’s services for files if it is prohibited form doing
so by a client or applicable law or if DJS LLC fails to cure breaches of the
performance metrics.  Currently, none of DJS’ files are subject to
such exclusions.  In the event that a DJS file became subject to such
an exclusion, DJS would be required to pay DJS an access fee that permits DJS to
access DJS LLC’s systems to handle and process the file itself.  In
addition, after the Services Agreement terminates, DJS is required to pay DJS
LLC the access fee to continue to use DJS LLC’s systems to process files than in
progress.  DJS is not paying DJS LLC any access fees at this
time.  The access fee amounts for each of the services provided by DJS
LLC in the Services Agreement were negotiated and agreed upon by Chardan 2008
and DJS on an arms-length basis in connection with the closing of the
Transaction.
 
 DJS
granted DJS LLC a security interest in its accounts receivable and work in
process to secure DJS’ obligations under the Services
Agreement.
 
 Under
the terms of the Services Agreement, DJS LLC will be obligated to make payments
to DJS for the first four years of the term of the Services Agreement, in the
event that DJS does not earn at least $2 million of EBITDA during each year,
subject to certain adjustments and conditions (“Guaranteed Payment”) in exchange
for supervisory services performed by DJS personnel for DJS
LLC.
  38
  For
purposes of calculating the amount due to DJS as a Guaranteed Payment in any
year, DJS’ EBITDA for the year is adjusted to remove the impact of gains or
losses from the sale of assets and other gains or losses treated as
extraordinary items for purposes of GAAP, reduced to reflect additional reserves
for uncollectible accounts receivable to the extent not already included and
increased in the event that the following expenses of DJS exceed
$2,000,000:  (i) travel and promotion, (ii) compensation, benefits and
payments to Mr. Stern and his affiliates in excess of $401,218, (iii) real
estate rental expenses in excess of those paid to DJS LLC, and (iv) increases in
DJS’ attorney compensation as a result of declines in efficiency, measured by
the number of files handled per attorney, and increases in attorney salary and
bonus.  An estimated payment of $166,667 is to be paid by DJS LLC to
DJS each month in payment of the Guaranteed Payment, with DJS repaying DJS LLC
the amount if its adjusted EBITDA for that month, up to the $166,667
received.  At each year end, there will be a final true-up of the
amount due to DJS by DJS LLC, if any, as a Guaranteed Payment based upon DJS’
audited financial statements for the year, with DJS repaying to DJS LLC any
excess payments it received during the year and DJS LLC paying DJS any
shortfall.  DJS was not required to make any payments to DJS LLC in
the first quarter of 2010 because DJS’ monthly adjusted EBITDA exceeded $166,667
for each of those months.
 
 The
amount of the Guaranteed Payments made by DJS LLC to DJS under the Services
Agreement in future periods , if any, are not yet known and are expected to
vary.
 
 The
Services Agreement can be terminated by any party upon written notice to the
other party of a material breach that remains uncured for one hundred twenty
(120) days.  If the termination is due to a non-monetary breach by
DJS, DJS can require DJS LLC to continue to provide services for up to six (6)
months to permit DJS to transition services to another provider.  DJS
LLC will also be required to complete work on all files in process, if requested
by DJS, upon termination of the Services Agreement in consideration of continued
payment of the scheduled fees for such files.  DJS LLC and DJS have
agreed to indemnify and hold harmless one another for their gross negligence,
willful misconduct, errors or omissions or breach of the Services
Agreement.  DJS has agreed not to compete with DJS LLC during the term
of the Services Agreement and for two years thereafter (unless termination is
due to a material breach by DJS LLC) or to solicit or employ DJS LLC’s employees
during that period, except that DJS may continue to provide such services on
files excluded form the Services Agreement.  Such restrictions cannot
restrict DJS from practicing law under applicable rules regulating the practice
of law.
 
 Management
is unable to determine at this time how the terms of the Services Agreement,
including the fees charged to DJS, would compare to the terms of a similar
agreement entered into with an unaffiliated party and so the fees charged to DJS
could be significantly less than what DJS LLC would charge an unrelated party
for the same services.
  Transferred
Employees Payroll and Benefits Transition and Reimbursement
Agreement
 
 On the
date of the closing of the Transaction, we entered into an agreement with the
Stern Contributors pursuant to which the Stern Contributors would provide to us
certain payroll services and would permit our employees to continue
participating in certain of their employee benefit plans until we could provide
such services and plans.  In exchange, we agreed to reimburse the
Stern Contributors for expenses incurred by them in connection with such
services and plans that relate to our employees.
 
 Facilities
Sharing Agreement
 
 Following
the closing of the Transaction, DJS LLC became the lessee of the premises used
for our operations located at 900 S. Pine Island Rd., Plantation,
Florida.  DJS and DJS LLC entered into an agreement pursuant to which
DJS will be entitled to occupy a portion of those premises for conducting its
operations, in exchange for which DJS will pay rent to DJS LLC.  In
addition, the facilities sharing agreement establishes the terms on which DJS
will be entitled to utilize certain office equipment located at the premises and
on which DJS LLC will furnish certain back-office services to DJS.
 
 FlatWorld
Consulting LLC  and Chardan Capital Markets, LLC Consulting Agreement
and Other Fees
 
 DAL
and FlatWorld Consulting LLC, an affiliate of FlatWorld Capital, Nagina,
Valenty, Gupta, FlatWorld and Fortuna, entered into an agreement to provide
ongoing consulting services to DAL for three years following the first
anniversary after the closing of the acquisition (the “Management Services
Term”). FlatWorld Consulting LLC will be paid a monthly amount of $111,111.11
during the Management Services Term. In addition, DAL will pay FlatWorld
Consulting LLC a 2% acquisition fee based on the total enterprise value of any
acquisition made by DAL post-closing for which FlatWorld has acted as a
financial intermediary. The agreement provides for FlatWorld Consulting LLC to
provide DAL with management consulting services consistent with those services
generally performed by middle-market private equity firms for their portfolio
companies, as DAL may reasonably request from time to time. Such services could
include advising DAL regarding acquisition strategy, potential acquisition
candidates, financing strategy, business development and growth strategy, and
specific growth and strategic operational initiatives.
  39
  Chardan
Capital, LLC, an affiliate of Chardan 2008’s chairman, Zhang Li, was entitled to
receive the $2 million Chardan Capital Fee when the Transaction closed.
Beginning in January 2011, Chardan Capital, LLC will also receive $40,000 per
month under a management consulting agreement with DAL. Mr. Zhang would derive a
direct benefit from the payment of those fees.
 
 D.
Exchange
Controls
 
 Under
British Virgin Islands law, there are currently no restrictions on the export or
import of capital, including foreign exchange controls or restrictions that
affect the remittance of dividends, interest or other payments to nonresident
holders of our shares.
 
 E.
Taxation
 
 The
following is a general summary of certain material BVI and U.S. federal income
tax considerations for U.S. holders of our securities.  The discussion is
not intended to be, nor should it be construed as, legal or tax advice to any
particular current or prospective shareholder.  The discussion is based on
laws and relevant interpretations thereof in effect as of the date hereof, all
of which are  subject to change or different interpretations, possibly
with retroactive effect.
 
 BVI
Taxation
 
 The BVI
does not impose a withholding tax on dividends paid by us to holders of our
ordinary or preferred shares, nor does the BVI levy any capital gains or income
taxes on us.  Further, a holder of our ordinary or preferred shares who is
not a resident of the BVI is exempt from the BVI income tax on dividends paid
with respect to the ordinary or preferred shares.  Holders of ordinary or
preferred shares are not subject to the BVI income tax on gains realized on the
sale or disposition of the ordinary or preferred shares.
 
 Our
ordinary and preferred shares are not subject to transfer taxes, stamp duties or
similar charges in the BVI.  However, as a business company, we are
required to pay the BVI government an annual license fee based on the number of
shares we are authorized to issue.
 
 There is
no income tax treaty or convention currently in effect between the United States
and the BVI; however, a Tax Information Exchange Agreement (“TIEA”) is in
place.  The TIEA allows the BVI and US governments to enforce their
own tax laws by exchanging, on request, information relating to the tax matters
covered by the TIEA.  The parties to the TIEA have agreed to provide
assistance through the exchange of information relating to the administration
and enforcement of the domestic laws of the parties concerning the taxes and the
tax matters covered by the TIEA, including information that may be relevant to
the determination, assessment, verification, enforcement, or collection of tax
claims with respect to persons subject to such taxes, or to the investigation or
prosecution of criminal tax evasion in relation to such persons.
 
 United
States Federal Income Taxation
 
 General
 
 The
following is a summary of the material U.S. federal income tax consequences to
holders of our ordinary shares and warrants, sometimes referred to collectively
as our securities, and of owning and disposing of our
securities.  Because the components of a unit are separable at the
option of the holder, the holder of a unit should be treated, for U.S. federal
income tax purposes, as the owner of the underlying ordinary share and warrant
components of the unit, as the case may be.  As a result, the
discussion below of the U.S. federal income tax consequences with respect to
actual holders of ordinary shares and warrants should also apply to the holder
of a unit (as the deemed owner of the underlying ordinary share and warrant
components of the unit).  The discussion below of the U.S. federal
income tax consequences to “U.S. Holders” will apply to a beneficial owner of
our securities that is for U.S. federal income tax purposes:
  ·
                an
      individual citizen or resident of the United
  States;
  40
  ·
                a
      corporation (or other entity treated as a corporation) that is created or
      organized (or treated as created or organized) in or under the laws of the
      United States, any state thereof or the District of
    Columbia;
  ·
                an
      estate whose income is includible in gross income for U.S. federal income
      tax purposes regardless of its source;
or
  ·
                a
      trust if (i) a U.S. court can exercise primary supervision over the
      trust’s administration and one or more U.S. persons are authorized to
      control all substantial decisions of the trust, or (ii) it has a valid
      election in effect under applicable U.S. Treasury regulations to be
      treated as a U.S. person.
 
 If a
beneficial owner of our securities is not described as a U.S. Holder and is not
an entity treated as a partnership or other pass-through entity for U.S. federal
income tax purposes, such owner will be considered a “Non-U.S. Holder” for
purposes of this discussion.
 
 This
summary is based on the Internal Revenue Code of 1986, as amended, or the
“Code,” its legislative history, Treasury regulations promulgated thereunder,
published rulings and court decisions, all as currently in effect. These
authorities are subject to change or differing interpretations, possibly on a
retroactive basis.
 
 This
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to us or to any particular holder based on such holder’s individual
circumstances.  In particular, this discussion considers only holders
that own our securities as capital assets within the meaning of Section 1221 of
the Code, and does not address the potential application of the alternative
minimum tax or the U.S. federal income tax consequences to holders that are
subject to special rules, including:
  ·
                financial
      institutions or financial services
entities;
  ·
                broker-dealers;
  ·
                taxpayers
      that are subject to the mark-to-market accounting rules under Section 475
      of the Code;
  ·
                tax-exempt
      entities;
  ·
                governments
      or agencies or instrumentalities
thereof;
  ·
                insurance
      companies;
  ·
                regulated
      investment companies;
  ·
                real
      estate investment trusts;
  ·
                certain
      expatriates or former long-term residents of the United
      States;
  ·
                persons
      that actually or constructively own 5% or more of our voting
      shares;
  ·
                persons
      that acquired our securities pursuant to an exercise of employee stock
      options, in connection with employee stock incentive plans or otherwise as
      compensation;
  ·
                persons
      that hold our securities as part of a straddle, constructive sale,
      hedging, conversion or other integrated transaction;
  or
  ·
                persons
      whose functional currency is not the U.S.
  dollar.
 
 This
discussion does not address any aspect of U.S. federal non-income tax laws, such
as gift or estate tax laws, or state, local or non-U.S. tax
laws.  This discussion assumes that any distributions made (or deemed
made) by us on our ordinary shares and any consideration received by a holder in
consideration for the sale or other disposition of our securities will be in
United States dollars.  Additionally, the discussion does not consider
the tax treatment of partnerships or other pass-through entities or persons who
hold our securities through such entities.  If a partnership (or other
entity classified as a partnership for U.S. federal income tax purposes) is the
beneficial owner of our securities, the U.S. federal income tax treatment of a
partner in the partnership will generally depend on the status of the partner
and the activities of the partnership.  In addition, this discussion
does not address the U.S. federal income tax treatment to holders of our
securities that may bring a successful claim for rescission or damages in
respect of the purchase of their securities.
  41
  We have
not sought, and will not seek, a ruling from the Internal Revenue Service
(“IRS”) or an opinion of counsel as to any U.S. federal income tax consequence
described herein.  The IRS may disagree with the description herein,
and its determination may be upheld by a court.  Moreover, there can
be no assurance that future legislation, regulations, administrative rulings or
court decisions will not adversely affect the accuracy of the statements in this
discussion.
 
 BECAUSE
OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY
PARTICULAR HOLDER OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED
HEREIN, EACH HOLDER OF OUR SECURITIES IS URGED TO CONSULT WITH ITS TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION AND THE
OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS
AND APPLICABLE TAX TREATIES.
 
 Taxation
of Distributions Paid on Ordinary Shares
 
 Subject
to the passive foreign investment company, or “PFIC,” rules discussed below, a
U.S. Holder generally will be required to include in gross income as ordinary
income the amount of any cash dividend paid on our ordinary shares. A cash
distribution on our ordinary shares generally will be treated as a dividend for
U.S. federal income tax purposes to the extent paid out of our current or
accumulated earnings and profits (as determined for U.S. federal income tax
purposes).  Such dividend will not be eligible for the
dividends-received deduction generally allowed to U.S. corporations in respect
of dividends received from other U.S. corporations. Such distribution in excess
of such earnings and profits generally will be applied against and reduce the
U.S. Holder’s basis in its ordinary shares and, to the extent in excess of such
basis, will be treated as gain from the sale or exchange of such ordinary
shares.
 
 With
respect to non-corporate U.S. Holders for taxable years beginning before January
1, 2011, dividends may be subject to U.S. federal income tax at the lower
applicable regular long term capital gains tax rate (see “— Taxation on the
Disposition of Ordinary Shares and Warrants” below) provided that (1) our
ordinary shares are readily tradable on an established securities market in the
United States, (2) we are not a PFIC, as discussed below, for either the taxable
year in which the dividend was paid or the preceding taxable year and (3)
certain holding period requirements are met. Under published IRS authority,
ordinary shares are considered for purposes of clause (1) above to be readily
tradable on an established securities market in the United States, only if they
are listed on certain exchanges, which presently include NASDAQ. Although our
ordinary shares are currently listed and traded on NASDAQ, U.S. Holders
nevertheless should consult their own tax advisors regarding the availability of
the lower rate for any dividends paid with respect to our ordinary
shares.
 
 Taxation
on the Disposition of Ordinary Shares and Warrants
 
 Upon a
sale or other taxable disposition of our ordinary shares or warrants, and
subject to the PFIC rules discussed below, a U.S. Holder should recognize
capital gain or loss in an amount equal to the difference between the amount
realized and the U.S. Holder’s adjusted tax basis in the ordinary shares or
warrants.
 
 The
regular U.S. federal income tax rate on capital gains recognized by U.S. Holders
generally is the same as the regular U.S. federal income tax rate on ordinary
income, except that long-term capital gains recognized by non-corporate U.S.
Holders are generally subject to U.S. federal income tax at a maximum regular
rate of 15% for taxable years beginning before January 1, 2011 (and 20%
thereafter). Capital gain or loss will constitute long-term capital gain or loss
if the U.S. Holder’s holding period for the ordinary shares or warrants exceeds
one year. The deductibility of capital losses is subject to various
limitations.
  42
  Exercise
or Lapse of a Warrant
 
 Subject
to the discussion of the PFIC rules below, a U.S. Holder generally will not
recognize gain or loss upon the exercise of a warrant for cash. Ordinary shares
acquired pursuant to the exercise of a warrant for cash generally will have a
tax basis equal to the U.S. Holder’s tax basis in the warrant, increased by the
amount paid to exercise the warrant. The holding period of such ordinary shares
generally would begin on the day after the date of exercise of the warrant. The
terms of a warrant provide for an adjustment to the number of ordinary shares
for which the warrant may be exercised or to the exercise price of the warrant
in certain events. Such adjustment may, under certain circumstances, result in
constructive distributions that could be taxable to the U.S. Holder of the
warrants.  Conversely, the absence of an appropriate adjustment
similarly may result in a constructive distribution that could be taxable to the
U.S. Holders of the ordinary shares. See “—Taxation of Distributions Paid on
Ordinary Shares,” above. If a warrant is allowed to lapse unexercised, a U.S.
Holder generally will recognize a capital loss equal to such holder’s tax basis
in the warrant. If a warrant is exercised other than by the payment of the
exercise price in cash, the tax treatment of such an exercise may vary from that
described above. U.S. Holders should consult their own tax advisors regarding
the tax treatment of such an exercise.
 
 Additional
Taxes After 2012
 
 For
taxable years beginning after December 31, 2012, U.S. Holders that are
individuals, estates or trusts and whose income exceeds certain thresholds
generally will be subject to a 3.8% Medicare contribution tax on unearned
income, including, among other things, dividends on, and capital gains from the
sale or other taxable disposition of, our securities, subject to certain
limitations and exceptions. U.S. Holders should consult their own tax advisors
regarding the effect, if any, of such tax on their ownership and disposition of
our securities.
 
 Passive
Foreign Investment Company Rules
 
 A foreign
corporation will be a PFIC if at least 75% of its gross income in a taxable year
of the foreign corporation, including its pro rata share of the gross income of
any corporation in which it is considered to own at least 25% of the shares by
value, is passive income. Alternatively, a foreign corporation will be a PFIC if
at least 50% of its assets in a taxable year of the foreign corporation,
ordinarily determined based on fair market value and averaged quarterly over the
year, including its pro rata share of the assets of any corporation in which it
is considered to own at least 25% of the shares by value, are held for the
production of, or produce, passive income. Passive income generally includes
dividends, interest, rents and royalties (other than certain rents or royalties
derived from the active conduct of a trade or business) and gains from the
disposition of passive assets.
 
 Based
on the expected composition of the assets and income of us and DAL for the 2010
taxable year, we do not expect to be treated as a PFIC for our 2010 taxable
year. However, our actual PFIC status for our 2010 taxable year or any
subsequent taxable year will not be determinable until after the end of such
taxable year. Accordingly, there can be no assurance with respect to our status
as a PFIC for our 2010 taxable year or any future taxable year.
 
 If we
are determined to be a PFIC for any taxable year (or portion thereof) that is
included in the holding period of a U.S. Holder of our ordinary shares or
warrants and, in the case of our ordinary shares, the U.S. Holder did not make
either a timely qualified electing fund (“QEF”) election for our first taxable
year as a PFIC in which the U.S. Holder held (or was deemed to hold) our
ordinary shares, or a mark-to-market election, as described below, such holder
generally will be subject to special rules with respect to:
  ·
                any
      gain recognized by the U.S. Holder on the sale or other disposition of its
      ordinary shares or warrants; and
  ·
                any
      “excess distribution” made to the U.S. Holder (generally, any
      distributions to such U.S. Holder during a taxable year of the U.S. Holder
      that are greater than 125% of the average annual distributions received by
      such U.S. Holder in respect of our ordinary shares during the three
      preceding taxable years of such U.S. Holder or, if shorter, such U.S.
      Holder’s holding period for the ordinary
  shares).
 
 Under
these rules:
  ·
                the
      U.S. Holder’s gain or excess distribution will be allocated ratably over
      the U.S. Holder’s holding period for the ordinary shares or
      warrants;
  ·
                the
      amount allocated to the U.S. Holder’s taxable year in which the U.S.
      Holder recognized the gain or received the excess distribution or to the
      period in the U.S. Holder’s holding period before the first day of our
      first taxable year in which we are a PFIC will be taxed as ordinary
      income;
  ·
                the
      amount allocated to other taxable years of the U.S. Holder and included in
      its holding period will be taxed at the highest tax rate in effect for
      that year and applicable to the U.S. Holder;
and
  43
  ·
                the
      interest charge generally applicable to underpayments of tax will be
      imposed in respect of the tax attributable to each such other taxable year
      of the U.S. Holder.
 
 In
general, a U.S. Holder may avoid the PFIC tax consequences described above in
respect to our ordinary shares of by making a timely QEF election to include in
income its pro rata share of our net capital gains (as long-term capital gain)
and other earnings and profits (as ordinary income), on a current basis, in each
case whether or not distributed, in the taxable year of the U.S. Holder in which
or with which our taxable year ends.  A U.S. Holder may make a
separate election to defer the payment of taxes on undistributed income
inclusions under the QEF rules, but if deferred, any such taxes will be subject
to an interest charge.
 
 A U.S.
Holder may not make a QEF election with respect to its warrants.  As a
result, if a U.S. Holder sells or otherwise disposes of a warrant to purchase
our ordinary shares (other than upon exercise of a warrant), any gain recognized
generally will be subject to the special tax and interest charge rules treating
the gain as an excess distribution, as described above, if we were a PFIC at any
time during the period the U.S. Holder held the warrants.  If a U.S.
Holder that exercises such warrants properly makes a QEF election with respect
to newly acquired ordinary shares in us (or has previously made a QEF election
with respect to its ordinary shares in us), the QEF election will apply to the
newly acquired ordinary shares, but the adverse tax consequences relating to
PFIC shares, adjusted to take into account the current income inclusions
resulting from the QEF election, will continue to apply with respect to such
newly acquired ordinary shares (which generally will be deemed to have a holding
period for the purposes of the PFIC rules that includes the period the U.S.
Holder held the warrants), unless the U.S. Holder makes a purging
election.  The purging election creates a deemed sale of such shares
at their fair market value. The gain recognized by the purging election
generally will be subject to the special tax and interest charge rules treating
the gain as an excess distribution, as described above. As a result of the
purging election, the U.S. Holder will have a new basis and holding period in
the ordinary shares acquired upon the exercise of the warrants for purposes of
the PFIC rules.
 
 The QEF
election is made on a shareholder-by-shareholder basis and, once made, can be
revoked only with the consent of the IRS.  A U.S. Holder generally
makes a QEF election by attaching a completed IRS Form 8621 (Return by a
Shareholder of a Passive Foreign Investment Company or QEF), including the
information provided in a PFIC annual information statement, to a timely filed
U.S. federal income tax return for the tax year to which the election
relates.  Retroactive QEF elections generally may be made only by
filing a protective statement with such return and if certain other conditions
are met or with the consent of the IRS.
 
 In order
to comply with the requirements of a QEF election, a U.S. Holder must receive
certain information from us. Upon request from a U.S. Holder, we will endeavor
to provide to the U.S. Holder, no later than 90 days after the request, such
information as the IRS may require, including a PFIC annual information
statement, in order to enable the U.S. Holder to make and maintain a QEF
election.  However, there is no assurance that we will have timely
knowledge of its status as a PFIC in the future or of the required information
to be provided.
 
 If a U.S.
Holder has elected the application of the QEF rules to our ordinary shares, and
the special tax and interest charge rules do not apply to such shares (because
of a timely QEF election for our first taxable year as a PFIC in which the U.S.
Holder holds (or is deemed to hold) such shares or a purge of the PFIC taint
pursuant to a purging election), any gain recognized on the appreciation of such
shares should be taxable as capital gain and no interest charge will be
imposed.  As discussed above, U.S. Holders of a QEF are currently
taxed on their pro rata shares of the QEF’s earnings and profits, whether or not
distributed. In such case, a subsequent distribution of such earnings and
profits that were previously included in income should not be taxable as a
dividend to those U.S. Holders who made a QEF election.  The tax basis
of a U.S. Holder’s shares in a QEF will be increased by amounts that are
included in income, and decreased by amounts distributed but not taxed as
dividends, under the above rules. Similar basis adjustments apply to property if
by reason of holding such property the U.S. Holder is treated under the
applicable attribution rules as owning shares in a QEF.
 
 Although
a determination as to our PFIC status will be made annually, an initial
determination that we are a PFIC generally will apply for subsequent years to a
U.S. Holder who held our ordinary shares or warrants while we were a PFIC,
whether or not we met the test for PFIC status in those years.  A U.S.
Holder who makes the QEF election discussed above for our first taxable year as
a PFIC in which the U.S. Holder holds (or is deemed to hold) our ordinary
shares, however, will not be subject to the PFIC tax and interest charge rules
discussed above in respect to such shares. In addition, such U.S. Holder will
not be subject to the QEF inclusion regime with respect to such shares for any
taxable year of ours that ends within or with a taxable year of the U.S. Holder
and in which we are not a PFIC.  On the other hand, if the QEF
election is not effective for each of the taxable years of ours in which we are
a PFIC and during which the U.S. Holder holds (or is deemed to hold) of our
ordinary shares, the PFIC rules discussed above will continue to apply to such
shares unless the U.S. Holder makes a purging election and pays the tax and
interest charge with respect to the gain inherent in such shares attributable to
the pre-QEF election period.
  44
  Alternatively,
if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that
are treated as marketable stock (as described below), the U.S. Holder may make a
mark-to-market election with respect to such shares for such taxable year. If
the U.S. Holder makes a valid mark-to-market election for the first taxable year
of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) our
ordinary shares and for which we are determined to be a PFIC, such holder
generally will not be subject to the PFIC rules described above in respect to
its ordinary shares. Instead, in general, the U.S. Holder will include as
ordinary income each year the excess, if any, of the fair market value of its
ordinary shares at the end of its taxable year over the adjusted basis in its
ordinary shares.  The U.S. Holder also will be allowed to take an
ordinary loss in respect of the excess, if any, of the adjusted basis of its
ordinary shares over the fair market value of its ordinary shares at the end of
its taxable year (but only to the extent of the net amount of previously
included income as a result of the mark-to-market election). The U.S. Holder’s
basis in its ordinary shares will be adjusted to reflect any such income or loss
amounts, and any further gain recognized on a sale or other taxable disposition
of the ordinary shares will be treated as ordinary income. Currently, a
mark-to-market election may not be made with respect to warrants.
 
 The
mark-to-market election is available only for stock that is regularly traded on
a national securities exchange that is registered with the SEC, including
NASDAQ, or on a foreign exchange or market that the IRS determines has rules
sufficient to ensure that the market price represents a legitimate and sound
fair market value. Although our ordinary shares currently trade on NASDAQ, U.S.
Holders nevertheless should consult their own tax advisors regarding the
availability and tax consequences of a mark-to-market election in respect to our
ordinary shares under their particular circumstances.
 
 If we are
a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC,
U.S. Holders generally would be deemed to own a portion of the shares of such
lower-tier PFIC, and generally could incur liability for the deferred tax and
interest charge described above we receive a distribution from, or disposes of
all or part of its interest in, the lower-tier PFIC.  Upon request, we
will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later
than 90 days after the request the information that may be required to make or
maintain a QEF election with respect to the lower-tier PFIC.  However,
there is no assurance that we will have timely knowledge of the status of any
such lower-tier PFIC or of the required information to be provided. U.S. Holders
are urged to consult their own tax advisors regarding the tax issues raised by
lower-tier PFICs.
 
 If a U.S.
Holder owns (or is deemed to own) shares in a PFIC during any taxable year of
the U.S. Holder, such holder may have to file an IRS Form 8621 (whether or not a
QEF or mark-to-market election is made).
 
 The rules
dealing with PFICs and with the QEF and mark-to-market elections are very
complex and are affected by various factors in addition to those described
above.  Accordingly, U.S. Holders of our ordinary shares and warrants
should consult their own tax advisors concerning the application of the PFIC
rules to such ordinary shares and warrants under their particular
circumstances.
 
 Backup
Withholding and Information Reporting
 
 In
general, information reporting for U.S. federal income tax purposes will apply
to distributions made on our ordinary shares within the United States to a
non-corporate U.S. Holder and to the proceeds from sales and other dispositions
of our ordinary shares or warrants by a non-corporate U.S. Holder to or through
a U.S. office of a broker.  Payments made (and sales and other
dispositions effected at an office) outside the United States will be subject to
information reporting in limited circumstances.
 
 In
addition, backup withholding of United States federal income tax, currently at a
rate of 28%, generally will apply to dividends paid on our ordinary shares to a
non-corporate U.S. Holder and the proceeds from sales and other dispositions of
our shares or warrants by a non-corporate U.S. Holder, in each case
who:
  ·
                fails
      to provide an accurate taxpayer identification
  number;
  ·
                is
      notified by the IRS that backup withholding is required;
  or
  ·
                in
      certain circumstances, fails to comply with applicable certification
      requirements.
  45
  Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S.
Holder’s U.S. federal income tax liability and may entitle such holder to a
refund, provided that certain required information is timely furnished to the
IRS.  Holders are urged to consult their own tax advisors regarding
the application of backup withholding and the availability of and procedure for
obtaining an exemption from backup withholding in their particular
circumstances.
 
 F.
Dividends and Paying
Agents
 
 Not
applicable.
 
 G.
Statement by
Experts
 
 Not
applicable.
 
 H.
Documents on
Display
 
 Documents
concerning us that are referred to in this document may be inspected at our
principal executive offices at 900 South Pine Island Road, Suite 400,
Plantation, Florida 33324.
 
 In
addition, we will file annual reports and other information with the SEC.
 Since we are currently a foreign private issuer, we will file annual
reports on Form 20-F and submit other information under cover of
Form 6-K. As a foreign private issuer, we are exempt from the proxy
requirements of Section 14 of the Exchange Act and our officers, directors
and principal shareholders will be exempt from the insider short-swing
disclosure and profit recovery rules of Section 16 of the Exchange
Act.  However, we expect our status as a foreign private issuer to
terminate as of December 31, 2010 and will thereafter file domestic company
reports with the SEC.  Annual reports and other information we file
with the Commission may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington,
D.C. 20549, and copies of all or any part thereof may be obtained from such
offices upon payment of the prescribed fees.  You may call the Commission
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms and you can request copies of the documents upon payment of a
duplicating fee, by writing to the Commission. In addition, the Commission
maintains a web site that contains reports and other information regarding
registrants (including us) that file electronically with the Commission which
can be assessed at http://www.sec.gov.
 
 I.
Subsidiary
Information
 
 Not
applicable.
  46
  PART
III
 
 ITEM
18. FINANCIAL STATEMENTS
 INDEX
TO FINANCIAL STATEMENTS
  DJS
Processing Division and its Combined Affiliates
 Audited
Combined Carve-Out Financial Statements as of December 31, 2009 and 2008 and for
the Years Ended December 31, 2009, December 31, 2008 and December 31, 2007
  PageReport
      of Independent Registered Public Accounting Firm
                    
                    
                    F-2Combined
      Carve-Out Balance Sheets
                    
                    
                    F-3Combined
      Carve-Out Statements of Income
                    
                    
                    F-4Combined
      Carve-Out Statements of Changes in Shareholder's and Member's
      Equity
                    
                    
                    F-5Combined
      Carve-Out Statements of Cash Flow
                    
                    
                    F-6Notes
      to the Combined Carve-Out Financial Statements
                    
                    
                    F-7
  Chardan
2008 China Acquisition Corp.
 Audited
Financial Statements as of December 31, 2009 and 2008 and for the Year Ended
December 31, 2009 and the period from February 19, 2008 (inception) to December
31, 2008
  PageReport
      of Independent Registered Public Accounting Firm
                    
                    
                    F-13Balance
      Sheets
                    
                    
                    F-14Statements
      of Operations
                    
                    
                    F-15Statements
      of Changes in Shareholders’ Equity
                    
                    
                    F-16Statements
      of Cash Flows
                    
                    
                    F-17Notes
      to Audited Financial Statements
                    
                    
                    F-18
  F-1
  Report
of Independent Registered Public Accounting Firm
 
 To the
Member and Shareholder
 DJS
Processing Division and its Combined Affiliates
 
 We have
audited the accompanying combined carve-out balance sheets of DJS Processing
Division and its Combined Affiliates (the “Company”) as of December 31, 2009 and
2008, and the related combined carve-out statements of income, changes in
shareholder’s and member’s equity, and cash flows for each of the three years in
the period ended December 31, 2009.  These financial statements are
the responsibility of the Company's management.  Our responsibility is
to express an opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with the 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.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
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.
 
 In our
opinion, the combined carve-out financial statements referred to above present
fairly, in all material respects, the financial position of DJS Processing
Division and its Combined Affiliates as of December 31, 2009 and 2008, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2009, in conformity with U.S. generally accepted
accounting principles.
 
 The
combined carve-out financial statements include the accounts of a division of an
entity and the amounts included therein are based on significant estimates and
judgments made by management. See Note 1 for further discussion.
  As
discussed in Note 10, the Company has restated their combined carve-out
financial statements to include segment disclosures.
   /s/
McGladrey & Pullen, LLP
 
 Orlando,
Florida
 April 1,
2010, except
for Note 10, as to which the date is April 22, 2010
  F-2
  DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 COMBINED
CARVE-OUT BALANCE SHEETS
 December
31, 2009 and 2008
  2009
                    
                    
                    2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                    
                    $
                    763,387
                    
                    
                    $
                    1,427,588Accounts
      receivableRelated
      partyClient
      reimbursed costs
                    
                    
                    6,046,760
                    
                    
                    
                    20,425,337Fee
      income, net
                    
                    
                    15,636,734
                    
                    
                    
                    15,189,550Unbilled
      receivables
                    
                    
                    10,591,850
                    
                    
                    
                    11,210,565Total
      related party accounts receivable
                    
                    
                    32,275,344
                    
                    
                    
                    46,825,452Fee
      income receivable, net
                    
                    
                    798,350
                    
                    
                    
                    2,340,250Total
      accounts receivable
                    
                    
                    33,073,694
                    
                    
                    
                    49,165,695Prepaid
      expenses
                    
                    
                    87,314
                    
                    
                    
                    46,939Total
      current assets
                    
                    
                    33,924,395
                    
                    
                    
                    50,640,222Equipment
      and leasehold improvements, net (Note 3)
                    
                    
                    4,691,520
                    
                    
                    
                    3,154,623Total
      assets
                    
                    $
                    38,615,915
                    
                    
                    $
                    53,794,845LIABILITIES
      AND SHAREHOLDER'S AND MEMBER'S EQUITYCurrent
      LiabilitiesAccounts
      payable – client reimbursed costs
                    
                    $
                    6,046,760
                    
                    
                    $
                    20,425,337Accounts
      payable
                    
                    
                    1,505,861
                    
                    
                    
                    742,601Accrued
      compensation
                    
                    
                    1,863,436
                    
                    
                    
                    2,207,094Accrued
      expenses
                    
                    
                    1,200,650
                    
                    
                    
                    976,643Current
      portion of capital lease obligations (Notes 3 and 4)
                    
                    
                    191,786
                    
                    
                    
                    217,095Deferred
      revenue
                    
                    
                    225,063
                    
                    
                    
                    263,900Due
      to related party
                    
                    
                    —
                    
                    
                    
                    25,035Client
      trust account
                    
                    
                    239,310
                    
                    
                    
                    —Notes
      payable
                    
                    
                    2,307,221
                    
                    
                    
                    —Line
      of credit
                    
                    
                    10,656,250
                    
                    
                    
                    —Total
      current liabilities
                    
                    
                    24,236,337
                    
                    
                    
                    24,857,705Deferred
      Rent (Note 5)
                    
                    
                    1,097,726
                    
                    
                    
                    959,323Capital
      Lease Obligations, less current portion(Notes
      3, and 4)
                    
                    
                    261,700
                    
                    
                    
                    512,168Total
      liabilities
                    
                    
                    25,595,763
                    
                    
                    
                    26,329,196Commitments
      and Contingencies (Notes 4, 5 and 7)Shareholder's
      and Member's EquityCommon
      stock
                    
                    
                    1,000
                    
                    
                    
                    1,000Retained
      earnings
                    
                    
                    4,348,342
                    
                    
                    
                    7,608,920Member's
      equity
                    
                    
                    8,670,810
                    
                    
                    
                    19,855,729Total
      shareholder's and member's equity
                    
                    
                    13,020,152
                    
                    
                    
                    27,465,649Total
      liabilities and shareholder's and member's equity
                    
                    $
                    38,615,915
                    
                    
                    $
                    53,794,845
  The
accompanying notes are an integral part of these combined carve-out financial
statements.
  F-3
  DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 COMBINED
CARVE-OUT STATEMENTS OF INCOME
 Years
Ended December 31, 2009, 2008 and 2007
  2009
                        
                        
                        2008
                        
                        
                        2007Revenue:Foreclosure
      and related services, related party
                        
                        $
                        104,879,187
                        
                        
                        $
                        99,952,361
                        
                        
                        $
                        65,209,835Foreclosure
      and related services, third parties
                        
                        
                        5,109,500
                        
                        
                        
                        2,857,800
                        
                        
                        
                        987,075Real
      estate owned liquidation services
                        
                        
                        11,220,824
                        
                        
                        
                        4,073,234
                        
                        
                        
                        1,690,241Client
      reimbursed costs, related party
                        
                        
                        139,059,336
                        
                        
                        
                        92,319,306
                        
                        
                        
                        47,613,198Total
      Revenue:
                        
                        
                        260,268,847
                        
                        
                        
                        199,202,701
                        
                        
                        
                        115,500,349Operating
      expenses:Client
      reimbursed costs, related party
                        
                        
                        139,059,336
                        
                        
                        
                        92,319,306
                        
                        
                        
                        47,613,198Compensation
      related expenses
                        
                        
                        50,085,039
                        
                        
                        
                        44,356,093
                        
                        
                        
                        20,268,283Direct
      operating and general and administrative expenses
                        
                        
                        25,435,754
                        
                        
                        
                        19,078,472
                        
                        
                        
                        8,668,430Depreciation
      expense
                        
                        
                        1,123,564
                        
                        
                        
                        594,156
                        
                        
                        
                        277,926Total
      operating expenses
                        
                        
                        215,703,693
                        
                        
                        
                        156,348,027
                        
                        
                        
                        76,827,837Operating
      Income
                        
                        
                        44,565,154
                        
                        
                        
                        42,854,674
                        
                        
                        
                        38,672,512Other
      Income
                        
                        
                        312
                        
                        
                        
                        31,677
                        
                        
                        
                        16,328Net
      Income
                        
                        $
                        44,565,466
                        
                        
                        $
                        42,886,351
                        
                        
                        $
                        38,688,840
 
 The  accompanying
notes are an integral part of these combined carve-out financial statements
  F-4
 
 DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of the Law Offices of David J. Stern, P.A.)
 COMBINED
CARVE-OUT STATEMENTS OF CHANGES IN SHAREHOLDER'S
 AND
MEMBER'S EQUITY
 Years
Ended December 31, 2009, 2008 and 2007
  Default
      Services, Inc.
                    
                    
                    Professional
      Title and Abstract Company of Florida, Inc.
                    
                    
                    DJS
      Processing Division
                    
                    
                    Combined2007Common
      stock, $1 par valueAuthorized
      and issued:Beginning
      and ending,500
      shares
                    
                    $
                    500
                    
                    
                    $
                    500
                    
                    
                    $
                    —
                    
                    
                    $
                    1,000Retained
      earnings (deficit)Balance,
      beginning
                    
                    
                    (27,779
                    )
                    
                    
                    1,680,395
                    
                    
                    
                    —
                    
                    
                    
                    1,652,616Net
      income
                    
                    
                    1,160,100
                    
                    
                    
                    5,893,796
                    
                    
                    
                    —
                    
                    
                    
                    7,053,896Dividends
                    
                    
                    (1,075,000
                    )
                    
                    
                    (1,557,827
                    )
                    
                    
                    —
                    
                    
                    
                    (2,632,827
                    )Balance,
      ending
                    
                    
                    57,321
                    
                    
                    
                    6,016,364
                    
                    
                    
                    —
                    
                    
                    
                    6,073,685Shareholder's
      and member's equityBalance,
      beginning
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    3,378,295
                    
                    
                    
                    3,378,295Net
      income
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    31,634,944
                    
                    
                    
                    31,634,944Dividends
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (15,943,165
                    )
                    
                    
                    (15,943,165
                    )Balance,
      ending
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    19,070,074
                    
                    
                    
                    19,070,074$
                    57,821
                    
                    
                    $
                    6,016,864
                    
                    
                    $
                    19,070,074
                    
                    
                    $
                    25,144,7592008Common
      stock, $1 par valueAuthorized
      and issued:Beginning
      and ending,500
      shares
                    
                    $
                    500
                    
                    
                    $
                    500
                    
                    
                    $
                    —
                    
                    
                    $
                    1,000Retained
      earnings (deficit)Balance,
      beginning
                    
                    
                    57,321
                    
                    
                    
                    6,016,364
                    
                    
                    
                    —
                    
                    
                    
                    6,073,685Net
      income
                    
                    
                    2,594,180
                    
                    
                    
                    4,643,198
                    
                    
                    
                    —
                    
                    
                    
                    7,237,378Dividends
                    
                    
                    (2,665,023
                    )
                    
                    
                    (3,037,120
                    )
                    
                    
                    —
                    
                    
                    
                    (5,702,143
                    )Balance,
      ending
                    
                    
                    (13,522
                    )
                    
                    
                    7,622,442
                    
                    
                    
                    —
                    
                    
                    
                    7,608,920Shareholder's
      and member's equityBalance,
      beginning
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    19,070,074
                    
                    
                    
                    19,070,074Net
      income
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    35,648,973
                    
                    
                    
                    35,648,973Dividends
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (34,863,318
                    )
                    
                    
                    (34,863,318
                    )Balance,
      ending
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    19,855,729
                    
                    
                    
                    19,855,729$
                    (13,022
                    )
                    
                    $
                    7,622,942
                    
                    
                    $
                    19,855,729
                    
                    
                    $
                    27,465,6492009Common
      stock, $1 par valueAuthorized
      and issued:Beginning
      and ending,500
      shares
                    
                    $
                    500
                    
                    
                    $
                    500
                    
                    
                    $
                    —
                    
                    
                    $
                    1,000Retained
      earnings (deficit)Balance,
      beginning
                    
                    
                    (13,522
                    )
                    
                    
                    7,622,442
                    
                    
                    
                    —
                    
                    
                    
                    7,608,920Net
      income
                    
                    
                    9,817,232
                    
                    
                    
                    7,130,910
                    
                    
                    
                    —
                    
                    
                    
                    16,948,142Dividends
                    
                    
                    (9,728,495
                    )
                    
                    
                    (10,480,225
                    )
                    
                    
                    —
                    
                    
                    
                    (20,208,720
                    )Balance,
      ending
                    
                    
                    75,215
                    
                    
                    
                    4,273,127
                    
                    
                    
                    —
                    
                    
                    
                    4,348,342Shareholder's
      and member's equityBalance,
      beginning
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    19,855,729
                    
                    
                    
                    19,855,729Net
      income
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    27,617,324
                    
                    
                    
                    27,617,324Dividends
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (38,802,243
                    )
                    
                    
                    (38,802,243
                    )Balance,
      ending
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    8,670,810
                    
                    
                    
                    8,670,810$
                    75,715
                    
                    
                    $
                    4,273,627
                    
                    
                    $
                    8,670,810
                    
                    
                    $
                    13,020,152
  The
accompanying notes are an integral part of these combined carve-out financial
statements.
  F-5
  DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 COMBINED
CARVE-OUT STATEMENTS OF CASH FLOWS
 Years
Ended December 31, 2009, 2008 and 2007
  2009
                    
                    
                    2008
                    
                    
                    2007Cash
      Flows from Operating ActivitiesNet
      Income
                    
                    $
                    44,565,466
                    
                    
                    $
                    42,886,351
                    
                    
                    $
                    38,688,840Adjustments
      to reconcile net income to net cash provided by operating activities:Depreciation
                    
                    
                    1,123,564
                    
                    
                    
                    594,156
                    
                    
                    
                    277,926Loss
      on disposal of leasehold improvements
                    
                    
                    —
                    
                    
                    
                    1,698,303
                    
                    
                    
                    —Changes
      in operating assets and liabilities:(Increase)
      decrease in:Accounts
      receivable – client reimbursed costs
                    
                    
                    20,101,077
                    
                    
                    
                    (10,562,492
                    )
                    
                    
                    (11,395,512
                    )Fee
      income receivable, net
                    
                    
                    (4,627,791
                    )
                    
                    
                    (1,825,505
                    )
                    
                    
                    (6,975,205
                    )Unbilled
      receivables
                    
                    
                    618,715
                    
                    
                    
                    (2,983,101
                    )
                    
                    
                    (8,227,464
                    )Prepaid
      expenses
                    
                    
                    (40,375
                    )
                    
                    
                    255,246
                    
                    
                    
                    (261,427
                    )Accounts
      payable – client reimbursed cost
                    
                    
                    (14,378,577
                    )
                    
                    
                    10,100,142
                    
                    
                    
                    8,208,412Accounts
      payable
                    
                    
                    763,260
                    
                    
                    
                    584,490
                    
                    
                    
                    108,645Accrued
      expenses
                    
                    
                    224,007
                    
                    
                    
                    450,030
                    
                    
                    
                    163,463Accrued
      compensation
                    
                    
                    (343,658
                    )
                    
                    
                    1,206,537
                    
                    
                    
                    475,601Client
      trust account
                    
                    
                    239,310
                    
                    
                    
                    —
                    
                    
                    
                    —Deferred
      revenue
                    
                    
                    (38,837
                    )
                    
                    
                    —
                    
                    
                    
                    (166,703
                    )Deferred
      rent
                    
                    
                    138,403
                    
                    
                    
                    959,323
                    
                    
                    
                    —Net
      cash provided by operating activities
                    
                    
                    48,344,564
                    
                    
                    
                    43,363,480
                    
                    
                    
                    20,896
      ,576Cash
      Flows from Investing ActivitiesPurchase
      of equipment and leasehold improvements
                    
                    
                    (2,652,098
                    )
                    
                    
                    (2,274,184
                    )
                    
                    
                    (1,301,523
                    )Net
      cash flow used for investing activities
                    
                    
                    (2,652,098
                    )
                    
                    
                    (2,274,184
                    )
                    
                    
                    (1,301,523
                    )Cash
      Flows from Financing ActivitiesNet
      advances from related party
                    
                    
                    (25,035
                    )
                    
                    
                    12,152
                    
                    
                    
                    6,305Proceeds
      from line of credit
                    
                    
                    10,656,250
                    
                    
                    
                    —
                    
                    
                    
                    —Proceeds
      from note payable
                    
                    
                    2,448,000
                    
                    
                    
                    —
                    
                    
                    
                    —Principal
      payments on note payable
                    
                    
                    (140,779
                    )Principal
      payments on capital lease obligations
                    
                    
                    (284,140
                    )
                    
                    
                    (87,165
                    )
                    
                    
                    (116,489
                    )Distributions
      and dividends
                    
                    
                    (59,010,963
                    )
                    
                    
                    (40,565,461
                    )
                    
                    
                    (18,575,992
                    )Net
      cash flow used for financing activities
                    
                    
                    (46,356,667
                    )
                    
                    
                    (40,640,474
                    )
                    
                    
                    (18,686,176
                    )Net
      change in cash and cash equivalents
                    
                    
                    (664,201
                    )
                    
                    
                    448,822
                    
                    
                    
                    908,877Cash
      and cash equivalents, beginning of year
                    
                    
                    1,427,588
                    
                    
                    
                    978,766
                    
                    
                    
                    69,889Cash
      and cash equivalents, end of year
                    
                    $
                    763,387
                    
                    
                    $
                    1,427,588
                    
                    
                    $
                    978,766Supplemental
      Disclosures of Cash Flow InformationCash
      payments for interest
                    
                    $
                    174,005
                    
                    
                    $
                    55,952
                    
                    
                    $
                    39,138Supplemental
      Schedule of Noncash Investing ActivitiesAcquisition
      of property and equipment through capital lease obligations
                    
                    $
                    —
                    
                    
                    $
                    448,304
                    
                    
                    $
                    281,950
 
 The
accompanying notes are an integral part of these combined carve-out financial
statements.
  F-6
   DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
1. Nature of Business and Significant Accounting Policies
  Nature of Business : DJS
Processing Division (“the Processing Division”) is a division of The Law Offices
of David J. Stern, P.A. (“the Law Firm”), which provides foreclosure,
bankruptcy, eviction, litigation processing, and other related services to
mortgage bankers, mortgage servicers, regional property owners and investor
groups involved with real property in the state of Florida. Professional Title
and Abstract Company of Florida, Inc. (“PTA”), an S corporation, provides title
searches and examinations related to services provided by the Law Firm and
defendant location services to third party processors engaged by the Law Firm.
Default Servicing, Inc. (“DSI”), an S corporation, provides real estate owned
(“REO”) liquidation related services including property inspection, valuation,
eviction, broker assignment, and closing. The Processing Division, PTA and DSI
perform real estate related services, are all 100% owned by one individual and
are collectively referred to as “the Company.”
  Basis of Financial Statement
Presentation : These combined financial statements represent a “carve
out” of the Processing Division of the Law Firm, and the accounts of PTA and DSI
as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008
and 2007. These financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America. All material
intercompany balances and activity are eliminated upon combination. In addition,
assets and liabilities directly relating to the Company have been included in
these combined carve-out financial statements.
  Reclassifications : Certain
reclassifications of 2008 and 2007 balances have been made to conform with
classifications used in 2009.  These reclassifications had no effect
on shareholder's and member's equity or reported net income.
  Use of Estimates : The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
  Fee Income Recognition :
Substantially all of the Processing Division’s and PTA’s revenues are generated
from services rendered to the clients of the Law Firm. Receivables are generated
from the Law Firm, the Processing Division’s only customer for foreclosure and
related services, at the time the Law Firm bills its clients. DSI has additional
clients for REO liquidation services.
  The
estimated average file processing time for all foreclosure files, except for
those cases that are fully litigated, ranges from 220 to 240 days. The fee
income for foreclosure processing is recognized utilizing the proportional
performance method during the file processing period based on the achievement of
various processing milestones. The Processing Division bills the Law Firm for
services performed and recognizes revenue for services performed but not yet
billed as unbilled receivables at the end of each reporting period.
  Revenue
related to all other types of services, other than foreclosure, is recognized
using the completed performance method. Revenue is recognized once the services
are performed and the Company has no further fulfillment responsibilities
related to these services. Accounts receivable for title services is presented
net of an allowance for estimated uncollectible accounts based on management’s
experience and expectations.  The amount estimated as uncollectible is
insignificant.
  The
per-file fee negotiated between the Processing Division and the Law Firm is
based on negotiations between related parties. There can be no assurances that
the per file fees or the level of profitability achieved would be the same if
the fees had been negotiated between unrelated entities. See the discussion
regarding expense allocations later in this Note 1.
  Equipment and Leasehold
Improvements : Equipment and leasehold improvements are recorded at cost
less accumulated depreciation. Leasehold improvements are depreciated over the
shorter of the estimated useful lives of the assets or the remaining lease term.
Depreciation for equipment is provided using the straight-line method over the
following estimated useful lives of the individual assets:
  YearsOffice
      equipment
                    
                    
                    3-5Furniture
      and fixtures
                    
                    
                    5-7
  F-7
   DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
1. Nature of Business and Significant Accounting Policies – (continued)
  Client Reimbursed Costs :
Certain costs incurred on behalf of clients are billed to and reimbursed by
clients. The Company’s incurrence of these costs is included in operating
expenses and reimbursements from clients are included in total revenue, in equal
amounts, in the accompanying statements of income.
  Cash and Cash Equivalents :
The Company maintains its cash and cash equivalents in bank depository accounts
which, at times, exceed federally-insured limits. The Company has not
experienced any losses in such accounts. Cash and cash equivalents include
short-term investments with original maturities of three months or less.
  Basis for Expense Allocations
: Management has allocated certain expenses of the Law Firm to the Company based
on its estimate of expenses the Company would have incurred on a stand-alone
basis; however, there can be no assurance that these expenses represent the
expenses of the Company on a stand-alone basis or that the allocations are fully
inclusive of the functions necessary to operate the Company on a stand-alone
basis.  The amount of operating expenses allocated on a direct basis
were approximately $34,500,000, $39,297,000, and $15,780,000 for the years ended
December 31, 2009, 2008 and 2007, respectively.  The following is a
summary of the major expense categories not allocated on a direct basis totaling
approximately $41,532,000, $27,732,000, and $13,435,000 for the years ended
December 31, 2009, 2008 and 2007, respectively, and the methodology used to
allocate such expenses.
  ·
                    Certain
      management personnel of the Law Firm are substantially involved with the
      Company’s operations. Their salaries, bonuses, payroll taxes and related
      auto, travel, meals, entertainment and professional expenses are allocated
      to the Company based on the estimated percentage of time the executive
      officers spend on the Company’s business activities.
  ·
                    Employee
      benefits, including health insurance, pension/profit sharing, workers’
      compensation, incentives and training, are allocated based on the number
      of employees specifically assigned to the Company in relation to the total
      employees of the Law Firm (“the employee ratio method”).
  ·
                    Equipment
      lease expense is allocated based on the employee ratio method.
  ·
                    Certain
      facilities lease expenses are allocated based on the ratio of the
      Company’s employees utilizing such space to the total employees of the Law
      Firm.
  ·
                    Depreciation
      is the computed amount based on the equipment and leasehold improvements
      utilized by the Company.
  ·
                    Postage
      and delivery is allocated based on the employee ratio method.
  ·
                    Advertising,
      marketing and professional fees are allocated based on the estimated
      percentages that apply to the Company’s business activities.
  ·
                    All
      other general and administrative expenses were allocated based on the
      employee ratio method.
  In the
opinion of management, the preceding expense allocations are a reasonable basis
for determining the costs associated with the carve-out Processing Division.
  Income Taxes : The Law Firm,
PTA and DSI are not subject to income taxes under the federal and state tax
laws. Instead, the taxable income of these entities is passed through to the
owner of the companies and is taxable to the owner on an individual level.
Therefore, these financial statements do not reflect an allocation of federal
and state income taxes. The Company adopted accounting standards relating to
accounting for uncertainty in income taxes for the year ended December 31,
2009.  As a result of this adoption, management assessed whether there
were any uncertain tax positions which may give rise to income tax liabilities
and determined that there were no such matters requiring recognition in the
accompanying financial statements.  The Processing Division is
included in the tax returns of the Law Firm while PTA and DSI are S Corporations
whereby income is passed through to the shareholder for tax return purposes and
is therefore not directly subject to income taxes.  With few
exceptions, the Company is not subject to U.S. federal and state income tax
examinations by tax authorities for years before December 31, 2006.
  Fair Value: The Company has
identified its cash and cash equivalents, accounts receivable, accounts payable,
note payable, and line of credit balances as financial
instruments.  Because of the short term nature of these financial
instruments, the Company believes the carrying values approximate fair values.
  F-8
  DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
1. Nature of Business and Significant Accounting Policies – (continued)
  FASB Accounting Standards
Codification : In June 2009, the Financial Accounting Standards Board
(“FASB”) issued new guidance concerning the organization of authoritative
guidance under U.S. Generally Accepted Accounting Principles (“GAAP”). This new
guidance created the FASB Accounting Standards Codification
(“Codification”).  The Codification has become the source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental
entities. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority
of federal securities laws are also sources of authoritative U.S. GAAP for SEC
registrants. The Codification became effective for the Company in its quarter
ended September 30, 2009. As the Codification is not intended to change or alter
existing U.S. GAAP, it did not have any impact on the Company’s combined
financial statements. On its effective date, the Codification superseded all
then-existing non-SEC accounting and reporting standards. All other
nongrandfathered non-SEC accounting literature not included in the Codification
became nonauthoritative.
  Recently Issued Accounting
Pronouncements :  In December 2007, FASB issued authoritative
guidance on Business Combinations. This guidance, among other things,
establishes principles and requirements for how the acquirer in a business
combination (a) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquired business, (b) recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain purchase, and (c)
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This guidance is effective for fiscal years beginning on or after
December 15, 2008, with early adoption prohibited. The Company is required to
adopt the provisions of this guidance for all business combinations for which
the acquisition date is on or after January 1, 2009. This standard changed the
accounting treatment for business combinations on a prospective basis.
  In
September 2006, the FASB issued guidance on Accounting for Uncertainty in Income
Taxes. This guidance clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with guidance
on Accounting for Income Taxes. The guidance on Accounting for Uncertainty in
Income Taxes prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken on a tax return. It also provides guidance on derecognition
of tax benefits, classification on the balance sheet, interest and penalties,
accounting in interim periods, disclosure and transition.
  In
December 2008, the FASB provided for a deferral of the effective date of
Accounting for Uncertainty in Income Taxes for certain nonpublic enterprises to
annual financial statements for fiscal years beginning after December 15, 2008.
The Company elected this deferral and accordingly adopted the provisions of this
guidance in its 2009 annual financial statements. Prior to adoption of this
guidance, the Company continued to evaluate its uncertain tax positions and
related income tax contingencies under guidance on Accounting for Contingencies,
which requires the Company to accrue for losses it believes are probable and can
be reasonably estimated. The adoption of Accounting for Uncertainty in Income
Taxes did not have a material impact on the Company’s combined
carve-out financial statements.
  In May
2009, the FASB updated its guidance on Subsequent Events. In particular, this
guidance sets forth the period after the balance sheet date during which
management shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under
which an entity shall recognize events or transactions occurring after the
balance sheet date in its financial statements, and the disclosures that an
entity shall make about events or transactions that occurred after the balance
sheet date. This guidance was effective for interim periods ending after June
15, 2009. In February, 2010, the FASB amended the guidance to remove the
requirement for an SEC filer to disclose a date through which subsequent events
have been evaluated in both issued and revised financial
statements.  Revised financial statements include financial statements
revised as a result of either correction of an error or retrospective
application of U.S. GAAP.  The FASB believes these amendments remove
potential conflicts with the SEC’s literature.  The Company has
applied the provisions of this statement in the current reporting period. See
Note 11 for information relating to any subsequent events.
  Note
2. Related Party Transactions and Concentrations
  The
Company’s primary source of revenues is from a per-file fee arrangement with the
Law Firm. Revenues from this arrangement account for approximately 94%, 97% and
98% of total revenues for the years ended December 31, 2009, 2008 and 2007,
respectively.  These related party revenues include approximately
$104,879,000, $99,952,000 and $65,210,000 of fee income for the years ended
December 31, 2009, 2008 and 2007, respectively, and approximately $139,059,000,
$92,320,000 and $47,613,000 of client reimbursed costs for the years ended
December 31, 2009, 2008 and 2007, respectively.  The revenues from the
arrangement with the Law Firm are reflected in the results of the
Processing Division and PTA segments.
 
 Amounts
due from the Law Firm for fees amounted to approximately $20,769,000 and
$21,010,000, including amounts earned and unbilled of approximately $10,592,000
and $11,211,000 as of December 31, 2009 and 2008,
respectively.  Amounts due from the Law Firm for client reimbursed
costs amounted to approximately $6,047,000 and $20,425,000 as of December 31,
2009 and 2008, respectively.
 
 Although
the Company’s primary customer relationship is with the Law Firm, the Company
has vulnerability due to concentrations in the volume of business transacted by
the Law Firm with its clients. The Law Firm’s direct customer concentrations as
a percentage of files processed are as follows:
  F-9
 
 DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
2.   Related Party Transactions and Concentrations – (continued)
   2009
                    
                    
                    2008
                    
                    
                    2007Client
      A
                    
                    
                    30
                    %
                    
                    
                    21
                    %
                    
                    
                    14
                    %Client
      B
                    
                    
                    11
                    %
                    
                    
                    18
                    %
                    
                    
                    26
                    %Client
      C
                    
                    
                    10
                    %
                    
                    
                    15
                    %
                    
                    
                    18
                    %Client
      D
                    
                    
                    9
                    %
                    
                    
                    11
                    %
                    
                    
                    2
                    %Client
      E
                    
                    
                    7
                    %
                    
                    
                    11
                    %
                    
                    
                    8
                    %Total
                    
                    
                    67
                    %
                    
                    
                    76
                    %
                    
                    
                    68
                    %
 
 Note
3.   Equipment and Leasehold Improvements
  Equipment
and leasehold improvements as of December 31, 2009 and 2008 consist of the
following:
  2009
                    
                    
                    2008Office
      equipment
                    
                    $
                    2,863,827
                    
                    
                    $
                    2,153,170Furniture
      and fixtures
                    
                    
                    2,590,869
                    
                    
                    
                    1,745,010Leasehold
      improvements
                    
                    
                    545,875
                    
                    
                    
                    354,8136,000,571
                    
                    
                    
                    4,252,993Accumulated
      depreciation
                    
                    
                    (1,309,051
                    )
                    
                    
                    (1,098,370
                    )$
                    4,691,520
                    
                    
                    $
                    3,154,623
  The
following equipment included in equipment and leasehold improvements was
acquired under capital leases:
 
 2009
                    
                    
                    2008Office
      equipment
                    
                    $
                    1,134,588
                    
                    
                    $
                    1,134,588Less
      accumulated amortization
                    
                    
                    (687,699
                    )
                    
                    
                    (412,553
                    )Office
      equipment under capital leases, net
                    
                    $
                    446,889
                    
                    
                    $
                    722,035
 
 Office
equipment includes equipment and leasehold improvements that were acquired under
capital leases. Amortization of equipment acquired under capital leases is
included in depreciation expense. The equipment and the related liability under
the capital leases were recorded based on the present value of future payments
due under the leases, at implied discount rates based on the fair market value
of the related office equipment.
  Certain
obligations of the Law Firm were secured by the Company’s equipment at December
31, 2009.
  F-10
  DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
4. Capital Lease Obligations
  The
following is a schedule by years of the future minimum lease payments the
Company is obligated under, through the Law Firm, of capital leases together
with the present value of the net minimum lease payments as of December 31,
2009:
 
 Years
      Ending December 31,
                    
                    Amount2010
                    
                    $
                    191,7862011
                    
                    
                    181,7012012
                    
                    
                    122,0992013
                    
                    
                    70,518Total
      minimum lease payments
                    
                    
                    566,104Less
      amount representing interest (effective rates from 5.8% to 13.5%)
                    
                    
                    112,618Present
      value of the net minimum lease payments
                    
                    
                    453,486Current
      portion of capital lease obligations
                    
                    
                    191,786Capital
      lease obligations, net of current portion
                    
                    $
                    261,700
 
 Note
5.  Operating Lease Commitments
  The
Company is obligated, through the Law Firm, for leases of office space under
noncancellable operating lease agreements which expire at times ranging from
September 2012 through October 2018.
  The total
minimum rental commitments as of December 31, 2009, under the leases are as
follows:
  Years
      Ending December 31,
                    
                    Amount2010
                    
                    $
                    2,711,2282011
                    
                    
                    2,913,6272012
                    
                    
                    2,981,4832013
                    
                    
                    3,023,0252014
                    
                    
                    3,113,865Thereafter
                    
                    
                    2,507,525$
                    17,250,753
 
 Rent
expense is recognized on a straight line basis over the terms of the leases
based on the aggregate amount of payments due over the lease terms. Amounts
expensed in excess of actual payments due to rent holidays and acceleration
clauses are presented as deferred rent on the accompanying combined balance
sheets. The total rental expense included in the combined carve-out statements
of income for the years ended December 31, 2009, 2008 and 2007, is approximately
$2,113,000, $2,145,000 and $1,019,000, respectively.
 
 Note
6. Employee Benefit Plan
  The Law
Firm offers a 401k plan for its employees, who become eligible to participate
after three months of employment and can enroll at the beginning of the first
calendar quarter thereafter. Employees may contribute up to 100% of their
eligible pay, subject to statutory limits. After one year of employment and at
the beginning of the first calendar quarter thereafter, employees are eligible
to receive discretionary matching contributions of up to 4% of eligible
compensation, and, if the employee has also completed 1,000 hours of service for
the applicable plan year, discretionary profit sharing contributions. Employees
vest in employer matching and profit-sharing contributions over six years.
Included in the combined carve-out financial statements are contributions to the
plan of approximately $50,000, $53,000 and $19,000 during the years ended
December 31, 2009, 2008 and 2007, respectively.
  Note
7. Contingencies
  The
Company is subject to legal claims in the ordinary course of business. In the
opinion of management, the amount of potential liability, if any, is not likely
to have a material adverse effect on the Company’s business, financial
condition, results of operations or liquidity. However, as the outcome of any
pending or threatened litigation or other legal claims is difficult to predict,
significant changes in the Company’s exposure could occur.
 
 Note
8. Notes Payable
  The
Company, through the Law Firm, has notes payable to a financial institution
in the amount of $2,307,221, which are collateralized by personal property with
a net book value of approximately $3.6 million as of December 31, 2009. The
terms of the notes call for monthly installment payments of $56,283, including
interest at an annual fixed rate from 5.46% to 5.98%.  The notes were
repaid in full on January 15, 2010.
 
 Note
9. Line of Credit
  The
Company, through the Law Firm,  has a line of credit from a bank with
maximum available borrowings in the amount of $20,000,000.  The line
bears interest equal to the BBA LIBOR Rate (adjusted periodically) (0.23% per
annum at December 31, 2009) plus one hundred seventy-five (175) basis points as
of December 31, 2009.  As of December 31, 2009, there was $10,656,250
outstanding under the line of credit with a maturity date of June 30,
2010.  This agreement is a continuing agreement and remains in full
force and effect until such time as the bank specifically consents to its
revocation in writing, notwithstanding the full repayment of the indebtedness
under the line of credit and, should an obligation constituting indebtedness due
to the bank under the line of credit arise after any full repayment, the line of
credit agreement shall immediately, in all respects, become effective with
respect to any such new indebtedness, without the necessity of any further acts
of writing between the Company and the bank.
 F-11
 
 DJS
PROCESSING DIVISION AND ITS COMBINED AFFILIATES
 (A
Division of The Law Offices of David J. Stern, P.A.)
 NOTES
TO THE COMBINED CARVE-OUT FINANCIAL STATEMENTS
  Note
10.    Segment Reporting
  In
response to comments raised by the Staff of the SEC, the Company performed an
analysis of financial information reviewed by the chief operating decision maker
and determined the combined carve-out financial statements should be restated to
include segment disclosures.The Company manages its operations and
prepares management reports on a basis consistent with the components of these
combined carve-out financial statements described in Note 1, which includes the
Processing Division, PTA, and DSI.  Applicable guidance provides that
the identification of reportable segments be on the basis of discreet business
units and their financial information to the extent such units are reviewed by
the entity’s chief operating decision maker.  The Company has
identified its reportable segments as the Processing Division, PTA,
and DSI for purposes of the combined carve-out financial statements. The
accounting policies of the segments are consistent with those described in Note
1. There are no significant transactions between segments that would require
elimination. The following
is a summary of selected segment information as of and for the years ended
December 31, 2009, 2008 and 2007:
 2009
                        
                        Processing
      Division
                        
                        
                        PTA
                        
                        
                        DSI
                        
                        
                        TotalPr
      Revenue
                        
                        $
                        226,869,796
                        
                        
                        $
                        22,178,227
                        
                        
                        $
                        11,220,824
                        
                        
                        $
                        260,268,847O
      Operating expenses
                        
                        
                        199,252,472
                        
                        
                        
                        15,047,317
                        
                        
                        
                        1,403,904
                        
                        
                        
                        215,703,693Operating
      income
                        
                        
                        27,617,324
                        
                        
                        
                        7,130,910
                        
                        
                        
                        9,816,920
                        
                        
                        
                        44,565,154Other
      income
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        312
                        
                        
                        
                        312Net
      income
                        
                        $
                        27,617,324
                        
                        
                        $
                        7,130,910
                        
                        
                        $
                        9,817,232
                        
                        
                        $
                        44,565,466$  Depreciation
      expense
                        
                        $
                        1,123,564
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        1,123,564I   Interest
      expense
                        
                        $
                        173,926
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        173,926Total
      assets
                        
                        $
                        33,593,335
                        
                        
                        $
                        4,630,179
                        
                        
                        $
                        392,401
                        
                        
                        $
                        38,615,915
  2008
                      
                      Processing
      Division
                      
                      
                      PTA
                      
                      
                      DSI
                      
                      
                      TotalPr
      Revenue
                      
                      $
                      169,819,498
                      
                      
                      $
                      25,309,969
                      
                      
                      $
                      4,073,234
                      
                      
                      $
                      199,202,701O
      Operating expenses
                      
                      
                      134,170,525
                      
                      
                      
                      20,692,182
                      
                      
                      
                      1,485,320
                      
                      
                      
                      156,348,027Operating
      income
                      
                      
                      35,648,973
                      
                      
                      
                      4,617,787
                      
                      
                      
                      2,587,914
                      
                      
                      
                      42,854,674Other
      income
                      
                      
                      -
                      
                      
                      
                      25,411
                      
                      
                      
                      6,266
                      
                      
                      
                      31,677Net
      income
                      
                      $
                      35,648,973
                      
                      
                      $
                      4,643,198
                      
                      
                      $
                      2,594,180
                      
                      
                      $
                      42,886,351$  Depreciation
      expense
                      
                      $
                      580,406
                      
                      
                      $
                      4,033
                      
                      
                      $
                      9,717
                      
                      
                      $
                      594,156I   Interest
      expense
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Total
      assets
                      
                      $
                      45,381,761
                      
                      
                      $
                      8,330,049
                      
                      
                      $
                      83,031
                      
                      
                      $
                      53,794,841
  2007
                  
                  Processing
      Division
                  
                  
                  PTA
                  
                  
                  DSI
                  
                  
                  TotalPr
      Revenue
                  
                  $
                  98,960,588
                  
                  
                  $
                  14,849,520
                  
                  
                  $
                  1,690,241
                  
                  
                  $
                  115,500,349O
      Operating expenses
                  
                  
                  67,325,644
                  
                  
                  
                  8,972,145
                  
                  
                  
                  530,048
                  
                  
                  
                  76,827,837Operating
      income
                  
                  
                  31,634,944
                  
                  
                  
                  5,877,375
                  
                  
                  
                  1,160,193
                  
                  
                  
                  38,672,512Other
      income (expense)
                  
                  
                  -
                  
                  
                  
                  16,420
                  
                  
                  
                  (92)
                  
                  
                  
                  16,328Net
      income
                  
                  $
                  31,634,944
                  
                  
                  $
                  5,893,795
                  
                  
                  $
                  1,160,101
                  
                  
                  $
                  38,688,840$  Depreciation
      expense
                  
                  $
                  263,691
                  
                  
                  $
                  10,000
                  
                  
                  $
                  4,235
                  
                  
                  $
                  277,926I   Interest
      expense
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Total
      assets
                  
                  $
                  30,955,748
                  
                  
                  $
                  6,741,570
                  
                  
                  $
                  102,824
                  
                  
                  $
                  37,800,142
  The
Company’s revenues are comprised of the following services for the years ending
December 2009, 2008 and 2007:
 
 2009
                    
                    
                    
                    2008
                    
                    
                    
                    2007Foreclosure
                    
                    72,621,917
                    
                    
                    
                    65,316,927
                    
                    
                    
                    45,808,013Title
                    
                    22,178,227
                    
                    
                    
                    25,309,969
                    
                    
                    
                    14,849,520Real estate
      liquidation
                    
                    11,220,824
                    
                    
                    
                    4,073,234
                    
                    
                    
                    1,690,241Closing
                    
                    8,711,600
                    
                    
                    
                    6,049,254
                    
                    
                    
                    1,121,310Bankruptcy
                    
                    3,811,744
                    
                    
                    
                    3,012,865
                    
                    
                    
                    2,027,600Eviction
                    
                    1,763,563
                    
                    
                    
                    2,031,492
                    
                    
                    
                    843,198Other
                    
                    901,636
                    
                    
                    
                    1,089,054
                    
                    
                    
                    1,547,269Total fee income
                    
                    121,209,511
                    
                    
                    
                    106,882,795
                    
                    
                    
                    67,887,151Client reimbursed
      costs
                    
                    139,059,336
                    
                    
                    
                    92,319,906
                    
                    
                    
                    47,613,198Total revenues
                    
                    260,268,847
                    
                    
                    
                    199,202,701
                    
                    
                    
                    115,500,349
 Note
11. Subsequent Event
  On
January 15, 2010, the Company completed a business combination with DJSP
Enterprises, Inc. (formerly known as Chardan 2008 China Acquisition
Corp.).  As a result of this transaction, DJSP Enterprises, Inc.
obtained a controlling interest in the Company, and the combined company is
traded on the NASDAQ under the symbols DJSP, DJSPU and DJSPW. The notes payable
to a financial institution in the amount of $2,307,221 and the line of credit of
$10,656,250 as of December 31, 2009 were repaid in full on January 15, 2010.
  F-12
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Board of Directors and Shareholders of
 Chardan
2008 China Acquisition Corp.
 
 We have
audited the accompanying balance sheets of Chardan 2008 China Acquisition
Corp.  as of December 31, 2009 and 2008 and the related statements of
operations, changes in shareholders' equity, and cash flows for the year ended
December 31, 2009 and for the period from February 19, 2008 (inception) through
December 31, 2008.  These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
 
 We
conducted our audits in accordance with the 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes 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.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Chardan 2008 China Acquisition
Corp. as of December 31, 2009 and December 31, 2008 and the results of its
operations and its cash flows for the year ended December 31, 2009 and for the
period from February 19, 2008 (inception) through December 31, 2008 in
conformity with accounting principles generally accepted in the United States of
America.
   /s/
JEWETT, SCHWARTZ, WOLFE & ASSOCIATES
 
 Hollywood,
Florida
 March 16,
2010
  F-13
  CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 BALANCE
SHEETS
 December
31, 2009 and 2008
 
 ASSETSDecember
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008(Audited)
                  
                  
                  (Audited)Current
      assets:Cash
                  
                  $
                  23,474
                  
                  
                  $
                  45,413Deferred
      acquisition costs
                  
                  
                  1,363,702
                  
                  
                  
                  -Total
      current assets
                  
                  
                  1,387,176
                  
                  
                  
                  45,413Restricted
      cash equivalents held in trust account
                  
                  
                  54,302,189
                  
                  
                  
                  54,564,894Total
      assets
                  
                  $
                  55,689,365
                  
                  
                  $
                  54,610,307LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      Payable
                  
                  $
                  1,401,302
                  
                  
                  $
                  -Loans
      from related parties
                  
                  
                  125,399
                  
                  
                  
                  9,854Total
      current liabilities
                  
                  
                  1,526,701
                  
                  
                  
                  9,854Long
      term liabilities:Deferred
      underwriting discounts, net of $770,000 subject toforfeiture
      in the event of possible conversion
                  
                  
                  1,430,000
                  
                  
                  
                  1,430,000Total
      liabilities
                  
                  
                  2,956,701
                  
                  
                  
                  1,439,854Commitments
      and contingenciesOrdinary
      shares, subject to conversion (2,406,249 shares atconversion
      value of $7.89 per share)
                  
                  
                  18,985,305
                  
                  
                  
                  18,985,305Stockholders'
      equity:Preferred  stock,
      $0.0001 par value, 5,000,000 shares authorized,  noneissued
      and outstanding
                  
                  
                  -
                  
                  
                  
                  -Common
      stock, $0.0001 par value, 60,000,000 shares authorized,9,166,666  shares
      issued and outstanding, respectively
                  
                  
                  917
                  
                  
                  
                  917Additional
      paid in capital
                  
                  
                  34,253,135
                  
                  
                  
                  34,244,020Accumulated
      deficit
                  
                  
                  (506,693
                  )
                  
                  
                  (59,789
                  )Total
      stockholders’ equity
                  
                  
                  33,747,359
                  
                  
                  
                  34,185,148TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
                  $
                  55,689,365
                  
                  
                  $
                  54,610,307
 
 See
accompanying notes to financial statements
  F-14
 
 CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 STATEMENTS
OF OPERATIONS
 For
the Year Ended December 31, 2009 and the Period from February 18, 2008
(Inception) to December 31, 2008
  Period
      February 19,For
      the Year
                    Ended
                  
                  
                  2008
      (Date of Inception) ThroughDecember
      31, 2009
                  
                  
                  December
      31, 2008REVENUE
                  
                  $
                  -
                  
                  
                  $
                  -COST
      OF SALES
                  
                  
                  -
                  
                  
                  
                  -GROSS
      PROFIT
                  
                  
                  -
                  
                  
                  
                  -OPERATING
      EXPENSES:Selling,
      general, and administrative
                  
                  
                  489,199
                  
                  
                  
                  544,683Total
      operating expenses
                  
                  
                  489,199
                  
                  
                  
                  544,683OTHER INCOME (EXPENSE):Other
      expense
                  
                  
                  (4,990
                  )
                  
                  
                  -Interest
      income
                  
                  
                  47,286
                  
                  
                  
                  484,894Net
      other income
                  
                  
                  42,295
                  
                  
                  
                  484,894LOSS
      BEFORE INCOME TAXES
                  
                  
                  (446,904
                  )
                  
                  
                  (59,789
                  )PROVISION
      FOR INCOME TAXES
                  
                  
                  -
                  
                  
                  
                  -NET
      LOSS
                  
                  $
                  (446,904
                  )
                  
                  $
                  (59,789
                  )NET
      LOSS PER SHARE:Basic
      and Diluted
                  
                  $
                  (0.05
                  )WEIGHTED-AVERAGE
      SHARESBasic
      and Diluted
                  
                  
                  9,166,666
 
 See
accompanying notes to financial statements
  F-15
 
 CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
 For
the Year Ended December 31, 2009 and the Period from February 18, 2008
(Inception) to December 31, 2008
  
 
 Common
      Stock $.0001 par
                  
                  
                  Additional
                  
                  
                  Accumulated
                  
                  
                  Shareholders'Shares
                  
                  
                  Par
      Value
                  
                  
                  Paid
      in Capital
                  
                  
                  Deficit
                  
                  
                  EquityBeginning
      Balance at February 18, 2008
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Initial
      Offering
                  
                  
                  2,291,666
                  
                  
                  
                  229
                  
                  
                  
                  24,771
                  
                  
                  
                  -
                  
                  
                  
                  25,000Sale
      of common stock
                  
                  
                  6,875,000
                  
                  
                  
                  688
                  
                  
                  
                  33,219,249
                  
                  
                  
                  
                  
                  
                  
                  33,219,937Purchase
      of warrants
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,000,000
                  
                  
                  
                  -
                  
                  
                  
                  1,000,000Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (59,789
                  )
                  
                  
                  (59,789
                  )Ending
      Balance at December 31, 2008
                  
                  
                  9,166,666
                  
                  
                  $
                  917
                  
                  
                  $
                  34,244,020
                  
                  
                  $
                  (59,789
                  )
                  
                  $
                  34,185,148Common
      Stock $.0001 par
                  
                  
                  Additional
                  
                  
                  Accumulated
                  
                  
                  Shareholders'Shares
                  
                  
                  Par
      Value
                  
                  
                  Paid
      in Capital
                  
                  
                  Deficit
                  
                  
                  EquityBeginning
      Balance at January 1, 2009
                  
                  
                  9,166,666
                  
                  
                  $
                  917
                  
                  
                  $
                  34,244,020
                  
                  
                  $
                  (59,789
                  )
                  
                  $
                  34,185,148Additional
      capital
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  9,115
                  
                  
                  
                  -
                  
                  
                  
                  9,115Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (446,904
                  )
                  
                  
                  (446,904
                  )Ending
      Balance at December 31, 2009
                  
                  
                  9,166,666
                  
                  
                  $
                  917
                  
                  
                  $
                  34,253,135
                  
                  
                  $
                  (506,693
                  )
                  
                  $
                  33,747,359
  See
accompanying notes to financial statements
  F-16
  CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 STATEMENTS
OF CASH FLOWS
 For
the Year Ended December 31, 2009 and the Period from February 18, 2008
(Inception) to December 31, 2008
 
 For
      the Period FromFebruary
      19, 2008(inception)
      toDecember
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (446,904
                  )
                  
                  $
                  (59,789
                  )Adjustments
      to reconcile net loss to net cash used in operating activities:Prepaid
      expenses
                  
                  
                  (1,363,702
                  )
                  
                  
                  -Accounts
      payable
                  
                  
                  1,397,988
                  
                  
                  
                  -Net
      cash used in operating activities
                  
                  
                  (412,618
                  )
                  
                  
                  (59,789
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from T-Bills held in trust account
                  
                  
                  262,705
                  
                  
                  
                  (54,564,894
                  )Net
      cash provided by investing activities
                  
                  
                  262,705
                  
                  
                  
                  (54,564,894
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of stock
                  
                  
                  -
                  
                  
                  
                  53,230,242Proceeds
      from deferred financing costs
                  
                  
                  -
                  
                  
                  
                  1,430,000Costs
      associated with issuance of stock
                  
                  
                  12,429
                  
                  
                  
                  -Net
      proceeds from related parties
                  
                  
                  115,545
                  
                  
                  
                  9,854Net
      cash provided by financing activities
                  
                  
                  127,974
                  
                  
                  
                  54,670,096NET
      CHANGE IN CASH AND CASH EQUIVALENTS
                  
                  
                  (21,939
                  )
                  
                  
                  45,413BEGINNING
      OF PERIOD
                  
                  
                  45,413
                  
                  
                  
                  -END
      OF PERIOD
                  
                  $
                  23,474
                  
                  
                  $
                  45,413Supplementary
      disclosure of cash flow information:Cash
      paid for interest
                  
                  $
                  -
                  
                  
                  $
                  -Cash
      paid for taxes
                  
                  $
                  -
                  
                  
                  $
                  -
 
 See
accompanying notes to financial statements.
  F-17
   CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 
 NOTES
TO AUDITED FINANCIAL STATEMENTS
  NOTE
1 –NATURE OF BUSINESS
 
 Chardan
2008 China Acquisition Corp. (the Company) is a newly organized British Virgin
Islands (“BVI”) business company with limited liability.  The Company
is a blank check company formed for the purpose of acquiring, engaging in a
merger, share capital exchange or contractual control arrangement with,
purchasing all or substantially all of the assets of, or engaging in any other
similar business combination of an unidentified operating
business.  The Company intends to focus on identifying a prospective
target business having its primary operations in the People’s Republic of
China.  Efforts in identifying a prospective target business will not
be limited to a particular industry within China.  The Company engaged
in preliminary discussions with several potential targets, but it does not have
any specific merger, share capital exchange, contractual control arrangement,
asset acquisition or other business combination under consideration.
  At
December 31, 2009, the Company had not commenced any operations or generated
revenue. All activity through December 31, 2009 relates to the Company’s
inception, capital raising, the initial public offering described below and
efforts to complete a business combination with DJSP Acquisition LLC (“DAL”).
Following such initial public offering, the Company has not and will not
generate any operating revenues until after completion of its initial business
combination, at the earliest. The Company generates non-operating income in the
form of interest income on cash and cash equivalents, held in a trust account,
from the proceeds of such offering. At December 31, 2009, in preparation for the
closing of the transaction, the Company held $54,302,189 in cash. These funds
have been deposited in a trust account held by JP Morgan Chase’s London branch,
and maintained by Continental Stock Transfer & Trust Company, acting as
trustee.
  Pursuant
to the Company’s amended and restated memorandum and articles of association and
applicable provisions of BVI law, the Company will promptly liquidate the trust
account and distribute to our public shareholders all of the funds (net of taxes
owed) held in it as of the date of  our voluntary liquidation if we:
 
 (a)
                  Do
      not effect a business combination within 18 months after consummation of
      the offering, or(b)
                  Do
      not effect a business combination within 30 months from the consummation
      of the offering if a letter of intent, agreement in principle or
      definitive agreement has been executed within 18 months after consummation
      of the offering and the business combination has not yet been consummated
      within such 18 month period, or(c)
                  Do
      not effect a business combination within 36 months from the consummation
      of the offering if the extended period is approved by our shareholders.
 
 NOTE
2 - BASIS OF PRESENTATION
 
 The
accompanying financial statements are presented in U.S. dollars and has been
prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) and pursuant to the accounting rules and
disclosure regulations of the Securities and Exchange Commission (SEC).
 
 NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Use
of estimates
 
 In
preparing financial statements in conformity with accounting principles
generally accepted in the United States, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period.  Actual results will differ from those estimates.
  Cash
and cash equivalents
  The
Company considers all highly liquid debt securities purchased with original or
remaining maturities of three months or less to be cash equivalents. The
carrying value of cash equivalents approximates fair value.
 
 Development
Stage Company
 
 The
Company complies with the reporting requirements issued from FASB for Accounting
and Reporting by Development Stage Enterprises, and is subject to the risks
associated with activities of development stage companies.
  F-18
   CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 
 NOTES
TO AUDITED FINANCIAL STATEMENTS
  Restricted
cash
  In
accordance with Accounting Review Board (ARB) No. 43, Chapter 3A “Current Assets
and Current Liabilities,” cash which is restricted as to withdrawal is
considered a noncurrent asset.  Restricted cash consists of funds held
in trust until provisions for release have been met.  As of December
31, 2009, the Company has approximately $54,302,000 held in cash that are
subject to such restrictions.
 
 Deferred
acquisition costs
  Costs
related to proposed acquisition costs are capitalized.  Should an
acquisition not occur, all related costs will be expensed.  As of
December 31, 2009, $1,363,702 of costs related to legal fees, accounting fees,
financial due diligence and other ancillary costs related to the closing of the
transaction have been incurred.
 
 Accrued
Interest
  As of
December 31, 2009, there is no accrued interest.
  Income
taxes
  The
Company accounts for income taxes under the liability
method.  Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled.  Valuation
allowances are established when it is more likely than not that the deferred tax
assets will not be realized.
  Income
(loss) per share
  The
Company complies with accounting and disclosure requirements as defined in the
FASB issued guidance for Earnings Per Share. Basic net income/loss per common
share is computed by dividing net income/loss applicable to common stock by the
weighted average number of common shares outstanding for the period. Income/loss
per share of common stock, assuming dilution, reflects the maximum potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock and would then share in the net
income of the Company, except where the results would be antidilutive. The
Company uses the treasury stock method to calculate potentially dilutive shares,
as if they were converted into common stock at the beginning of the period.
  Concentration
of credit risks
  The
Company is subject to concentrations of credit risk primarily from cash and cash
equivalents.  The Company maintains accounts with financial
institutions, which may exceed the insured Federal Deposit Insurance Corporation
limit of $250,000 in the future.  The Company minimizes its credit
risks associated with cash by periodically evaluating the credit quality of its
primary financial institutions.
 
 Fair
value of financial instrument
  The fair
value of the Company’s other current assets and accrued expenses, which qualify
as financial instruments under guidance by FASB for Disclosures About Fair Value
of Financial Instruments, approximates the carrying amounts represented in the
accompanying balance sheet.
 
 Foreign
currency translation:
  The
Company’s reporting currency is the U.S. dollar. Although the Company maintains
a cash account with a foreign bank, its expenditures to date have been and are
expected to continue to be denominated in U.S. dollars. Accordingly, the Company
has designated its functional currency as the U.S. dollar.
  F-19
   CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 
 NOTES
TO AUDITED FINANCIAL STATEMENTS
  As
defined in the FASB issued guidance for Foreign Currency Translation, foreign
currency balance sheets will be translated into U.S. dollars using the exchange
rate in effect rate in effect as of the balance sheet date and the statements of
operations will be translated at the average exchange rates for each period. The
resulting translation adjustments to the balance sheet will be recorded in
accumulated other comprehensive income (loss) within stockholder’s equity.
 
 Foreign
currency transaction gains and losses will be included in the statement of
operations as they occur.
  Recent
accounting pronouncements
  The
Financial Accounting Standards Board (the “FASB”) has codified a single source
of U.S. Generally Accepted Accounting Principles (GAAP), the Accounting
Standards CodificationTM. Unless needed to clarify a point to readers, we will
refrain from citing specific section references when discussing application of
accounting principles or addressing new or pending accounting rule changes.
There are no recently issued accounting standards that are expected to have a
material effect on our financial condition, results of operations or cash flows.
 
 A variety
of proposed or otherwise potential accounting standards are currently under
study by standard-setting organizations and various regulatory agencies. Because
of the tentative and preliminary nature of these proposed standards, management
has not determined whether implementation of such proposed standards would be
material to the Company’s financial statements.
 
 NOTE
4 - UNITED STATES TREASURIES
 
 Since the
closing of the Offering, an amount equal to approximately 98.7% of the gross
proceeds has been held in the Trust Account. The Trust Account may be invested
in U.S. “government securities,” defined as any Treasury Bill or equivalent
securities issued by the United States government having a maturity of one
hundred and eighty (180) days or less or money market funds meeting the
conditions specified in Rule 2a-7 under the Investment Company Act of 1940,
until the earlier of (i) the consummation of its first business combination
or (ii) the distribution of the Trust Account as described below. The
proceeds in the Trust Account includes $2,200,000 of the gross proceeds
representing deferred underwriting discounts and commissions that will be
released to the underwriters on completion of a business combination.
  Investment
securities in the Company’s Trust Account consist of direct U.S. Treasury Bills.
The Company classifies its U.S. Treasury bills as held-to-maturity as defined in
the FASB issued guidance for Accounting for Certain Investments in Debt and
Equity Securities. Held-to-maturity securities are those securities which the
Company has the ability and intent to hold until maturity. Held-to-maturity
treasury securities are recorded at amortized cost and adjusted for the
amortization or accretion of premiums or discounts. Any dividend and interest
income, including any amortization of the premium and discount arising at
acquisition shall continue to be included in earnings. Realized gains and losses
for securities classified as either held-to-maturity also shall continue to be
reported in earnings. The Company’s investment in the U.S. Treasury Bills is
recorded at cost.  There were no holdings as of December 31, 2009.
 
 The
carrying amount, including accrued interest, gross unrealized holding gains, and
fair value of held-to-maturity securities at December 31, 2009 were as follows:
 
 Held-to-maturity:
                  
                  Carry
      Amount
                  
                  
                  Gross
                    unrealized
                    holding
      gains
                  
                  
                  Fair
      valueU.S.
      Treasury securities
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
 
 NOTE
5 - ACCOUNTS PAYABLE
 
 As of
December 31, 2009, there was $1,401,302 of accounts payable primarily related to
invoices associated with the closing of the business combination as well as
on-going operational costs owed to third parties.
  F-20
   CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 
 NOTES
TO AUDITED FINANCIAL STATEMENTS
  NOTE
6 - EQUITY
  On March
12, 2008, the Company entered into an agreement to issue 2,291,666 insider units
at a purchase price of $.01091 per unit, for total proceeds of
$25,000.  Each unit consists of one share of common stock and one
warrant.  These units have been issued and proceeds have been
received.  Accordingly, the Company presented these units as issued on
the Statement of Shareholders’ Equity and Balance Sheet as of December 31, 2009.
  The
Company calculated the fair value of the warrants by using the Black-Scholes
option-pricing model with the following weighted average assumptions: no
dividend yield for all the years; expected volatility of 30.87%; risk-free
interest rate of 2.5% and an expected life of four years.  Based on
the assumptions above, no value was assigned to these warrants at the date of
issuance.
  F-21
  CHARDAN
2008 CHINA ACQUISITION CORP.
 (A
Development Stage Company)
 
 NOTES
TO AUDITED FINANCIAL STATEMENTS
 NOTE
7 - AGREEMENTS
 
 The
Company has entered into an agreement to pay a monthly fee of $7,500 to a
related entity for general and administrative services.  This
agreement commenced on August 11, 2008 and will continue until the consummation
of a business combination, 30 months from August 11, 2008, or the date on which
the Company ceases its corporate existence, whichever occurs first.
 
 NOTE
8 – LOANS FROM RELATED PARTIES
 
 As of
December 31, 2009, loans from related parties totaled $125,399 which represents
monies lent from Royale Holdings, Chardan Capital and Chardan Capital Markets.
This money was lent to cover operational costs of the Company that could not be
covered entirely by interest earned on the Trust Account.
 
 NOTE
9 – SUBSEQUENT EVENTS
 
 On
December 10, 2009, the Company entered into a material definitive agreement to
enter into a business combination with DAL Group, LLC (“DAL”), which, following
the closing, is one of the largest providers of mortgage processing services in
Florida. At the closing of the business combination with Chardan, DAL owned 100%
of the business and operations of Default Servicing, Inc. and Professional Title
& Abstract Company of Florida and the non-legal operations supporting the
foreclosure and other legal proceedings handled by the Law Offices of David J.
Stern, P.A.
  On
January 11, 2010, the Company’s shareholders approved the acquisition of a
controlling interest in DAL at a meeting that took place that day at the offices
of Company’s lawyers in New York City and that the acquisition and all proposals
presented at the meeting were approved with fewer than 0.5% of outstanding
public shares electing to redeem their shares.
  On
January 15, 2010, the Company completed the business combination between itself
and DAL.  As a result, the combined Company began trading on the NASDAQ
under the symbols DJSP, DJSPU, and DJSPW on Tuesday, January 19,
2010.  The transaction was recorded as a reverse acquisition.
  We
evaluated events occurring between the end of our fiscal year, December 31,
2009 and March 16, 2010 when the financial statements were issued.
 F-22


ITEM 19. EXHIBITS
 
 Exhibit
                          No.
                        
                        Description1.1
                        
                        Second
      Amended and Restated Memorandum and Articles of Association of DJSP
      Enterprises, Inc.  (incorporated herein by reference to Exhibit
      1.1 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).2.1
                        
                        Specimen
      Ordinary Share Certificate (incorporated herein by reference to Exhibit
      4.1 to Amendment No. 1 to the Company’s Registration Statement on Form F-1
      (File No. 333-164907), as filed with the Securities and Exchange
      Commission on March 26, 2010).2.2
                        
                        Specimen
      Unit Certificate (incorporated herein by reference to Exhibit 4.2 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-164907), as filed with the Securities and Exchange Commission on
      March 26, 2010).2.3
                        
                        Specimen
      Warrant Certificate (incorporated herein by reference to Exhibit 4.3 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-164907), as filed with the Securities and Exchange Commission on
      March 26, 2010).2.4
                        
                        Form
      of Warrant Agreement by and between the Company and Continental Stock
      Transfer & Trust Company (incorporated herein by reference to Exhibit
      4.5 to Amendment No. 1 to the Company’s Registration Statement on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.5
                        
                        Form
      of Registration Rights Agreement by and among the Company and the existing
      shareholders (incorporated herein by reference to Exhibit 10.5 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).2.6
                        
                        Amendment
      to Registration Rights Agreement, dated as of January 15, 2010, by and
      among the Company and certain existing shareholders signatory
      thereto.  (2)2.7
                        
                        Private
      Placement Registration Rights Agreement, dated as of December 22, 2009, by
      and between the Company and certain investors signatory thereto
      (incorporated herein by reference to Exhibit 4.4 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.8
                        
                        Transaction
      Registration Rights Agreement, dated as of January 15, 2010, by and
      between the Company and certain investors signatory thereto (incorporated
      herein by reference to Exhibit 4.5 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).2.9
                        
                        Form
      of Unit Purchase Option to be granted to the underwriters (incorporated
      herein by reference to Exhibit 4.4 to Amendment No. 1 to the Company’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).2.10
                        
                        Form
      ofSecurities
      Escrow Agreement by and among Continental Stock Transfer & Trust
      Company, the Company, and existing shareholders signatory thereto
      (incorporated herein by reference to Exhibit 10.2 to Amendment No. 1 to
      the Company’s Registration Statement on Form F-1 (File No. 333-152623), as
      filed with the Securities and Exchange Commission on August 4,
      2008).2.11
                        
                        Form
      of Private Placement Warrant Escrow Agreement by and among Continental
      Stock Transfer & Trust Company, the Company, and the purchasers of the
      private placement warrants (incorporated herein by reference to Exhibit
      10.3 to Amendment No. 1 to the Company’s Registration Statement on Form
      F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4,
2008).
  47
  Exhibit
                          No.
                        
                        Description2.12
                        
                        Amendment
      to Private Placement Warrant Escrow Agreement, dated as of January 15,
      2020, by and among Continental Stock Transfer & Trust Company, the
      Company, and certain purchasers of the private placement
      warrants.  (2)2.13
                        
                        Escrow
      Agreement, dated January 15, 2010, by and among DAL Group, LLC, the Law
      Offices of David J. Stern, P.A., Professional Title and Abstract Company
      of Florida, Inc., Default Servicing, Inc., the Company, and U.S. Bank
      National Association (incorporated herein by reference to Exhibit 4.6 to
      the Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film
      No. 10542397), as filed with the Securities and Exchange Commission on
      January 22, 2010).2.14
                        
                        Form
      of Warrant Purchase Agreement by and between the Company and the
      purchasers of the private placement warrants (incorporated herein by
      reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.15
                        
                        Form
      of Warrant Sale Agreement, dated as of January 15, 2010, by and among the
      Company, certain of its existing shareholders signatory thereto, the agent
      for the existing shareholders, Law Offices of David J. Stern, P.A.,
      Professional Title and Abstract Company of Florida, Inc., and Default
      Servicing, Inc. (incorporated herein by reference to Exhibit 4.11 to the
      Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film No.
      10542397), as filed with the Securities and Exchange Commission on January
      22, 2010).2.16
                        
                        Form
      of Letter Agreement by and between the Company, Kerry Propper and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.6 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.17
                        
                        Form
      of Letter Agreement by and between the Company, Xiaosong Zhong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.7 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.18
                        
                        Form
      of Letter Agreement by and between the Company, Li Gong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.8 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.19
                        
                        Form
      of Letter Agreement by and between the Company, Li Zhang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.9 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.20
                        
                        Form
      of Letter Agreement by and between the Company, Dr. Jianjun Shi and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.10 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.21
                        
                        Form
      of Letter Agreement by and between the Company, Steve Urbach and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.1 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.22
                        
                        Form
      of Letter Agreement by and between the Company, Jonas Grossman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.2 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4,
2008).
  48
  Exhibit
                          No.
                        
                        Description2.23
                        
                        Form
      of Letter Agreement by and between the Company, George Kaufman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.3 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.24
                        
                        Form
      of Letter Agreement by and between the Company, Todd Gold and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.4 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.25
                        
                        Form
      of Letter Agreement by and between the Company, Jiangnan Huang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.5 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.26
                        
                        Form
      of Letter Agreement by and between the Company, Royale Holdings and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.6 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.27
                        
                        Form
      of Letter Agreement by and between the Company, Dr. Richard D. Propper and
      the representatives of the underwriters (incorporated herein by reference
      to Exhibit 10.11.7 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.28
                        
                        Form
      of Letter Agreement by and between the Company, Paula Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.8 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.29
                        
                        Form
      of Letter Agreement by and between the Company, Daniel Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.9 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.30
                        
                        Form
      of Letter Agreement by and between the Company, Li Ping He, as custodian
      for Tiffany He under the California Uniform Transfers to Minors Act and
      the representatives of the underwriters (incorporated herein by reference
      to Exhibit 10.11.10 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.31
                        
                        Form
      of Letter Agreement by and between the Company, Carman Ramirez and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.11 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.32
                        
                        Form
      of Letter Agreement by and between the Company, Edward Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.12 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.33
                        
                        Form
      of Letter Agreement by and between the Company, Ida Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.13 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.34
                        
                        Form
      of Senior Term Note (incorporated herein by reference to Exhibit 4.12 to
      the Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film
      No. 10542397), as filed with the Securities and Exchange Commission on
      January 22,
2010).
  49
 
 Exhibit
                          No.
                        
                        Description2.35
                        
                        Senior
      Loan, Security and Pledge Agreement, dated as of January 15, 2010, by and
      among DAL Group, LLC and the lenders listed on Schedule 1 thereto
      (incorporated herein by reference to Exhibit 4.13 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.36
                        
                        Subordination
      and Intercreditor Agreement, dated as of January 15, 2010, by and among
      Law Offices of David J. Stern, P.A., Professional Title and Abstract
      Company of Florida, Inc., Default Servicing, Inc., David J. Stern, and the
      lenders listed on Schedule 1 thereto (incorporated herein by reference to
      Exhibit 4.14 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).2.37
                        
                        Form
      of Senior Security Agreements of each of DJS Processing, LLC, Professional
      Title and Abstract Company of Florida, LLC, and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.15 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.38
                        
                        Form
      of Senior Guarantees of each of DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.16 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.39
                        
                        Form
      of Stern Deferral Note (incorporated herein by reference to Exhibit 4.17
      to the Company’s Shell Company Report on Form 20-F (File No. 001-34149,
      Film No. 10542397), as filed with the Securities and Exchange Commission
      on January 22, 2010).2.40
                        
                        Loan,
      Security, and Pledge Agreement, dated as of January 15, 2010, by and among
      DAL Group, LLC, Law Offices of David J. Stern, P.A., Professional Title
      and Abstract Company of Florida, Inc., and Default Servicing, Inc.
      (incorporated herein by reference to Exhibit 4.18 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.41
                        
                        Form
      of Security Agreements of each of DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.19 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.42
                        
                        Form
      of Guarantees of each of DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC and Default Servicing, LLC (incorporated
      herein by reference to Exhibit 4.20 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).2.43
                        
                        Loan
      Agreement, dated as of March 18, 2010, by and between Bank of America,
      N.A. and DAL Group, LLC.  (2)2.44
                        
                        Security
      Agreement, dated as of March 18, 2010, by and between Bank of America,
      N.A. and DAL Group, LLC.  (2)2.45
                        
                        General
      Subordination and Assignment, dated as of March 18, 2010, by and among DAL
      Group LLC, DJS Processing, LLC, Professional Title and Abstract Company of
      Florida, LLC, Default Servicing, LLC, Chardan Capital Markets, LLC, Kerry
      Propper, Chardan Capital LLC,  Law Offices of David J. Stern,
      P.A., Stern Holding Company - PT, Inc. and Stern Holding Company - DS,
      Inc.  (2)2.46
                        
                        Form
      of Security Agreements by and between Bank of America, N. A. and each of
      DJS Processing, LLC, Professional Title and Abstract Company of Florida,
      LLC, and Default Servicing, LLC.  (2)2.47
                        
                        Form
      of Guarantees of each of DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC and Default Servicing, LLC. To Bank of
      America, N.
A.  (2)
  50
 
 Exhibit
                        No.
                      
                      Description3.1
                      
                      Voting
      Agreement, dated as of January 15, 2010, by and among David J. Stern, Law
      Offices of David J. Stern, P.A., Professional Title and Abstract Company
      of Florida, Inc., Default Servicing, Inc., FlatWorld DAL LLC, Jeffrey A.
      Valenty, Nagina Partners LLC, certain shareholders of the Company
      signatory thereto, and the Company (incorporated herein by reference to
      Exhibit 3.1 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).4.1
                      
                      Master
      Acquisition Agreement dated as of December 10, 2009, by and among David J.
      Stern, Law Offices of David J. Stern, P.A., Professional Title and
      Abstract Company of Florida, Inc., Default Servicing, Inc., Raj K. Gupta,
      Jeffrey A. Valenty, FlatWorld DAL LLC, Fortuna Capital Partners, LP, DJS
      Processing, LLC, Professional Title and Abstract Company of Florida, LLC,
      Default Servicing, LLC, DAL Group, LLC, and the Company (incorporated
      herein by reference to Annex C to the Company’s Proxy Statement, filed
      under cover of Form 6-K (File No. 001-34149, Film No. 091262797), as filed
      with the Securities and Exchange Commission on December 29,
      2009).4.2
                      
                      Contribution
      and Membership Interest Purchase Agreement by and among David J. Stern,
      Law Offices of David J. Stern, P.A., Professional Title and Abstract
      Company of Florida, Inc., Default Servicing, Inc., Raj K. Gupta, Jeffrey
      A. Valenty, FlatWorld DAL LLC, Fortuna Capital Partners, LP, DJS
      Processing, LLC, Professional Title and Abstract Company of Florida, LLC,
      Default Servicing, LLC, DAL Group, LLC, and the Company (incorporated
      herein by reference to Exhibit 4.2 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).4.3
                      
                      Employment
      Agreement of David J. Stern, dated as of January 15, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, the Company, and David J. Stern
      (incorporated herein by reference to Exhibit 4.7 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).4.4
                      
                      Stern
      Confidentiality and Noncompetition Agreement, dated as of January 15,
      2010, by and among  DAL Group, LLC, DJS Processing, LLC, the
      Company, and David J. Stern.  (2)4.5
                      
                      Employment
      Agreement of Kumar Gursahaney, dated as of February 15, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC, Default Servicing, LLC, the Company and Kumar
      Gursahaney.  (2)4.6
                      
                      Gursahaney
      Confidentiality and Noncompetition Agreement dated as of February 15,
      2010, by and among DAL Group, LLC, DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC, Default Servicing, LLC, the Company
      and Kumar Gursahaney.  (2)4.7
                      
                      Employment
      Agreement of Matthew S. Kayton, dated as of March 2, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC, Default Servicing, LLC, the Company and Matthew
      S. Kayton.  (2)4.8
                      
                      Kayton
      Confidentiality and Noncompetition Agreement, dated as of March 2, 2010,
      by and among DAL Group, LLC, DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC, Default Servicing, LLC, the Company and
      Matthew S. Kayton.  (2)4.9
                      
                      2009
      Equity Incentive Plan, effective January 11, 2010 (incorporated herein by
      reference to Exhibit 4.8 to the Company’s Shell Company Report on Form
      20-F (File No. 001-34149, Film No. 10542397), as filed with the Securities
      and Exchange Commission on January 22, 2010).4.10
                      
                      Services
      Agreement, dated as of January 15, 2010, by and between Law Offices of
      David J. Stern, P.A. and DJS Processing, LLC.  (3),
      (4)4.11
                      
                      Amendment
      to Services Agreement, dated as of May 27, 2010, by and between Law
      Offices of David J. Stern, P.A. and DJS Processing, LLC.  (3),
      (4)
  51
 
 Exhibit
                          No.
                        
                        Description4.12
                        
                        FlatWorld
      Services Agreement, dated as of January 15, 2010, by and between DAL
      Group, LLC and FlatWorld Consulting LLC (incorporated herein by reference
      to Exhibit 4.9 to the Company’s Shell Company Report on Form 20-F (File
      No. 001-34149, Film No. 10542397), as filed with the Securities and
      Exchange Commission on January 22, 2010).4.13
                        
                        Consulting
      Services Agreement, dated as of January 15, 2010, by and between DAL
      Group, LLC and the Company (incorporated herein by reference to Exhibit
      4.10 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).4.14
                        
                        DAL
      Group, LLC Tax Indemnification Agreement, dated as of January 15, 2010, by
      and between DAL Group, LLC and the
    Company.  (2)4.15
                        
                        Stern
      Participants Tax Indemnification Agreement, dated as of January 15, 2010,
      by and among David J. Stern, Law Offices of David J. Stern, P.A.,
      Professional Title and Abstract Company of Florida, Inc., Default
      Servicing, Inc., DAL Group, LLC and the
      Company.  (2)4.16
                        
                        FlatWorld
      Participants Tax Indemnification Agreement, dated as of January 15, 2010,
      by and among Raj Gupta, Jeffrey Valenty, FlatWorld DAL LLC, DAL Group, LLC
      and the Company.  (2)4.17
                        
                        Transferred
      Employees Payroll and Benefits Transition and Reimbursement Agreement,
      dated as of January 15, 2010, by and among Law Offices of David J. Stern,
      P.A., Professional Title and Abstract Company of Florida, Inc., Default
      Servicing, Inc., DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC and Default Servicing,
      LLC.  (2)4.18
                        
                        Law
      Offices of David J. Stern, P.A. 401(k) Plan Cost-Sharing Agreement, dated
      as of January 19, 2010, by and among Law Offices of David J. Stern, P.A.,
      DJS Processing, LLC, Professional Title and Abstract Company of Florida,
      LLC and Default Servicing, LLC.  (2)4.19
                        
                        Facilities
      Sharing Agreement, dated as of January 15, 2010, by and between Law
      Offices of David J. Stern, P.A. and DJS Processing,
      LLC.  (2)4.20
                        
                        Amended
      and Restated Limited Liability Company Agreement of DAL Group, LLC
      (incorporated herein by reference to Exhibit 4.21 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).4.21
                        
                        First
      Amendment to Amended and Restated Limited Liability Company Agreement of
      DAL Group, LLC, dated as of January 15,
      2010.  (2)4.22
                        
                        Form
      of Non-Employee Director Nonqualified Share Option Agreement (incorporated
      herein by reference to Exhibit 4.22 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).4.23
                        
                        Form
      of Nonqualified Share Option Agreement - Employees (incorporated herein by
      reference to Exhibit 4.23 to the Company’s Shell Company Report on Form
      20-F (File No. 001-34149, Film No. 10542397), as filed with the Securities
      and Exchange Commission on January 22, 2010).4.24
                        
                        Form
      of Nonqualified Share Option Agreement –
      Consultants.  (2)4.25
                        
                        Form
      of Director Hold Harmless Indemnification
      Agreement.  (2)4.26
                        
                        Form
      of Officer Hold Harmless Indemnification
      Agreement.  (2)4.27
                        
                        Security
      Agreement, dated as of March 18, 2010, by and between Law Offices of David
      J. Stern, P.A. and DJS Processing,
  LLC.  (2)8.1
                        
                        List
      of Subsidiaries.  (2)11.1
                        
                        Code
      of Conduct and Ethics (incorporated herein by reference to Exhibit 14 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4,
2008).
  52
 
 Exhibit
                        No.
                      
                      Description12.1
                      
                      CEO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR
      240.13a-14(a)) or Rule 15d-1(a) (17 CFR
      240.15d-14(a)).  (1)12.2
                      
                      CFO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
      15d-1(a) (17 CFR 240.15d-14(a)).  (1)13.1
                      
                      CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.  (1)13.2
                      
                      CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.  (1)
 
 (1)
              Filed
      herewith.
 
 (2)
              Previously
      filed as an exhibit to the initial Annual
  Report.
 
 (3)
              Previously
      filed as an exhibit to Amendment No. 2 to the Annual
      Report.
 
 (4)
              Portions
      of this exhibit have been omitted pursuant to the Company’s request to the
      Secretary of the Securities and Exchange Commission for confidential
      treatment, pursuant to Rule 24b-2 under the Securities Exchange Act of
      1934, as amended.
 
 The
Company will furnish, upon request, other long-term debt instruments, under
which the total amount of securities authorized does not exceed 10% of the
Company’s assets.
  53
 
 SIGNATURES
  The
Registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this shell company report on its behalf.
  DJSP
      ENTERPRISES, INC.By:
                /s/ Kumar GursaheneyName:
                Kumar
      GursahaneyTitle:
                Chief
      Financial OfficerDate:
                June
      30, 2010
  54
  EXHIBIT
INDEX
 
 Exhibit
                          No.
                        
                        Description1.1
                        
                        Second
      Amended and Restated Memorandum and Articles of Association of DJSP
      Enterprises, Inc.  (incorporated herein by reference to Exhibit
      1.1 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).2.1
                        
                        Specimen
      Ordinary Share Certificate (incorporated herein by reference to Exhibit
      4.1 to Amendment No. 1 to the Company’s Registration Statement on Form F-1
      (File No. 333-164907), as filed with the Securities and Exchange
      Commission on March 26, 2010).2.2
                        
                        Specimen
      Unit Certificate (incorporated herein by reference to Exhibit 4.2 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-164907), as filed with the Securities and Exchange Commission on
      March 26, 2010).2.3
                        
                        Specimen
      Warrant Certificate (incorporated herein by reference to Exhibit 4.3 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-164907), as filed with the Securities and Exchange Commission on
      March 26, 2010).2.4
                        
                        Form
      of Warrant Agreement by and between the Company and Continental Stock
      Transfer & Trust Company (incorporated herein by reference to Exhibit
      4.5 to Amendment No. 1 to the Company’s Registration Statement on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.5
                        
                        Form
      of Registration Rights Agreement by and among the Company and the existing
      shareholders (incorporated herein by reference to Exhibit 10.5 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).2.6
                        
                        Amendment
      to Registration Rights Agreement, dated as of January 15, 2010, by and
      among the Company and certain existing shareholders signatory
      thereto.  (2)2.7
                        
                        Private
      Placement Registration Rights Agreement, dated as of December 22, 2009, by
      and between the Company and certain investors signatory thereto
      (incorporated herein by reference to Exhibit 4.4 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.8
                        
                        Transaction
      Registration Rights Agreement, dated as of January 15, 2010, by and
      between the Company and certain investors signatory thereto (incorporated
      herein by reference to Exhibit 4.5 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).2.9
                        
                        Form
      of Unit Purchase Option to be granted to the underwriters (incorporated
      herein by reference to Exhibit 4.4 to Amendment No. 1 to the Company’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).2.10
                        
                        Form
      ofSecurities
      Escrow Agreement by and among Continental Stock Transfer & Trust
      Company, the Company, and existing shareholders signatory thereto
      (incorporated herein by reference to Exhibit 10.2 to Amendment No. 1 to
      the Company’s Registration Statement on Form F-1 (File No. 333-152623), as
      filed with the Securities and Exchange Commission on August 4,
      2008).2.11
                        
                        Form
      of Private Placement Warrant Escrow Agreement by and among Continental
      Stock Transfer & Trust Company, the Company, and the purchasers of the
      private placement warrants (incorporated herein by reference to Exhibit
      10.3 to Amendment No. 1 to the Company’s Registration Statement on Form
      F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4,
2008).
  55
 
 Exhibit
                          No.
                        
                        Description2.12
                        
                        Amendment
      to Private Placement Warrant Escrow Agreement, dated as of January 15,
      2020, by and among Continental Stock Transfer & Trust Company, the
      Company, and certain purchasers of the private placement
      warrants.  (2)2.13
                        
                        Escrow
      Agreement, dated January 15, 2010, by and among DAL Group, LLC, the Law
      Offices of David J. Stern, P.A., Professional Title and Abstract Company
      of Florida, Inc., Default Servicing, Inc., the Company, and U.S. Bank
      National Association (incorporated herein by reference to Exhibit 4.6 to
      the Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film
      No. 10542397), as filed with the Securities and Exchange Commission on
      January 22, 2010).2.14
                        
                        Form
      of Warrant Purchase Agreement by and between the Company and the
      purchasers of the private placement warrants (incorporated herein by
      reference to Exhibit 10.4 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.15
                        
                        Form
      of Warrant Sale Agreement, dated as of January 15, 2010, by and among the
      Company, certain of its existing shareholders signatory thereto, the agent
      for the existing shareholders, Law Offices of David J. Stern, P.A.,
      Professional Title and Abstract Company of Florida, Inc., and Default
      Servicing, Inc. (incorporated herein by reference to Exhibit 4.11 to the
      Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film No.
      10542397), as filed with the Securities and Exchange Commission on January
      22, 2010).2.16
                        
                        Form
      of Letter Agreement by and between the Company, Kerry Propper and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.6 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.17
                        
                        Form
      of Letter Agreement by and between the Company, Xiaosong Zhong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.7 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.18
                        
                        Form
      of Letter Agreement by and between the Company, Li Gong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.8 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.19
                        
                        Form
      of Letter Agreement by and between the Company, Li Zhang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.9 to Amendment No. 1 to the Company’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).2.20
                        
                        Form
      of Letter Agreement by and between the Company, Dr. Jianjun Shi and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.10 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.21
                        
                        Form
      of Letter Agreement by and between the Company, Steve Urbach and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.1 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.22
                        
                        Form
      of Letter Agreement by and between the Company, Jonas Grossman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.2 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4,
2008).
  56
 
 Exhibit
                        No.
                      
                      Description2.23
                      
                      Form
      of Letter Agreement by and between the Company, George Kaufman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.3 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.24
                      
                      Form
      of Letter Agreement by and between the Company, Todd Gold and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.4 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.25
                      
                      Form
      of Letter Agreement by and between the Company, Jiangnan Huang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.5 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.26
                      
                      Form
      of Letter Agreement by and between the Company, Royale Holdings and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.6 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.27
                      
                      Form
      of Letter Agreement by and between the Company, Dr. Richard D. Propper and
      the representatives of the underwriters (incorporated herein by reference
      to Exhibit 10.11.7 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.28
                      
                      Form
      of Letter Agreement by and between the Company, Paula Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.8 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.29
                      
                      Form
      of Letter Agreement by and between the Company, Daniel Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.9 to Amendment No. 1 to the Company’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).2.30
                      
                      Form
      of Letter Agreement by and between the Company, Li Ping He, as custodian
      for Tiffany He under the California Uniform Transfers to Minors Act and
      the representatives of the underwriters (incorporated herein by reference
      to Exhibit 10.11.10 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.31
                      
                      Form
      of Letter Agreement by and between the Company, Carman Ramirez and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.11 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.32
                      
                      Form
      of Letter Agreement by and between the Company, Edward Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.12 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.33
                      
                      Form
      of Letter Agreement by and between the Company, Ida Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.13 to Amendment No. 1 to the Company’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).2.34
                      
                      Form
      of Senior Term Note (incorporated herein by reference to Exhibit 4.12 to
      the Company’s Shell Company Report on Form 20-F (File No. 001-34149, Film
      No. 10542397), as filed with the Securities and Exchange Commission on
      January 22,
2010).
  57
 
 Exhibit
                        No.
                      
                      Description2.35
                      
                      Senior
      Loan, Security and Pledge Agreement, dated as of January 15, 2010, by and
      among DAL Group, LLC and the lenders listed on Schedule 1 thereto
      (incorporated herein by reference to Exhibit 4.13 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.36
                      
                      Subordination
      and Intercreditor Agreement, dated as of January 15, 2010, by and among
      Law Offices of David J. Stern, P.A., Professional Title and Abstract
      Company of Florida, Inc., Default Servicing, Inc., David J. Stern, and the
      lenders listed on Schedule 1 thereto (incorporated herein by reference to
      Exhibit 4.14 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).2.37
                      
                      Form
      of Senior Security Agreements of each of DJS Processing, LLC, Professional
      Title and Abstract Company of Florida, LLC, and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.15 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.38
                      
                      Form
      of Senior Guarantees of each of DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.16 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.39
                      
                      Form
      of Stern Deferral Note (incorporated herein by reference to Exhibit 4.17
      to the Company’s Shell Company Report on Form 20-F (File No. 001-34149,
      Film No. 10542397), as filed with the Securities and Exchange Commission
      on January 22, 2010).2.40
                      
                      Loan,
      Security, and Pledge Agreement, dated as of January 15, 2010, by and among
      DAL Group, LLC, Law Offices of David J. Stern, P.A., Professional Title
      and Abstract Company of Florida, Inc., and Default Servicing, Inc.
      (incorporated herein by reference to Exhibit 4.18 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.41
                      
                      Form
      of Security Agreements of each of DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC and Default Servicing, LLC
      (incorporated herein by reference to Exhibit 4.19 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).2.42
                      
                      Form
      of Guarantees of each of DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC and Default Servicing, LLC (incorporated
      herein by reference to Exhibit 4.20 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).2.43
                      
                      Loan
      Agreement, dated as of March 18, 2010, by and between Bank of America,
      N.A. and DAL Group, LLC.  (2)2.44
                      
                      Security
      Agreement, dated as of March 18, 2010, by and between Bank of America,
      N.A. and DAL Group, LLC.  (2)2.45
                      
                      General
      Subordination and Assignment, dated as of March 18, 2010, by and among DAL
      Group LLC, DJS Processing, LLC, Professional Title and Abstract Company of
      Florida, LLC, Default Servicing, LLC, Chardan Capital Markets, LLC, Kerry
      Propper, Chardan Capital LLC,  Law Offices of David J. Stern,
      P.A., Stern Holding Company - PT, Inc. and Stern Holding Company - DS,
      Inc.  (2)2.46
                      
                      Form
      of Security Agreements by and between Bank of America, N. A. and each of
      DJS Processing, LLC, Professional Title and Abstract Company of Florida,
      LLC, and Default Servicing, LLC.  (2)2.47
                      
                      Form
      of Guarantees of each of DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC and Default Servicing, LLC. To Bank of
      America, N.
A.  (2)
  58
 
 Exhibit
                        No.
                      
                      Description3.1
                      
                      Voting
      Agreement, dated as of January 15, 2010, by and among David J. Stern, Law
      Offices of David J. Stern, P.A., Professional Title and Abstract Company
      of Florida, Inc., Default Servicing, Inc., FlatWorld DAL LLC, Jeffrey A.
      Valenty, Nagina Partners LLC, certain shareholders of the Company
      signatory thereto, and the Company (incorporated herein by reference to
      Exhibit 3.1 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).4.1
                      
                      Master
      Acquisition Agreement dated as of December 10, 2009, by and among David J.
      Stern, Law Offices of David J. Stern, P.A., Professional Title and
      Abstract Company of Florida, Inc., Default Servicing, Inc., Raj K. Gupta,
      Jeffrey A. Valenty, FlatWorld DAL LLC, Fortuna Capital Partners, LP, DJS
      Processing, LLC, Professional Title and Abstract Company of Florida, LLC,
      Default Servicing, LLC, DAL Group, LLC, and the Company (incorporated
      herein by reference to Annex C to the Company’s Proxy Statement, filed
      under cover of Form 6-K (File No. 001-34149, Film No. 091262797), as filed
      with the Securities and Exchange Commission on December 29,
      2009).4.2
                      
                      Contribution
      and Membership Interest Purchase Agreement by and among David J. Stern,
      Law Offices of David J. Stern, P.A., Professional Title and Abstract
      Company of Florida, Inc., Default Servicing, Inc., Raj K. Gupta, Jeffrey
      A. Valenty, FlatWorld DAL LLC, Fortuna Capital Partners, LP, DJS
      Processing, LLC, Professional Title and Abstract Company of Florida, LLC,
      Default Servicing, LLC, DAL Group, LLC, and the Company (incorporated
      herein by reference to Exhibit 4.2 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).4.3
                      
                      Employment
      Agreement of David J. Stern, dated as of January 15, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, the Company, and David J. Stern
      (incorporated herein by reference to Exhibit 4.7 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).4.4
                      
                      Stern
      Confidentiality and Noncompetition Agreement, dated as of January 15,
      2010, by and among  DAL Group, LLC, DJS Processing, LLC, the
      Company, and David J. Stern.  (2)4.5
                      
                      Employment
      Agreement of Kumar Gursahaney, dated as of February 15, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC, Default Servicing, LLC, the Company and Kumar
      Gursahaney.  (2)4.6
                      
                      Gursahaney
      Confidentiality and Noncompetition Agreement dated as of February 15,
      2010, by and among DAL Group, LLC, DJS Processing, LLC, Professional Title
      and Abstract Company of Florida, LLC, Default Servicing, LLC, the Company
      and Kumar Gursahaney.  (2)4.7
                      
                      Employment
      Agreement of Matthew S. Kayton, dated as of March 2, 2010, by and among
      DAL Group, LLC, DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC, Default Servicing, LLC, the Company and Matthew
      S. Kayton.  (2)4.8
                      
                      Kayton
      Confidentiality and Noncompetition Agreement, dated as of March 2, 2010,
      by and among DAL Group, LLC, DJS Processing, LLC, Professional Title and
      Abstract Company of Florida, LLC, Default Servicing, LLC, the Company and
      Matthew S. Kayton.  (2)4.9
                      
                      2009
      Equity Incentive Plan, effective January 11, 2010 (incorporated herein by
      reference to Exhibit 4.8 to the Company’s Shell Company Report on Form
      20-F (File No. 001-34149, Film No. 10542397), as filed with the Securities
      and Exchange Commission on January 22, 2010).4.10
                      
                      Services
      Agreement, dated as of January 15, 2010, by and between Law Offices of
      David J. Stern, P.A. and DJS Processing, LLC.  (3),
      (4)4.11
                      
                      Amendment
      to Services Agreement, dated as of May 27, 2010, by and between Law
      Offices of David J. Stern, P.A. and DJS Processing, LLC.  (3),
      (4)
  59
 
 Exhibit
                        No.
                      
                      Description4.12
                      
                      FlatWorld
      Services Agreement, dated as of January 15, 2010, by and between DAL
      Group, LLC and FlatWorld Consulting LLC (incorporated herein by reference
      to Exhibit 4.9 to the Company’s Shell Company Report on Form 20-F (File
      No. 001-34149, Film No. 10542397), as filed with the Securities and
      Exchange Commission on January 22, 2010).4.13
                      
                      Consulting
      Services Agreement, dated as of January 15, 2010, by and between DAL
      Group, LLC and the Company (incorporated herein by reference to Exhibit
      4.10 to the Company’s Shell Company Report on Form 20-F (File No.
      001-34149, Film No. 10542397), as filed with the Securities and Exchange
      Commission on January 22, 2010).4.14
                      
                      DAL
      Group, LLC Tax Indemnification Agreement, dated as of January 15, 2010, by
      and between DAL Group, LLC and the
    Company.  (2)4.15
                      
                      Stern
      Participants Tax Indemnification Agreement, dated as of January 15, 2010,
      by and among David J. Stern, Law Offices of David J. Stern, P.A.,
      Professional Title and Abstract Company of Florida, Inc., Default
      Servicing, Inc., DAL Group, LLC and the
      Company.  (2)4.16
                      
                      FlatWorld
      Participants Tax Indemnification Agreement, dated as of January 15, 2010,
      by and among Raj Gupta, Jeffrey Valenty, FlatWorld DAL LLC, DAL Group, LLC
      and the Company.  (2)4.17
                      
                      Transferred
      Employees Payroll and Benefits Transition and Reimbursement Agreement,
      dated as of January 15, 2010, by and among Law Offices of David J. Stern,
      P.A., Professional Title and Abstract Company of Florida, Inc., Default
      Servicing, Inc., DJS Processing, LLC, Professional Title and Abstract
      Company of Florida, LLC and Default Servicing,
      LLC.  (2)4.18
                      
                      Law
      Offices of David J. Stern, P.A. 401(k) Plan Cost-Sharing Agreement, dated
      as of January 19, 2010, by and among Law Offices of David J. Stern, P.A.,
      DJS Processing, LLC, Professional Title and Abstract Company of Florida,
      LLC and Default Servicing, LLC.  (2)4.19
                      
                      Facilities
      Sharing Agreement, dated as of January 15, 2010, by and between Law
      Offices of David J. Stern, P.A. and DJS Processing,
      LLC.  (2)4.20
                      
                      Amended
      and Restated Limited Liability Company Agreement of DAL Group, LLC
      (incorporated herein by reference to Exhibit 4.21 to the Company’s Shell
      Company Report on Form 20-F (File No. 001-34149, Film No. 10542397), as
      filed with the Securities and Exchange Commission on January 22,
      2010).4.21
                      
                      First
      Amendment to Amended and Restated Limited Liability Company Agreement of
      DAL Group, LLC, dated as of January 15,
      2010.  (2)4.22
                      
                      Form
      of Non-Employee Director Nonqualified Share Option Agreement (incorporated
      herein by reference to Exhibit 4.22 to the Company’s Shell Company Report
      on Form 20-F (File No. 001-34149, Film No. 10542397), as filed with the
      Securities and Exchange Commission on January 22,
2010).4.23
                      
                      Form
      of Nonqualified Share Option Agreement - Employees (incorporated herein by
      reference to Exhibit 4.23 to the Company’s Shell Company Report on Form
      20-F (File No. 001-34149, Film No. 10542397), as filed with the Securities
      and Exchange Commission on January 22, 2010).4.24
                      
                      Form
      of Nonqualified Share Option Agreement –
      Consultants.  (2)4.25
                      
                      Form
      of Director Hold Harmless Indemnification
      Agreement.  (2)4.26
                      
                      Form
      of Officer Hold Harmless Indemnification
      Agreement.  (2)4.27
                      
                      Security
      Agreement, dated as of March 18, 2010, by and between Law Offices of David
      J. Stern, P.A. and DJS Processing,
  LLC.  (2)8.1
                      
                      List
      of Subsidiaries.  (2)11.1
                      
                      Code
      of Conduct and Ethics (incorporated herein by reference to Exhibit 14 to
      Amendment No. 1 to the Company’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4,
2008).
  60
 
 Exhibit
                        No.
                      
                      Description12.1
                      
                      CEO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR
      240.13a-14(a)) or Rule 15d-1(a) (17 CFR
      240.15d-14(a)).  (1)12.2
                      
                      CFO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
      15d-1(a) (17 CFR 240.15d-14(a)).  (1)13.1
                      
                      CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.  (2)13.2
                      
                      CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.  (1)
 
 (1)
              Filed
      herewith.
 
 (2)
              Previously
      filed as an exhibit to the initial Annual
  Report.
 
 (3)
              Previously
      filed as an exhibit to Amendment No. 2 to the Annual
      Report.
 
 (4)
              Portions
      of this exhibit have been omitted pursuant to the Company’s request to the
      Secretary of the Securities and Exchange Commission for confidential
      treatment, pursuant to Rule 24b-2 under the Securities Exchange Act of
      1934, as amended.
 
 The
Company will furnish, upon request, other long-term debt instruments, under
which the total amount of securities authorized does not exceed 10% of the
Company’s assets.
  61